This graph from the "Calculated Risk" web page, shows the saving rate starting in 1959 through November of this year. (Right click on it to see a larger version.)
There are several interesting things to note in it. The first one is that our savings was on a more or less steady rise from the 50s to the 80s. It peaked a couple of times in the 70 and early 80s, but then went on a steady decline (with a few up and down blips) to about 2006. Then it went steadily upward.
The second thing is that 2006 date. That hints to me is that the "people" began seeing the crisis coming earlier than the "experts," who were still denying that we had any problem until the major banks on Wall Street (Lehmann, Merrill, and Bear Stearns) began to collapse.
Third, there is a hint that the savings surge might be beginning to taper off. It hit a peak in January 2010, and has gone down and is projected to stabilize after that.
That may mean that most of the "adjustment," as they call it, has already happened and consumption will go up with income growth next year. That may be a good thing for the over all economy because it will mean that people are spending more and generating more sales and hirings. Instead of socking money away every week, people are spending it in the market place, which moves money around in the economy, and that creates jobs. Hopefully it is a sign that we are beginning to (slightly) trust the market not to crash on us if we go out and buy a few things for the family.
On the other hand, I don't want us to go back to the place we were before, when we were spending more than we were making and going increasingly into debt. No only would that be a return to some of the unhealthy behaviors of the last generation, but it also says something about our inability to either recognize or deal with the larger political and economic forces that brought us here.
Part of the reason we slid so far into debt was that, for most of us, our incomes were either declining or stagnating, so we borrowed to make it up. Our personal pride prevented us from accepting we weren't growing and our collective blindness kept us from understanding the market decisions that caused it. There were intentional policy decisions made in Congress and the global financial centers that sucked money out of the economy and upward from the poor and middle class and then blamed it on evil taxes and a bloated government. In one way or another, we were all participants in a spiritual ethos that said that human beings must continually be getting better and better (read "wealthier and wealthier"). When that stopped happening, we either took it inward and blamed our personal shortcomings and inadequacies, or we projected it outward and blamed the socialist government that took our taxes and redistributed them to undeserving welfare cheats.
The thought that we were not going to be richer than our parents (or as rich as we thought we deserved) was an assault on our collective self-concept. But instead of blaming a market system that was stacked and organized against us, we blamed ourselves or a wasteful government. And instead of changing the system and forcing some of that money back downward from "the rich" to "the rest," or on the other hand instead of learning to believe that goodness and joy could be found in a non-growing income (both positive at different levels), we decided to borrow, and borrow, and borrow. And then when the crash came, we paid for it big time. While much of the blame for the housing crisis was the result of a demented financial system that demanded more and more borrowers to fund Wall Street's gambling addiction, some of it was our desire to own a home, or own a bigger home, to prove to ourselves that we were not as insignificant as our incomes told us we were.
So, while on the one hand, I'm pleased that we started saving again instead of incessantly borrowing. And I'm a little bit pleased that we may be slightly spending again in ways that may help bring the economy back up a little. On the other hand, I'm nervous that we may not have learned the right lessons. Certainly the Wall Street survivors only learned that if you are clever you won't be punished for your sins. If the Tea Party movement is the public voice of this blame-ourselves-or-blame-the-socialist mentality in America, then Main Street may not have learned anything at all.
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