We’re Saving More And That Ticks Off Krugman

Here’s some good news for a change. Americans’ personal savings increased from 3.9% in December to 5% in January.

From the BEA:

Personal saving — DPI less personal outlays — was $545.5 billion in January, compared with
$416.8 billion in December.  Personal saving as a percentage of disposable personal income was 5.0
percent in January, compared with 3.9 percent in December.

The fact that we’re rediscovering a virtue that our parents or grandparents for my younger readers tried to instill in us is refreshing. There are some, however, who see a dark side to this development. Paul Krugman in the NYT today decries savings as the root cause of all the evils that have been visited on us.

And the saving glut is still out there. In fact, it’s bigger than ever, now that suddenly impoverished consumers have rediscovered the virtues of thrift and the worldwide property boom, which provided an outlet for all those excess savings, has turned into a worldwide bust.

One way to look at the international situation right now is that we’re suffering from a global paradox of thrift: around the world, desired saving exceeds the amount businesses are willing to invest. And the result is a global slump that leaves everyone worse off.

So does anybody know what might be the right thing to do. Spend like there’s no tomorrow or sock that money away?

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