Why Aren't Savings Rates Moving Even Higher?

From the last quarter of 2008 to the first quarter of 2009, the USA personal savings rate went up from just over 3% annualised to just over 4%. This movement is expected during economic decline, but we are asking the question: given how severe the decline is, why aren't people saving even more?

The USA has barely budged from a culture of consumerism to a culture of thrift. Given the depth of the crisis, we would expect the response on the part of the citizenry to be more urgent. There are several possible explanations as to why the increase in savings is muted.

One is that the citizenry is 'buying' the official story that the 'recession' will be ending this year and recovery will follow. Thus, with the difficulties apparently only of a short-term nature, people can continue their spending habits mostly as usual with some minor adjustments (e.g. shopping more at Wal-Mart).

Another explanation is that somehow the citizenry 'knows' that the 'recession' is short-term and is acting appropriately. Things really are aren't all that bad. In this scenario, our estimations are way-off, and our use of the term depression, over-reactive.

Perhaps there is just a lot of cultural lag. We have read quite a few horror-stories about people who lost their livelihoods, but just kept on spending as if nothing was going on - and, in the process, depleted their savings and ran up credit-card debts. Perhaps a large portion of the population is engaging in massive denial and unconscious, inappropriate spending.

Finally, at the depth of the Great Depression in 1932 and 1933, much to their chagrin, Americans dis-saved and personal savings rates went negative. It's possible that history repeats and although people may want to be saving more, circumstances are too harsh and spending patterns are adjusted too late.