Bad News Also Means Good News

I’m taking a look at some hot topics again this week, and felt like a little Q&A would go a long way. Riddle me this, riddle me that…

Q: How does the United States define poverty?

A: In the US, poverty is defined as the bottom 20% of all income earners. So, technically you can be a millionaire but have no earned income for a given year and be considered living in the poverty level and thus qualify for some government benefits. I share this because it is very easy to get caught up in “how bad our country is doing” because 20% of our population is living at the poverty level. By definition, there will ALWAYS be 20% of the country living at or below the poverty level.  

Q: What is the definition of a Recession? 

A: A recession is defined as two consecutive quarters of negative growth in the economy.

Now this begs the question, “When was the last down quarter?”

A: Q1 of 2014 was the LAST time there was a down quarter. That was over 5.5 years ago. 

So are we ready to ring the recession bell yet? Certainly not.

Next, we often hear about how “bad “Americans are at saving money. We are told repeatedly that our saving rate in America is low and that if we don’t make smart adjustments we will headed for financial ruin. I remember reading this 15 -20 years ago and at the time, our savings rate was under 5%. It was all over the news at the time and drew heightened concern. Then, I read what was not included in the equation. Simply put, it blew my mind. 

Q: What is the definition of the national savings rate for the good old US of A?

A: The national savings rate is the amount not allocated by Individuals, Business, and Governments that is earned. It has nothing to do with what is actually saved in an account or more importantly invested in retirement accounts or any other investment for that matter. 

For clarity’s sake, let’s review what low savings rate vs. high savings rate by government definition really means. 

Low savings rate means:

1. People are confident in the economy so they will spend.

2. People are confident and will invest in business, real estate, and other ventures. 

High savings rate means:

It is very likely that people are nervous about their future and the economy so they are reducing spending and not investing. 

***It is important to note that our national savings rate is currently at 8.3% which is somewhat high for Americans.

Q: Why might people be somewhat nervous despite all of the good data I’ve just shared? 

A: We have political and media groups that gain readership, and therefore control, through messaging by creating fear. So many things are presented in a way to make us uncomfortable with the information fed to us all day, every day online, in print, on podcasts and via social media.

I share these points because the universal truth is that in every piece of “bad” news you hear, there is also “good” news. I encourage you to find the good news, go after it, and rejoice in the fact that there are always two sides to a story.

‘Til next week - Scott