American Is transforming from debt spending to saving and paying down debt.

We only have 300 million consumers that will probably be cutting back in spending for a decade or more as they move away from debt spending to saving and paying down debt. It takes years for the savings to build up to a point they feel like spending instead of saving.

During the depression there was a great lesson also, in banking that many missed. The banks tried to save and build a reserve against writedowns that was over the required reserve. They were trying to prepare for bad times to come, just like the citizens were doing who still had a job and were saving in case they lost that job.

Our brilliant Federal Reserve Board at that time said, oh look, the banks want higher reserve requirements. They raised the requirement and killed lending that was beginning to take place and plunged us back down. The banks didn’t want higher reserve requirements, they wanted a cushion above that requirement for breathing room.

Consumers are doing that now. Millions aren’t broke and are making payments with no real problem but, they want a cushion. They are saving and building up their own “reserve” against losing a job or for some other need. However, because they aren’t so far above water they can save enough in a few months, they will alter their lifestyle for years until they have saved enough to feel comfortable.

This is a major shift in consumer attitude and the longer this market is down and the longer the economy is down and the more that are laid off, the more that will change their thinking about spending.

Saving is what turns recessions into depressions in consumption based economies, especially when it is debt based spending.

Related Posts:

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• Good Read:The Real Cause of Hyperinflation
• Retail profits…joke.
• The shop till I drop, I must sustain my unsustainable lifestyle, US consumers days are over.
• Here’s a few words from Wikipedia about recessions:

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