The fourth quarter of 2008 found a 2.9% personal savings rate with 3.6% reached in December. The consumer has made a decision, forced though it may have been, that having some cash reserves for a rainy day is a prudent life style change. The other good news is that the consumer is ignoring those absurd pleadings sprinkled across the MSM attempting to instill more fear, that if you don’t spend and consume with abandon, the recession will get worse. Even the NYT laments that saved dollars don’t circulate through the economy.
The argument, obviously, runs that consumption now forms such a major portion (71%) of U.S. GDP, that only the consumer’s spending can bring this recession out of its tailspin. Ignore those experts and pundits, and disregard their threats and idiotic short-term thinking. While Obama helps failing companies and bails mortgage foreclosures, consumers should disregard the noise and remain on track. The economy is a long-term game with long-term effects in which patience should prevail as the governing strategy.
With this perspective, consumers armed with their increased savings will gain confidence as they live within reasonable and manageable levels of consumption. Wherever they choose to preserve their capital in a pillow, in gold, silver or any other medium, the state of mind will be positively impacted over a 3 or 4 year period. Such assurance in time will translate into long term, sustainable support of the economy.