American’s On a Spending Spree

It’s official folks. Americans spent more than they made in 2005. Yep, we are now a nation of spendthrifts. According to the U.S. Commerce Department’s – Bureau of Economic Analysis, the savings rate in America was negative .5%.

The savings rate has been negative twice before in this country, once in 1932 and again in 1933. These were of course years of the Great Depression when jobs were scarce and the nation was digging itself out of a mess of economic trouble. You could kind of understand it back then. But what about now?

Could it be that people are feeling “real flush” now that their home values have benefited from one of the biggest real estate booms in history? Or has it suddenly become “unfashionable” to save and deny yourself the finer things in life?

Maybe we Americans have it in the back of our minds that Uncle Sam would never let us down in our old age. After all, he bailed us out of the stock market crash in 2000. After 9/11 the boys in Washington pumped so much “easy money” into the economy to keep it alive that it now seems they can fix anything by throwing a few bucks at it. Even our new Fed Chairman, Ben Bernanke said the government could “drop money from helicopters” if it had to.

We used to be savers. In 1985 we Americans saved 11.1 % of our disposable income. If you are smart you know this party can’t go on forever. I have a feeling that soon as we realize that our homes are not a perpetual ATM machine and that there really is a bottom to Uncle Sam’s pockets, we will go on that crash diet and return to our “fighting weight.” The sooner - the better.