For The First Time In 50 Years, People Increase Savings

I found an article in the Wall Street Journal entitled, "Hard-Hit Families Finally Start Saving." In the article, it says "U.S. household debt, which has been growing steadily since the Federal Reserve began tracking it in 1952, declined for the first time in the third quarter of 2008."

Technically, I see this as an extremely good thing. The more people save, the more capital there is available for banks and entrepreneurs to use to create businesses and produce goods. Unfortunately, there are some short term side effects. I left out part of the title, "Hard-Hit Families Finally Start Saving, Aggravating Nation's Economic Woes". The article goes on to say, "In the same quarter, U.S. consumer spending growth declined for the first time in 17 years."

It will hurt the economy in the short run. People who are saving don't spend money. When they don't spend money, businesses close. As businesses close, more people are out of work. More people without pay checks means less spending. However, saving money is good thing in the long run. The long run is something American's have lost sight of in the last 30 years but need to catch sight of again. I say, as painful as it becomes, keep on saving.

That said, one problem that I see with savings right now, if/when inflation hits, all that savings will go down the drain as the dollar will be worth far less. If you saved $1000 to buy a new camera, that same camera might cost $10,000 5 years from now. My advice, if you're going to save money, use it to buy gold. There is a limited supply of it, and it will keep it's value much better then paper (the supply of which seems to be unlimited).