From the tone of Crutsinger's opening lines, you might think such saving is a bad thing:
Americans are hunkering down and saving more. For a recession-battered economy, it couldn't be happening at a worse time.
Economists call it the "paradox of thrift." What's good for individuals - spending less, saving more - is bad for the economy when everyone does it [Martin Crutsinger, "Americans Save Just When Economy Needs Their Money," AP via Forbes, 2009.02.01].
Did you catch that headline? "...Just When Economy Needs...."
Tell me, please, who is this "Economy" you speak of?
I've discussed this paradox of thrift here previously: if we all act sensibly, pay our debts, and save our money, we drive an economy that depends on ever-increasing spending into the tank. Act like a good American, destroy the American economy. Uh oh.
If our economy can only be sustained by such wild spending and "harvesting cash out of... home equity," which Cornell economist Robert Frank calls an "illusion," then maybe that economy needs destroying.
Thomas Friedman discusses the unpleasant sense at Davos that no one has the answer, the "magic bailout package," to pull us out of this recession and make the economy all warm and fuzzy like we thought it was:
A broker friend told me it reminded him of when he was a teenager and his doctor first diagnosed him as unable to digest wheat products. He said to the doctor, “Well, just give me a pill.” And the doctor told him: there is no pill. “You mean I’m just going to have to live with this?” he asked. That’s us. There is no pill — not for this mess [Thomas Friedman, "Elvis Has Left the Mountain," New York Times, 2009.01.31].
Friedman gets it: fixing the economy is about "getting our fundamentals right again." The "economy" can't rely on absurdly easy credit, negative savings rates, and hyperconsumerism. Frugality is a virtue, and the economy—business, labor, and government—will have to adjust. If we stick with this new frugality (and Crutsinger cites experts who think "consumers have been so shaken by how fast their wealth has shrunk, so burned by credit card debt, that they might not resume their robust spending for years, if ever"), we will need to build a new business model, based not on frenzied marketing to ever-inflating desires, but on the slow, steady production of goods and services people need.
Oh yeah: people. The economy is about what people need. Let's try to remember that as we rebuild the new economy.