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All savers should pay attention to what happens with the recent IndyMac Bancorp default.

IndyMac Bancorp is different than other recent defaults because IndyMac is a bank that offers checking accounts, which are money by definition of the Federal Reserve Bank and by common understanding of depositors and everyone else. Bear-Stearns, remember, was not a bank.

It is good that accounts are insured by the Federal Deposit Insurance Corporation up to $100,000, but that is not the only protection for depositors. Failure to guarantee every dollar of every checking account has potentially severe and dangerous consequences for savers and the economy.

Failure to pay on a bank default introduces risk for those who are holding money as deposits. Every business and individual needs somewhere to hold money that is risk free.

If businesses and individuals realize there is risk to holding checking accounts, they will change their financial habits in unpredictable and unmanageable ways that will make it much harder to manage the U.S. economy.

Businesses can hold accounts abroad. Individuals can horde cash and so on.

As a bank offering checking accounts for depositors, IndyMac only had to hold around fifteen cents on each dollar of deposits as reserves to pay on their customer's checks. In the normal course of business that is adequate because those writing checks will about equal those making deposits.

In the normal course of business, their borrowers will be paying monthly principal and interest to further assure they have reserves to pay on their checking account customers.

There in lies the problem. The banks were careless and made many risky and foolish mortgage loans. The loans were made with the other eighty five cents on the dollar of depositors' money; loans made without the knowledge or approval of depositors.

Notice how different that is from someone who buys a stock or a bond by their own decision and using their own money.

Our Federal Reserve Bank and other bank regulators have the full ability and authority to regulate and supervise loan practices and review their financial condition. They failed to do so.

Our Federal Reserve Bank has full ability and authority to protect every dollar of the IndyMac accounts in addition to deposit insurance. They can provide the reserves in case of default. They determine and manage total bank reserves. Now they must do so. Pay close attention here.

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com

In the process of saving for college, families sometimes forget saving on college. There are few bargains left, but allow me to suggest the junior college. It could be the last of America's educational bargains.

In the year ending June 2006, there were 713,000 associates degrees granted in the United States. There were less than 500,000 a year until after 1990, when growth in the AA degree began to pick up. Associates degrees are now growing faster than Baccalaureate degrees, although the BA degree has almost 1.5 million degrees.

Less known are the many certificate programs at Junior colleges that run one year or less. There were 229,000 certificates awarded for the year ending June 2006. There another 183,600 awards granted in specialty programs that run between 1 up to 4 years.

Combined, there are well over a million people leaving junior colleges with degrees and certificates.

In addition to the many technical and allied health programs, junior colleges have a whole slate of English, math and social science courses that fulfill two full years of requirements at four-year colleges. A state's four-year college accepts their state's junior college credits.

Another advantage comes because junior colleges are usually sprinkled around a state at many locations and so they are convenient to attend without changes in address or work schedules.

There is also reason to believe the quality of instruction continues to rise because there is a growing surplus of qualified faculty with masters and doctorate degrees. Many of these people have work experience and want to get into teaching.

More and more junior colleges are hiring from the same pool of faculty as the four year colleges, and this is especially true in large metropolitan areas where the surplus is likely to be even bigger.

In Virginia in 2007, the average tuition and required fees for a full time student at the 4 year colleges was $7,083. At the many junior colleges, it was $2,524 — a savings of $4,559 a year with a full time course load.

Most states have similar or bigger disparities. If we figure a savings of $4,559 from the beginning of the first two years at 4 percent interest until the end of a four year degree, the savings is $10,853.36. Even at two percent interest is the savings is $9,771.91.

For savers who want a four year degree, think junior college.

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com

It has been common in politics to hear that tax cuts in the higher income tax brackets will be good for the economy because the wealthy and the well-to-do will be able to save and provide funds for capital investment spending and jobs.

Americans must have jobs. Large scale unemployment in an urban society guarantees untenable social, economic and political conditions. It is total spending that generates jobs, which includes the investment spending generated by our savings, but also consumption spending including government spending.

In the last two posts I quoted from Alan Greenspan, who told us there are not enough investment opportunities for our savings since the year 2000. Creating hedge funds or other speculative financial investments does not create many jobs: mostly financial advisors and lawyers.

Since financial investment speculation does not create enough jobs, America must rely more on consumption spending to keep ourselves employed.

The consumption spending America needs the most is for domestic services. Consumption spending that goes for luxury products imported from abroad creates foreign jobs, but not American jobs.

The growing importance of consumption spending for creating jobs makes credit card spending a necessity. Given the wages and taxes for millions of Americans, keeping up spending requires credit card borrowing. For those of us who save and read savings blogs, it is sobering that so much of our savings supports credit card spending.

It would be better if it helped pay for long-lived physical assets, but at least we can have an interest return knowing our savings support jobs and the economy.

The growing importance of consumption spending brings us back to the politics and tax cuts I mentioned above. If America is going to have enough jobs, the well-to-do must see to it that all of their income goes back into the spending stream.

They can only save if it helps create jobs, otherwise they must consume.

Washingtonian Magazine published an article over a year ago describing the proper things to buy for the well-to-do lifestyle. They included landscaping, flowers, dog walkers, sports tickets, club memberships, personal trainers, spa memberships, dining out and charity events. For those with kids, include coaches' fees, soccer camp, piano lessons, college consultants and live in nannies.

