Recession Regression

A keen indicator of how powerful this recession is (officially that's not its name but it will likely be termed that by the National Bureau of Economic Research): Americans are actually starting to save their nickels.

The American savings account has been in freefall, below 1% for many years according to the Bureau of Economic Analysis, until this year when it ticked up to nearly 3%. This is still far below the savings rates of Germany, Japan and other countries who put away as much as 10% of their income.

The most incredible shift in this recession is not the personal savings rate increase, decrease in household income, the collapse of entire industries, mortgage freefall, and job losses associated with that malaise. That's drastic enough. The real kicker of all that is the monumental shift in psychology of the American worker, especially the growing ranks of the American unemployed, toward a more frugal existence. Luxury goods are officially out.

Do you feel yourself pulling back on purchases? Emarketer.com reports that more consumers are abandoning their online shopping carts. The holiday season is supposed to increase an anemic 0.5-1%, not matching the 2.6% inflation rate.

Long-term, if the American mindset remains focused on the savings account instead of the credit card account, we will be in a much better position to weather future storms.