Thursday, December 17, 2009

Spendthrift to Penny Pincher

From today's edition of WSJ, an article that examines how the current economy has impacted some basic psychology about spending vs. saving. It is subscriber content at this writing, but if you use your browser to search for the title of this post, you should be able to find an ungated version.

If you can't find the article, the main point of the article that I took away is that the recession has had an impact on Americans' financial behavior. We are spending less and saving more. That may be, but I'm not sure it represents a long-term change. The institutional structure has not changed significantly. Our tax structure and our financial system does not reward saving, and investment is treated only marginally better. We still have mechanisms in place to give favored tax status for certain borrowing. And I haven't noticed a reduction in the commercials encouraging us to "buy, buy, buy." I suspect that once the economy gets back on firmer footing, we will see the American consumer rise with a list of back-ordered wants. It may take a while, but I don't see this recession turning us into our grandparents or great-grandparents who survived the recession while raising a family.

One further point related to Blinder's piece (see post above), his scenario doesn't see us turning into massive savers either.

What do you think? Has this recession significantly changed the way you look at spending/saving? Or will you return to your previous habits when the economy recovers?

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