Foreign Affairs
The Return of Saving - Martin Feldstein

The savings rate of American households has been declining for more than a decade and recently turned negative. This decrease has dramatically reduced total national savings despitea a rise in corporate saving. In 2003 and 2004, the combined net savings of households, businesses, and government were only about one percent of gross national income--the lowest level in at least 50 years.

A commonly asked question, when some essay mentions the savings rate, is "does this include contributions to individual retirement accounts (IRAs) and 401(k) plans as well as employer contributions to defined-benefit pension plans?" Until today, I didn't know. The answer is apparently yes. A negative saving rate, amid stagnant wages, and rising costs. You'd think this was pretty tough for the American consumer.
Where did those consumer dollars go?

If the credit card companies didn't want us to save money, they wouldn't have called for a tightening of bankruptcy legislation. "Don't borrow from us unless you want to be an indentured servant forever," is the message.

If people in Washington D.C. didn't want us to save money, they'd have protected our jobs and instilled a cost of living increase, presenting no incentive to save. Instead, the stagnation of wages and gloomy outlook, the rise in oil prices are challenging Americans to save or participate in economies that do not favour "big money": prosper.com, eBay.com, solari.com.

article on marketwatch.com by Paul Farrell, "America's savings hoax exposed."

excerpt:
There are three major lessons here.
One: Stop wasting your time and money on useless repetitive studies. Stop droning on with the same tired mantra: We know America is a debt-ridden, consumption-addicted nation with a bankrupt public policy on savings, run by myopic politicians whose main goal is re-election and kowtowing to special-interest money. Neither party has the will or the guts to stand up and get into action. That's reality folks!

(It's also reality that at least 90% of Americans who aren't benefiting from special interests or kickbacks to the wealthy aren't angry enough to strong arm the legislators whose salaries they pay to stop sucking at the Big Money teat and start working for the voter, for a change. There's huge complacency.)

Two: Only one thing will reverse America's failed savings policy: a catastrophe! Past prosperity has lulled us to sleep. But that's coming to an end. The Brookings Institution warns that if we do nothing for the next 10 years, problems will get so bad that balancing the budget would require a 40% plus cut in benefits and spending, or offsetting tax increases. They also acknowledge that politically nothing will be done until a crisis explodes.
Three: What can you do? No news here. Ten studies and things keep getting worse. Yes, 33% listen and invest regularly. But the other 67% are oblivious, addicted to short-term consumption and immediate gratification. Solution? Save 10% or more.
Once again, here's the crux of the problem: America has no savings policy because Washington, Wall Street and Corporate America don't want a saving policy! Because savings competes with their No. 1 priority, which is short-term spending, consumption, expansion, production and growth. They secretly hate savings. A savings policy would kill their spending programs. You can't have both. So America's 295 million citizens are doing exactly what our policymakers really want us to do; not save, but spend, spend, spend!

I am totally digging Charles Hugh Smith's July 28 blog entry.