Low Savings

On average, Americans earn less than 1% after tax, compared to 7% in the early 1990s. Due to the high cost of housing and interest rates, American citizens have less savings. Many homeowners believe that rising real estate value will provide them the savings they need or they will keep these savings. Like the previous stock market boom, the real estate boom allowed Americans to save without reducing consumption. As the value of the asset rises, people will of course be rich.

Low saving is a factor in the cycle of poverty. During inflation, families with surplus funds are reluctant to save. Because inflation reduces the true value of savings, there is little motivation to abandon current consumption. Lowering the level of savings and investment will lead to economic growth and declining development. Inflation leads to a rise in nominal interest rates. Since the actual value of interest payments is eroded by inflation, banks and financial institutions need to raise their nominal interest rates to persuade people to deposit into the bank. Higher interest rates will increase the cost to gain credit. This will reduce the investment by the company.

Interest rates are a way of protecting you from inflation. For example, in good practice, accrued interest on ordinary savings accounts should take into account the decline in purchasing power due to inflation. At the moment interest rates are at historically low levels. In other words, your funds have been deposited in a savings account everyday, and the actual value is declining. Inflation of 1% or 3% may not sound so bad, but inflation may be one of the most hidden form of theft. The government began expanding currency printing in 1913. Therefore, the value of today's dollar is $ 1,913, less than 2 cents. This means that the dollar has lost 98% of the purchasing power of the last century. Unfortunately, this is shocking, but most Americans do not even know what is going on. This system is being deprived of millions of Americans and needs to be changed.