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Spending to recovery
February 2, 2009 - Jim Smith
For decades the federal government has been telling Americans to save more of their income and has pointed out that citizens of nearly every industrialized nation in the world saves a larger percentage of income than do Americans.
Well, apparently as the economy has gone South, Americans have begun to take the recession seriously and have started spending less and saving more.
The problem is the government now wants us all to spend more and save less, which the experts say will help us get out of this economic turndown.
According to the AP, economists call it the "paradox of thrift." What's good for individuals -- spending less, saving more -- is bad for the economy when everyone does it.
Last Friday the government reported Americans' savings rate rose to 2.9 percent in the last three months of 2008, up from 1.2 percent in the third quarter of 2008 and up from 1 percent a year ago.
The Commerce Department is reporting consumer spending has fallen for a record sixth straight month, dropping more than 1 percent in December.
The experts say when consumers don't spend, companies have to cut back, which means layoffs rise and consumers spend even less ... all of which just deepens the recession.
President Obama has a very tough nut to crack. I just hope he has a big enough hammer.
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