Are We Just Paying Lip Service To Saving More?

In response to a comment on another blog earlier this week that Americans are consumers and will continue to consume rather than save, Paul Kedrosky asks his readers for their opinion. Kedrosky contends that the savings rate will hit 7% fairly quickly and stay there for awhile. You can go to his site and vote for your number if you like.

His question, however, stirred up a couple of things that have been eating at me for the last few days, so let’s pursue them for a moment.

Since things started going downhill with the economy, the conventional wisdom seems to have been that this was a tipping point for the American consumer and that they would and should emerge from it saving more and borrowing and spending less. It’s probably gone beyond conventional wisdom and become an article of faith. I haven’t seen either pundits or politicians regardless of their stripe advocating anything else.

That’s all well and good but at the same time most of the plans being bandied about seem intent on goosing the consumer back into parting with their money. All manner of plans to light a fire under the housing market are floating around. No discussion of the proposed fiscal stimulus plan that I’ve seen suggests that its objective is to put more money back into the hands of the citizenry in order for it to save more. And, when Washington recapitalized GMAC the first thing the company did was to reintroduce 0% financing. Cynically, I conclude that saving is not exactly what our leaders really want us to do.

Realistically, you can only do so much at any given point in time and, given the nature and depth of our economic problems, fast action may be more in order than wise measured action. Perhaps plans are afoot to incorporate some sort of incentives to spur savings at the appropriate point in the recovery. If that is the case then some indication of those plans would be welcome. If that is not the case then all we would seem to be doing is recreating a failed system.

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