Thursday, Jun. 18, 2009

Frugality

This is an extremely fashionable topic at the moment. Some cultural observers even think Americans are due for a prolonged shift away from the consumption obsession of the post–World War II era. That strikes me as an iffy bet, but it is clear that the debt-fueled consumer spending binge of the past couple of decades is over. The household debt-to-income percentage more than doubled, from 65% in 1982 to 135% in 2007. That turned out to be way too much for us to handle, and now the leveraging process has gone into reverse. The latest household debt-load reading from the Federal Reserve is 128%, and while nobody knows exactly where the percentage will end up, a lot lower seems like a safe prediction. Which means that for years to come, American households will be spending less than they take in.