“In December, the personal savings rate dropped to 2.4 percent, its lowest level since 2005.” – Slate
Americans don’t save, at least not the way they did thirty years ago. Prior to 1980, savings rates were typically over 10%. Since then, they’ve been dropping. Since 2000, the only time they rose was during the Great Recession. The two lowest levels were during the Internet Bubble and the start of the Great Recession. That is a correlation, not a causation; but there are similarities. In both of those instances, the economy looked strong, paper assets were growing, and there was a general feeling of optimism. One caution now is the fact that savings are falling while expenses are rising and wages are stagnant. The combination suggests a populace less prepared for any negative downturn. If booms and busts follow cycles, we may be due for another. In the meantime, maybe this time is different – we hope.