Who else is worried about the Savings rate? I believe it is now that we Americans spend 98 cents of every dollar we make. That really is frightening. We Americans need to stop spending so much and start saving and investing more and that will help everyone.

What is more frightening is the amount people are borrowing.

very true, a saw a really funny snl skit or maybe it was mad tv where it was a commercial for a debt consolidation service and they were just like "dont spend more money than you have" and the people were all surprised and confused. "So if I have 10$, then i shouldnt spend 20$?" It was good laughs.

What is more frightening is the amount people are borrowing.

Actually borrowing is not a bad thing at all for an economy.

It's borrowiing WITHOUT the ability to repay is where the problem arises. And people in the USA do that at much too great a frequency ...or should we say that lenders lend the money too easily?

Baron Max

Actually borrowing is not a bad thing at all for an economy.
Just like spending.

... I believe it is now that we Americans spend 98 cents of every dollar we make.... I think the actual number is spend $1.04 for every dollar made. (The US savings rate has been negative for a few years.) It is hard to know what will happen near term. The number of people who were spending more than their incomes by taking cash out of their homes (refinancing the mortgage) are definitely finding it much harder to do this now that home prices are static or decreasing. This by itself would tend to bring the saving rate back to zero, but one must also consider the now beginning to retire "baby boomers."

Many of them were part of the "go/go" generation spending all they could (Buying house for as little down as they could, correctly confident for many years that someone would come along and buy it for much more than their mortgage debt, giving them some profit to "move up" to an even bigger more expensive house.) About 10 years ago, the baby boomers began to realize that they might need to live on their Social Security alone if they did not start to save big time soon and many did. Some even sold those big houses they did not need with no kids at home to the X- generation, invested the proceeds in stocks etc.

Point is that the baby boomers, in their peak earning years, were finally big savers, yet despite this, the US saving rate was negative. Now that they are starting to retire, their saving rate is turning negative too. - I.e. they are taking money out of their savings so they need not reduce their standard of living to that which Social Security alone will provide.

If your were worried that US was in trouble when assuming your false 2% positive saving rate, and now understand that saving rate has been negative for a few years and will rapidly become more negative as the baby boomers retire, I expect you will soon need to go and change your underpants.