I read a pair of articles about the economy today that are surely bad news, but that give me hope in the long run.
The New York Times reports that carmakers worry that this is the new normal, that the go-go car sales day of the past 15 years was a bubble. This was the bit that really got my attention:
After an era of excess indulgence, we’re now entering a prolonged period of conservation,” said John A. Casesa of the consulting firm Casesa Shapiro Group. “Trading in a car every three years is a luxury that the average American can no longer afford.”
WTF? The average American could afford to trade in their car every three years? That’s totally unreasonable for anybody who isn’t flat-out wealthy. I certainly hope Casesa is misrepresenting the situation, but the point is that things have improved, albeit under significant economic duress.
The second article is in the Wall Street Journal, explaining that Americans have started saving money again. In the past decade or so, the U.S. saving rate has been negative—people have actually spent more than they’ve made, consistently and nationally. That speaks very, very poorly of our nation. Household debt has grown every year in this country since 1952, but it finally dropped last fall, in tandem with consumer spending growth. This isn’t a lack of income resulting in reduced spending, it’s people saving money that they would otherwise have spent. Economists forecast that the savings rate will climb to anywhere from 3%-10%.
With regard to the larger economy, both of these things are terrible news. The modern U.S. economy is premised on a high level of consumption and a low level of savings. But our country is in dire need of frugality, both governmentally and individually. If the average household spends more than they make, how can we be surprised when our government does the same? I’m not an economist, so I’m not knowledge enough to be able to consider this fully, but surely it’s got to be good for us in the long run to return to thrift.