Perhaps the editors at Washingtonian were celebrating conspicuous consumption or encouraging the wealthy to do their duty and create jobs. That I cannot tell, but tax cuts to the wealthy pose a threat to jobs and economic growth unless they go into consumption. Like it or not; that's a fact.

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com

Everywhere you go, you hear that the stock market is tanking — and analysts are discussing what you should do to keep more of your money.

While my philosophy of index investing says to buy more when stock prices are low, I came across a guy using an additional method to get returns on his money: peer-to-peer lending at Prosper.com.

We've talked a little bit about Prosper before, but if you're new to it, the site allows users to make and borrow loans from other individuals at agreed-upon interest rates.

So if you've got some extra cash, you can bid on loans as part of or as the entire amount that a borrower is looking for. With interest rates as high as 35%, it's an attractive alternative to watching your money tank in the stock market.

Have you considered loaning out money at Prosper? Share your experiences with us in a comment.

E-Trade has upped the APY on their Complete Savings Account to 3.30%, putting it in the top 5 of online savings accounts.

The move follows WTDirect and HSBC's upward revision of their online savings accounts (to 3.26% and 3.50% APY, respectively).

E-Trade's account has a $1 minimum to open and no minimum to avoid fees.

The rate was previously 3.15%.

Freakonomics author Steven Levitt posts today about the best personal finance advice he ever received:

When I was a first-year assistant professor at the University of Chicago, my friend and department chair, Jose Scheinkman, relayed the advice Milton Friedman had given him 20 years earlier, “Don’t save too much.”

The logic was simple: An academic’s salary rises steadily over time, as do outside opportunities — like writing popular economics books! The right reason to save is so you can even out your consumption. When times are good, you should save, and when times are bad, borrow.

Most likely, I would never be as poor again as I was starting out. That meant I should have been borrowing, not saving. I didn’t follow the advice as fully as I should have, partly because my wife insisted we save — she is not quite as good an economist as Milton Friedman.

Of course, most of us would agree that saving is important all of the time, but especially when you are starting out.

The best comment to support that, posted by donw, channels another pretty smart guy:

Your wife (and Albert Einstein) - COMPOUND INTEREST!

The earlier you start, the more you'll have.

Plus, your wife always wins every argument anyway.

In the last chapter of his new book, The Age of Turbulence, former Federal Reserve Chairman Alan Greenspan says new technology innovations sometimes slow down so much that new machinery and equipment is not worth the investment for corporations.

For example, the fall off in investments after 2000.

"The slow down in innovation is particularly evident in the dramatic swing in corporations' use of their internal cash flow from fixed investment to buybacks of company common stock and cash disbursed to shareholders in the process of implementing mergers and acquisitions."

After citing some investment data, he concludes, "A corporation returns equity capital to shareholders when it cannot find opportunities for prospective risk-adjusted rates of return superior to the rate of return that the corporation returns from existing assets. Large cash disbursements to shareholders are usually a signal of lowered prospective rates of return on fixed investments available to the corporation, the likely result of a slowed pace of profitable new application of innovation."

Wow! Chairman Greenspan tells us corporations sometimes have profits but few capital investment opportunities, so they turn to speculative buying and selling of stocks for implementing mergers and acquisitions. Buying and selling in mergers and acquisitions creates work for lawyers and securities dealers along with speculative opportunities, but it creates nothing new for Americans.

The federal government could sell bonds to finance public projects like the construction of levees for New Orleans and the Mississippi river. Some of the loanable funds that keep going into assorted mergers, acquisitions and other speculations could be redirected to an important public project.

However, public projects mean new taxes to pay interest and principal. Taxes are already high for millions of Americans who oppose new taxes.

If Mr. Greenspan is correct and corporations have profits for speculation while public projects like New Orleans' levees go unfunded, then higher taxes on corporations and lower income and payroll taxes for individuals would decrease America's savings available for speculation and increase America's savings available for public projects.

Notice I did not say it is fair or unfair to change taxes, only that the distribution of income and taxes will change how America saves and invests. Remember savers, the value of your savings depends on the quality of America's investments.

What should we do about taxes? You decide.

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com

In his recent book, The Age of Turbulence, former Federal Reserve Chairman Alan Greenspan discusses savings.

"The shift of shares of world Gross Domestic Product since 2001 from low saving developed countries to higher saving developing countries has increased world saving so much that aggregate growth of savings world wide has greatly exceeded planned investments," he writes. "Or to put it another way, the supply of funds looking for a return on investment has grown faster than investment demand."

His tenure as Federal Reserve Chair began in 1987, so there is also some saving and lending history that he writes about. Speaking of banks in 1987, he says "[they] were in serious trouble."

And what was their problem? "… [Too] much speculative lending; in the early eighties, the major banks had gambled on Latin American debt, and then, as those loans went bad, like amateur gamblers trying to get square they'd bet even more by leading the whole industry into a binge of commercial real estate lending."

Amateur gamblers? Too much real estate lending? Isn't that what we have just been having?

When we save and earn an interest return, we entrust banks and financial intermediaries to use our savings wisely. The best loans for an economy create long lived physical assets.

On the news, I often hear that America's infra-structure needs improving. The levees in New Orleans and now on the Mississippi river need expensive capital improvements.

If banks use loanable funds as amateur gamblers when America needs levees, then it's not just banks that are in serious trouble as Mr. Greenspan mentions.

Remember savers, the more our savings are used to produce new products and new technologies, the more valuable your savings in the future.

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com