Doubts about the strength of the economy continue to grow with a survey from the Associated Press noting that two-thirds of Americans don’t have enough money to cover any emergency expenses. Thursday, the Associated Press-NORC Center for Public Affairs Research survey noted that 75% of people who make less than $50,000 a year would have difficulty coming up with $1,000 to cover an emergency expense like a new appliance or unexpected car repair. But it’s not just the bottom end in society who are living paycheck to paycheck, as the survey showed the lack of savings is a problem across all spectrums. The survey notes that 67% of people who make between $50,000 and $100,000 would also have difficult coming up with a grand. Among the wealthiest in society, those making more than $100,000, 38% said they would have difficulty coming up with $1,000. “The more we learn about the balance sheets of Americans, it becomes quite alarming," said Caroline Ratcliffe, a senior fellow at the Urban Institute focusing on poverty and emergency savings issues in an AP article. This is a pretty scary statistic and highlights the risk to society if the U.S. falls into another recession. Not only do U.S. consumers have a dismal savings rate but they are also leveraged up to the hilt. What is going to happen if the average person has a major financial shock like the loss of a job? In a previous post I said that I think too much pressure is being put on the U.S. consumer. Domestic demand is pretty much the only sector of the U.S. economy seeing any kind of growth. I noted in my post that in 2015 the average consumer owned $8,000 on their credit card. Total credit card debt totaled more than $70 billion, a 24% increase from 2014. It is becoming pretty obvious that something needs to be done, but what? With interest rates still near historical lows, monetary policy has pretty much gone as far as it can. We tried bailing out the banks and that failed miserably, so now maybe we should bailout households and get people back to work? The government should look at putting money into updating its crumbling infrastructure. The government could easily get people back to work rebuilding roads and bridges and laying fiber optic lines. These are things that we will benefit from for generations and, if done right, might give the U.S. economy the jump start it needs.
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