Consumers Are Spending Faster Than Normal

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Sunday, 09 January 2011 10:26
The NYT had another piece suggesting that pessimism about the economy is preventing consumers from spending more. Actually, the current 5.5 percent saving rate is well below the post-war average, which is close to 8.0 percent. With tens of millions of baby boomers approaching retirement with almost no wealth, and many of the politicians in Washington planning to cut back Social Security and Medicare, it would be reasonable to expect the saving rate to rise rather than fall, meaning that consumption will weaken in the future.