The piggybank effect

During the 2002–2007 economic expansion, the personal savings rate fell to below 1 percent of disposable income. The savings rate had declined steadily from over 12 percent in the 1980s’ recession. What changed the way people allocated their budgets?

U.S. household wealth grew considerably as home prices and the stock market soared. According to the Wall Street Journal, “Starting in the late 1990s, soaring stocks made Americans feel richer…. Savings jumped for a bit following the 2001 recession, but plummeted afterwards as housing prices rose, again making Americans feel that it wasn’t especially important to save.”

Credit storm hitting the high seas?

Now that the mystery has been solved concerning whether we are in recession or not, our attention can turn to monitoring the conditions that might signal the contraction’s end. A nice assist in this endeavor comes from the “Credit Crisis Watch” at The Big Picture, which includes an extensive list of graphs summarizing ongoing conditions in credit markets.