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We All Know Who's On First, But What's On Second?

Jeffrey Snider profile picture
Jeffrey Snider


  • On September 1, 2005, the Bureau of Economic Analysis (BEA) reported that the nation's personal savings rate had turned negative during the month of July.
  • The lack of credit growth post-2008 related to mostly asymmetric liquidity risks (no matter the level of bank reserves) has left very deep scars on the global economy.
  • Every quarter the Federal Reserve surveys the opinions of senior bank loan officers (SLOOS or Senior Loan Officer Opinion Survey) to gauge bank perceptions on all lines of debt issues.

It wasn't entirely unexpected, though when it was announced it was still quite a lot to take in. On September 1, 2005, the Bureau of Economic Analysis (BEA) reported that the nation's personal savings rate had turned negative during the month of July. The press release announcing the number, in trying to explain the result was reduced instead to a tautology, "The negative personal saving reflects personal outlays that exceed disposable personal income."

Why had it become this way? What were the implications, if any? Beyond the scope of the BEA's mandate, the government could merely recite the progressions behind it:

Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods.

The implications, therefore, behavioral.

Over the years and the many benchmark revisions in between, the BEA now thinks the lowest the savings rate ever got was +2.2% in that same month of July 2005. Though nominally on the plus side, still an incredibly low proportion.

Savings had been falling for decades by then, which is why it wasn't a surprise at how low the rate would get to be by the middle 2000s. And it wasn't just the housing bubble's apex, that merely drove the trend to its final extremes.

Americans had not only come to use debt to such levels, but they had also come to see it as a dependable expansion of their personal situation. No one would ever need savings, not in the era of the "maestro" and the economy of the Great "Moderation."

Though there had been some rumblings about some giant sucking sound and Democrats complaining (correctly) about George Bush's "jobless recovery" from the unusually mild dot-com recession, robust global

This article was written by

Jeffrey Snider profile picture
As Head of Global Investment Research for Alhambra Investment Partners, Jeff spearheads the investment research efforts while providing close contact to Alhambra’s client base. Jeff joined Atlantic Capital Management, Inc., in Buffalo, NY, as an intern while completing studies at Canisius College. After graduating in 1996 with a Bachelor’s degree in Finance, Jeff took over the operations of that firm while adding to the portfolio management and stock research process. In 2000, Jeff moved to West Palm Beach to join Tom Nolan with Atlantic Capital Management of Florida, Inc. During the early part of the 2000′s he began to develop the research capability that ACM is known for. As part of the portfolio management team, Jeff was an integral part in growing ACM and building the comprehensive research/management services, and then turning that investment research into outstanding investment performance. As part of that research effort, Jeff authored and published numerous in-depth investment reports that ran contrary to established opinion. In the nearly year and a half run-up to the panic in 2008, Jeff analyzed and reported on the deteriorating state of the economy and markets. In early 2009, while conventional wisdom focused on near-perpetual gloom, his next series of reports provided insight into the formative ending process of the economic contraction and a comprehensive review of factors that were leading to the market’s resurrection. In 2012, after the merger between ACM and Alhambra Investment Partners, Jeff came on board Alhambra as Head of Global Investment Research. Currently, Jeff is published nationally at RealClearMarkets, ZeroHedge, Minyanville and Yahoo!Finance. Jeff holds a FINRA Series 65 Investment Advisor License.

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