It's Not What You May Think

Credit Donkey carried out a survey of Americans in September, finding that nearly half have no emergency savings.

Close to half have no cash savings and are living on the edge of financial disaster, according to a recent CreditDonkey.com survey. While 59% of respondents reported having more than $500 in savings, the other 41% do not have a cash safety net.

Well, no surprise there, although there is a definitely possibility that many of these Americans do indeed have over $500 available in case of an emergency—they have 573 dollars and 49 cents. Of course, if you lose your job, or your car breaks down in a serious way, or you have a medical emergency, and you don't have insurance or you've got a high deductible, you are still screwed. $573.49 doesn't go quite as far as it used to

But Credit Donkey emphasizes that it's not what you may think.

It’s not what you may think: this 41% is made up not only of people living at or below the poverty line. They are also dual-income earners with nice homes, nice cars, nice toys, a 401K retirement savings plan, big mortgages. and big credit card bills. But if they ever get into a bind and need some quick cash — say, because of a car breakdown or an unexpected doctor visit — they don’t have it.

While this group may be rich in home equity and other investments, their assets are not liquid. In other words, none of those items converts easily into cash in an emergency. People in this situation even have their own name — the "liquid asset poor" — a term coined by the Washington, D.C.-based advocacy group Corporation for Enterprise Development.

With no cash reserves, they are just one paycheck away from financial ruin should an emergency or a job loss happen because they cannot easily access cash on a moment’s notice.

Sadly, the CreditDonkey.com survey also found that more than half of respondents (54%) said they may be stuck in this situation for the foreseeable future. They have not set up an emergency cash savings strategy.

That was a new one for me — the "liquid asset" poor. 54% of respondents don't even have a strategy for saving some cash, although we don't know how many have spent every dime they make to finance nice homes, nice cars, nice toys, a 401K retirement savings plan, big mortgages. and big credit card bills. It would have been nice if respondents had been classified according to income.

No doubt many poll respondents could not possibly have a strategy for saving money because they're spending everything they have to make essential ends meet (food, gas, rent/mortgage, utilities). When I last checked, approximately 146 million Americans were living within 200% of the poverty line.

Nevertheless, we must acknowledge the existence of the "liquid asset" poor. Some unhappy thoughts came to mind as I considered them.

• If you live in a society in which you have been called a "consumer" in the media and by economists for as long as you can remember, you might conclude (albeit unconsciously) that I Consume, Therefore I Am. That's not quite what René Descartes had in mind, although it is still hard to determine what exactly René did have in mind. If one's existence follows from being a subject ("I") who thinks—cogito ergo sum—and many lives are lived devoid of thought, as with these "liquid asset" poor, we are forced to conclude that these people do not exist. But these "consumers" demonstrably do exist—somebody is buying all that Stuff. Therefore we definitely have a philosophical riddle to solve

• If these "uber-consumers" do indeed exist, and I think we can agree they do, some of them may not exist for long if an unforeseen emergency presents itself. Such an emergency would necessarily be unforeseen because, as just noted, such people apparently live in the absence of something we might call actual thought.


• The "liquid asset" poor are doing precisely what Ben Bernanke and Paul Krugman want them to do: they spend all their income and more—they have big credit card bills—on Stuff. This is the essence of neo-Keynesian economics as it has come down to us in the early 21st century. I hope we can agree that this "economic theory" has been a most unhappy development.

If I can be serious for a moment—on second thought, when I am not serious? —there is always a trade-off in life between risk and security. The "economic theory" which has governed our lives, and which economists like Ben Bernanke and Paul Krugman still push, like crack dealers to the blind, has tilted very far toward the risk side of life. Interest earnings on cash savings is basically zero.

We are entitled to conclude that neo-Keynesian "economic theory" gives us an unbalanced view of life, a stance which is potentially very self-destructive, because of its extraordinary slant toward risk. You might well ask when did skydiving become a model for living?

Needless to say, any sense of security ordinary (i.e. non-wealthy) Americans might have in 2012 is illusory. One might think that the events of 2008 and subsequent developments would have tipped off Americans that the rules of consumption they had lived by no longer apply. Sadly, as Credit Donkey says, the "liquid asset" poor have not gotten the message.

Comments

[James]

Those "asset poor" are largely the so called middle class. They are the ones just above the poverty line that can (supposedly) afford the house and cars, etc. Often using large amounts of credit to maintain that lifestyle. They have no real wealth (as it is all debt leveraged) and so are barely hanging on to the ladder.

This is why it is so important to look at wealth distribution, not just income inequality. As of 2010, the top 1% of households (the upper class) owned 35.4% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 53.5%, which means that just 20% of the people owned a remarkable 89%, leaving only 11% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.1%

11% of wealth spread amongst 80% of the population is a joke. I would guess by 2012, it is an even greater disparity with the bottom 50% owning some miniscule fraction of wealth. For most Americans, their home is the only significant source of wealth that they own (if any). But guess how that has been going. The point is that there is no security for at least 50% and probably 80% of the population- they effectively own nothing.

This is intentional, of course. Those at the top are largely the products of largesse and inheritance and have no intention of sharing. It is only the fools at the bottom who do not understand the situation and think they have a chance to "make it". The reality is that they are kept expendable.