Peter Coyne

Where did we leave off yesterday? Ah, right. The government’s got savers by las pelotas.

“The Spanish word in that context is cojones, not pelotas,” two sabelotodos emailed us. Oy… both word choices work, confirmed with confidence, by my fiancee. She’s a native Colombian and knows her way around Spanish slang.

In any case, you get the point. The consumer price index for June was released this morning. It increased by 0 .5% in June. That puts year-over-year inflation at 1.8%.

Energy prices lurched 3.4%. Gasoline pounced 6.3 percent. Both along with food aren’t counted in what’s called the Core CPI. Economists want an accurate picture of the price level. Food and energy prices move around a lot, so they’re thrown out. Because someone living without buying food or gas paints an accurate picture, right?

John Williams at puts year-over-year inflation at 9.38%, up from 8.99%.If you’re a saver, you’ve had another salvo fired at you: 0.39% of your purchasing power — poof. For every $1,000 you spent one year ago, you’ll need $93.80 extra to buy the same thing today. Don’t like it? Too bad.

What’s the little guy to do? He’s on the sidelines, not in the stock market. And he’s getting pummeled. It’s ironic. Typically, seniors are off-limits in Washington. It’s just good politics. But today’s saver is tomorrow’s sweet old grandmother. And there are a whole lot of ticked-off grannies in the future.

People may be able to get by today with high debt and falling purchasing power. But there’s a savings gap of $14 trillion. That’s the extra cash American savers would need to have the current standard of retirement living. The National Institute on Retirement Security writes that the gap shrinks to $6.8 trillion when looking at savers’ net worth.

Aggregate savings gap among working households that do not meet retirement savings targets for their age

Most of savers’ net worth is home equity, which, we’ve seen can be fleeting. Stuff happens too. CNN Money includes stock market setbacks and adult children living at home longer than expected. That’s on top of lower returns from interest rates, the loss of job, the cost of a kid’s college or caring for an elder family member. God forbid you have an unexpected medical expense.

Those surprises have set people back by an average of $117,000. That’s people near retirement age. One-third of those near retirement have nothing saved, and another third have less than one year’s income saved. And it doesn’t seem like college is getting cheaper, jobs are cropping up or interest rates will actually be allowed to rise.

That’s scary when you see that 45% of current working households have no retirement account assets. How does that play out? Our guess is not well.


Peter Coyne
for The Daily Reckoning

Ed. Note: This piece originally appeared in The Daily Reckoning’s email edition. If you’re not yet getting the Daily Reckoning — sent straight to your email inbox every day around 4 p.m. — you’re only getting part of the story. Click here now to sign up for free.

You May Also Like:

How QE Simulates a Real Economic Recovery

Bill Bonner

After 2008, the "borrow and spend" US economy officially ended. Since then, US consumers have learned the value of "thrift"... whether they've wanted to or not. But is it a lesson that will stick? As Bill Bonner explains, Americans intent on returning to their old spending habits may have a date with destiny. Read on...

Peter Coyne

Peter Coyne is the managing editor of the Daily Reckoning and Jim Rickards' Strategic Intelligence. He received his degree in economics and political science from Loyola University Maryland where he studied under the Austrian economist, Tom DiLorenzo. Before joining Agora Financial, Peter worked in Congress for Dr. Ron Paul until he retired in 2012.

Recent Articles

The One Vitamin Most People Should Take

Stephen Petranek

Americans seem to be fixated on popping store-bought multivitamins to increase their health. But in reality, most of it is not necessary. Stephen Petranek explores a recent study that recommends the one vitamin you should be taking, and the best way to consume it.

How to Bag Easy Gains from the “Mass Affluent”

Greg Guenthner

But these mass affluent sorts have the loyalty of a hooker. They'll dump one high-end brand for another at the first whiff of a better deal. And a company's profits can go poof if it doesn't figure out in advance what the hell this bunch wants next season.

Addison Wiggin
When Genius Fails Again, Part III

Addison Wiggin

Addison Wiggin gives even more reasons why genius will fail again in part III of his series on Jim Rickards and the collapse of the financial market house of cards...