- The U.S. has recently seen consistent economic growth that has been fueled by strong consumer spending from average Americans.
- To sustain this level of consumer spending, Americans are draining their savings, spending more than they are bringing in as their wages stay stagnant or decline, according to experts who spoke to the Daily Caller News Foundation.
- “The high probability of recession in the near term is very troubling when coupled with the decline in savings,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the DCNF. “People need more savings today than ever to cope with the higher cost of living, and instead, many families are headed into the next recession with less savings and more debt.”
(Daily Caller)—Under President Joe Biden, economic growth has been partly sustained by Americans spending through their savings on everyday goods, according to experts who spoke to the Daily Caller News Foundation.
Gross Domestic Product (GDP), a measure of economic growth, has remained persistently high, coming in at 2.1% for the second quarter of 2023, even as the Federal Reserve has attempted to tame growth through hikes of its federal funds rate. The main contributor to U.S. GDP is consumer spending, which has managed to notch consistent increases at the expense of the savings of average Americans, experts told the DCNF.
“Consumption is about 70 percent of GDP growth, so naturally any additional consumption by households and businesses is going to add to GDP,” Ryan Ellis, president of the Center for a Free Economy, told the DCNF. “But to the extent that consumption is fueled by one time windfalls from the government, it’s basically bringing future consumption into the present. Eventually, the lack of real income to justify the higher consumption will catch up with the households and businesses.”
The Personal Consumption Expenditure, a measure of the amount Americans have spent on consumer goods and services, as a percentage of GDP has stayed slightly elevated since the second quarter of 2022, staying around 68%, while a number closer to 67% has been more common over the last decade, according to the Federal Reserve Bank of St. Louis (FRED). In the second quarter of 2023, it made up 68.1% of GDP.
“In this case, it’s the excess savings,” Ellis told the DCNF. “Those are still being worked down. People are drawing down those savings to counter inflation increasing their core goods and services faster than income growth.”
Personal savings have declined in recent months, falling from over $1 trillion in May to just $794.1 billion in August, paling in comparison to the nearly $6 trillion Americans had saved in April 2020 at the early stages of the COVID-19 pandemic, according to FRED.
Inflation remained high in September, rising 3.7% year-over-year for the month, following the same rise for the month of August. Core inflation, which excludes the volatile categories of energy and food, was even higher for the month of September, rising 4.1% for the year.
Inflation, as measured by the personal consumption expenditures (PCE) price index, peaked at 7.1% in June 2022. In August, PCE inflation stood at 3.5%. Are there risks that might cause PCE inflation to take longer to drop or potentially heat up again? https://t.co/AAjkTqcCxn pic.twitter.com/7PhZwGugIU
— St. Louis Fed (@stlouisfed) October 20, 2023
“In the last three months for which we have data, the growth in consumer spending has outpaced income growth,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the DCNF. “Consumers have been using savings and going into debt to fuel their spending. That’s providing a temporary boost to GDP but the decline in savings is also throttling investment, the key driver of long-run economic growth. Savings have been trending down for nearly the entire tenure of the Biden administration because that’s precisely the period in which we’ve had inflation above the pre-pandemic trend.”
Real wages have declined 2.1% from the first quarter of 2021 when Biden took office compared to the third quarter of 2023, according to FRED.
The Biden administration has repeatedly insisted that the economy is in good shape, pointing to the president’s signature economic policy, “Bidenomics,” as the reason. Despite the insistence, many experts have pointed to the high-spending policies at the core of Bidenomics as the cause of the recent sustained high inflation.
“Alas, the U.S. savings rate has plunged back down to normal low levels today,” Chris Edwards, the Kilts Family Chair in Fiscal Studies at the Cato Institute, told the DCNF. “The low savings rate is a concern because it may indicate that Americans expect the government to bail them out if a recession or another crisis hits.”
The Fed has been keen on trying to avoid a recession, even as it keeps rates at a 22-year high. Despite this, Jerome Powell, chair of the Fed, noted at the end of the September Federal Open Market Committee meeting that an economic soft landing, meaning a slowdown in market growth without triggering a recession, was not a “baseline expectation” for the Fed.
“The high probability of recession in the near term is very troubling when coupled with the decline in savings,” Antoni told the DCNF. “People need more savings today than ever to cope with the higher cost of living, and instead, many families are headed into the next recession with less savings and more debt.”
Household debt shot up to a new high in the second quarter of 2023, with Americans collectively owing $17.06 trillion, with $1 trillion of that being held just in credit card debt.
“The notion one often hears by left-of-center analysts is that savings are bad for the economy, but this is based on faulty Keynesian theories,” Edwards told the DCNF. “Savings are hugely positive for the economy because they are the corn seed of growth. Savings fuel capital investment and expansion.”
The White House did not respond to a request to comment from the DCNF.
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Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
Important: Our sponsors at Jase are now offering emergency preparedness subscription medications on top of the long-term storage antibiotics they offer. Use promo code “Rucker10” at checkout!
