The Wall Street Journal seems to have completely missed the story of the housing bubble and the resulting economic collapse. It begins an article telling readers:

"After a slow start early in the economic recovery, consumer spending has begun to pick up. The question is whether Americans are ready to open their wallets more widely."

It is just mind-boggling to see this in the country's leading business newspaper. Umm, no actually wallets have been pretty wide open for a long time. The way that economists determine the width of the opening is by looking at the saving rate. In the good old days before the stock and housing bubbles, savings out of disposable income averaged more than 8.0 percent.

The savings rate began to fall in the late 1980s in the response to the beginnings of the stock bubble. It fell further in the late 1990s as the bubble peaked. The savings rate bottomed out at just over 2.0 percent in 2000. It rose again after the bubble burst but then fell back to 2.0 percent as a result of the wealth created by the housing bubble. (Actually the saving rate fell to near zero by some measures.)

Predictably, the saving rate rose again following the collapse of the housing bubble and the loss of $8 trillion in housing wealth. However it has remained unusually low, at less than 4.0 percent in recent quarters. This means that consumers are actually spending quite freely. It is not clear what data the piece is referring to when it complains that consumers have been reluctant to spend. Clearly the opposite is true.

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