Why Consumer Spending Went Away

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Posted: Oct 08, 2010 2:43 PM
The usual reasons given for the slump in consumer spending don’t go far enough. Sure household wealth deteriorated thanks to housing prices. Tight credit has made it harder to get credit cards or buy big ticket items. High unemployment means many Americans just lack income to spend. Fear of unemployment drives even employed Americans to put a little more away for the proverbial rainy day.

But there is a deeper reason Americans aren’t spending as much. Typically it goes under the rubric of a “desire to save more”—although that is more of a description than an explanation. If Americans suddenly desire to save more, it’s worth trying to find out why.