| NJ5 said:
I agree, but with unemployment so high that has to have an impact on future consumption, wouldn't you agree? We have literally millions of people going out of work, losing their homes (or having cheaper homes), paying higher interest rates on mortgages and credit cards. Unemployment further pushes this vicious circle, resulting in low sales for retail, manufacturers, who then have to lay off more people... With consumers accounting for 70% of the US economy I would be very surprised if the recession could end when consumers are constantly getting poorer.
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I could be wrong, but I think one of the longer term consequences of this recession will be a "generation" of people who develop a new perspective on credit ...
I was raised with a (fairly) old-school perspective on debt in that you only go into debt for things you (really) need and can't afford another way; basically a house and possibly a car are (just about) the only reasons a person should have personal debt. This was not the standard view of debt that most people had leading up to the recession, and for decades the savings rates of most people has been negative due to people buying stuff they didn't want or need on credit.
Now this trend has changed recently and (probably for the first time in my life) the average savings rate is a positive number. While there are several experts who believe this is a short term trend, I think that people (in general) are really starting to understand why they were told to save money for a rainy day and their entire outlook on things has changed. With how our economy is really a flow-through system and "one dollar" cycles through the system producing countless dollars worth of goods over time, the shift from a -4% savings rate to a 2% to 4% savings rate could drastically lower overall production.
Over the long run this is not a bad thing because you can buy more goods for the same ammount of money if paying with saved cash than if it was bought using credit, but the transition from a debt driven economy to a cash driven economy will have (a lot of) short and mid-term pain.
