The recession has American families cleaning up their balance sheets. Households paid off nearly 1 percent of their debt in the third quarter of this fiscal year. For the year, household debt shrunk nearly 1 percent, the first such shrinkage recorded. Credit card balances are shrinking as well, though perhaps because credit card companies aren't lending so easily anymore, and mortgages certainly aren't growing. This household balance sheet repair is the first such showing in more than 50 years.
Despite January's unexpected 1 percent rise in retail sales, Americans are paying off their debts. Reuters reported in November, "Consumer spending excluding autos fell 3.8 percent last month on a seasonally adjusted basis, steeper than the 1.5 percent decline in October." American families increased their savings to 3.6 percent in December, according to Charles Schwab, up from almost zero a year before.
Consumption goes underground
While the uber-consumption of the last 18 years has ended, old habits ...1