George F. Will asked in the October 25th issue of Newsweek “Does anyone doubt that Americans consume too much and save too little? In the three decades prior to the 1990s, Americans saved nine cents of every after-tax dollar. Since then, they have saved 3.5 cents of each dollar; in each of the last three years they have saved less than a penny of each dollar. They kept their consumption rising not only by scanting saving but also by supplementing credit-card debt with home-equity loans.”
The USA Today headline of a couple months ago asked if the current economic crisis resulted from over-extended consumers who purchased too many disposable items, not enough capital goods, and saved too little.
The answer is, to a great degree, yes.
Our response must be to balance our desire for “stuff” with our need. Our job in the next few months will be to write our budget for the new year clarifying that difference and striking a good balance between desire and need.