WaPo - "Weak economy motivates Americans to save more"

[TomCADem]

I remember during President Obama's campaign he talked about how George Bush literally told people to "go shop" following 9/11, and how President Obama thought that advocating community service would have been more appropriate. Oddly, President Obama is experiencing first hand the paradox of thrift. The question is whether this is a bad thing? On the one hand, people with jobs are saving more during the recession. On the other hand, such saving results in less spending, which translates to less economic activity.

I certainly do not want to return to the days where it was okay to use home equity to finance vacations and consumer purchases. Also, a negative savings rate is not a good thing in the long run. However, if this modest increase in saving sticks, how will it impact the economy? How will the economy adjust? Or, is consumer debt powered spending a necessary evil?

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/24/AR2009122403374.html?hpid=topnews

The recession has caused a seismic shift in the consumer culture, converting die-hard spenders into savers. A growing number of people, either smarting from a job loss or spooked by the financial crises of others, are scrambling to get out of debt, establish emergency funds, and add to their retirement and savings accounts.

After having taken the first plunge by cutting holiday spending, many are seeking more substantial ideas on how to sustain their frugality.

With the turn of the calendar, financial planners and counselors typically get an influx of calls from people seeking help with New Year's resolutions to save money. This year, the requests have multiplied.

"Before, people came to us when they hit a crisis. Now they come to us as a preventative measure," said Emily Appel, director of the savings program at Capital Area Asset Builders, a nonprofit organization in the District that mainly counsels low- and moderate-income residents.

Demand for the services has increased so much, Appel said, that the organization has added classes. Also, she said, more middle-income people and young professionals are signing up. "When you see your friends go through financial crisis, you want to know how to prevent that from happening to you," she said.