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July 8, 2010 A Family Benefit: An Economic Drag
Posted on 7/8/2010
by Don Creech
For the past three decades we have supported our economy by spending our generally increasing incomes. We accelerated our pleasure, acquisitions and life styles with the use of cheaper and cheaper financing. We lived better. Our kids missed the “sacrifice for the future events,” the economy grew. It was leveraged up with credit cards, consumer and mortgage debt.
In times of uncertainty and with an increasing number of empty nesters, households re-prioritize the allocation of income. The change is not solely a function of the recent financial crisis. The age of life drives the change and is occurring as well in Europe as populations prepare for retirement. In England, the populace is saving more money than it is borrowing for the first time in twenty years.
In addition to actual savings deposits, principal payments on debt are classified as saving. Increasing liquid assets and less debt are good for family security. However, it is money that previously was magnified by credit and is no longer supporting global economies.
With a weak job market, it is no wonder federal data reflects what we have been telling clients to expect for years.
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