Are Extraordinary U.S. Savings Levels Coming to an End?
But after 1995 (and specifically after 2001), the U.S. savings rate plummeted to less than 2% at various points. I believe we can attribute this to a combination of easy credit, escalating home values, and the importation and demand for Chinese goods priced below market (and made artificially cheap by the change in the RMB/dollar peg). It would seem, however, that things are changing. According to Harrison it's important to "notice the surge in savings since the recession began. The rolling 4-quarter average rate hit an all-time low of 1.5% in Q1 2008 when the recession began. As of last quarter it had reached 4.6%. This increase of 3.1% in 7 quarters is without precedent ... we have witnessed an increase in the savings rate the likes of which we have never seen since data tracking began."
We should not get too far ahead of ourselves and assume that the U.S. has become a culture of savers and spend-minders. After all, depending on how you count the savings rate -- many numbers I've seen count consumer-debt repayment as part of the savings rate -- we could still be in a spending frenzy as before, albeit without the freely available credit and second mortgages against which to borrow. Still, I hold out hope that as more consumers really begin to look at how their personal spend matters, we'll begin to put a bit more under the proverbial mattress with every paycheck.
Your analysis is the very reason why I expected Holiday sales to be up...and they were! We are not a nation of savers, we are, in fact, a nation of consumers. Frugality fatigue set in and it was time to go shopping.
And while, like you, I don't think this is healthy in the long term, as long as the gdp is so dependent on consumption (or in other terms, as long as we don't make much of anything), we need to prime our economic pump with spending.
I would like nothing better than to see our economy become more balanced between production and consumption, but our "All Asia all the time" sourcing strategies have led us right here. Until that changes, we have no choice but to spend. I can also say I've realized that as a nation of consumers, we will find whatever ways we can to make that consumption possible. I dont know if that's good or bad...it just is. So as Dubya famously said when asked what we individually could do about terrorism, "Go shopping".