According to a survey released earlier on Monday, about 1/3 of American consumers say that if confronted with a $2000 emergency, they would have trouble coming up with the cash in a month.
The study was performed by the New York Fed via a survey focused on the financial fragility of consumers vs their expectations. The findings were pretty worrying, with just 67% of consumers saying that they would able to face a two thousand dollars emergency in a month, with the rest of 33% saying they wouldn’t be capable to come up with that kind of cash.
The credit score underlined these differences, i.e. only 11% of customers with a credit score of 760 or more were saying that they would have difficulty, compared to 64% of customers with a credit score of 680 or less. That means in layman’s terms that regardless of one’s credit score, the American way of life is based on credit/consumerism, i.e. people stopped saving a long time ago.
And with saving being the base of capitalism, what does that say about the US economy? Moving along with the study, its findings were consistent with other surveys. More than one third of American families which saw significant income fluctuations were more likely to have trouble coming up with an unexpected $2000 need, compared to the families with stable income.
These numbers are emphasizing the fact that even if official unemployment figures dropped under 4.7 percent, the perceived vulnerability of Americans hasn’t really changed a bit.
What the New York Fed’s survey doesn’t show is how many American families own $2000 worth of electronic gadgets and long term bills for the respective electronics, i.e. iPads, MacBooks, iPhones, big screen TVs, cable bills and various long term contracts for each of those. Also, if the average Joe pays about 25% of his/hers income just in Federal taxes, if you include state/FED taxes on electricity/phone bills plus other numerous hidden taxes, about half of the income of an average American worker goes to the government, one way or the other.
And that makes for a pretty good explanation why Americans stopped saving a long time ago and why the US is a nation of debtors with the majority of American families living paycheck to paycheck.