If U.S. households are saving more, they are spending less and this change in behavior is hurting small businesses, the major source of job creation in the American economy.
A dollar saved is not a dollar spent. Given that consumer spending accounts for more than 70 percent of our gross domestic product, today’s new-found thrift fueled to a large extent by fear, seriously impairs the odds of a prompt economic recovery. If consumer spending does not pick up, the economy will continue to suffer.
Facing decreased demand for their products and services, the more than 27.2 million small businesses that account for more than 50 percent of U.S. workers on payroll, continue to lay off workers, put on hold expansion plans and reduce capital expenditures —- a confluence of decisions that in the aggregate make things worse for the economy.
This sequence of events contributes to a vicious circle where economic uncertainty creates fear and reinforces the need for increased savings, which leads to reductions in spending and so goes the cycle.
Dah well. We'll get over it.
Honestly, if I were asked, I don't see much wrong with a little savings to shore up your savings. Perhaps bubble-based economics aren't what we need.When housing prices fell in the 1980s, stocks and bonds were up (and so was consumer savings) . When the dot-com bubble burst 9 years ago, housing was stable. Today, both housing and the stock market are way off their previous highs, and I think we need to move away from a culture of debt for everything because it puts us at the mercy of the Credit Card mafiaand loan companies, who, if you've been following the news can turn off the lending spigots even while receiving bailout money or raise their rates to exorbitant highs even if you've been a prompt payer. So when I see the lamenting of expertsabout Americans gaining a bit more control of their spending habits, I urge them patience.