My husband sent me this article the other day that says America’s debt has shrunk for the first time ever.

They said…

The government reported Thursday that household debt in the third quarter fell for the first time ever. Meanwhile, net worth dropped by the largest amount on record based on data going back to 1951.

Household debt fell by a seasonally adjusted $30 billion, or an annualized 0.8% in the third quarter to $13.91 trillion, according to the Federal Reserve’s flow of funds report.

They quote both the fact that interest rates have increased which has lead to less spending on credit and the fact that credit in general is harder to come by.  Another major factor is that so many people have lost their homes.  When the bank forecloses they take the debt onto their books, removing it from the homeowner.  This will show as less overall debt on consumers.

They go on to say…

“There has been a particularly steep rise in the savings rate recently,” said Englund. “With a large part of thriftiness due to panic, this trend could continue for a long time.”

“Consumers are going through a major change in their spending and savings habits,” said Lyle Gramley, a former Fed Governor. “Throughout the housing bubble, consumers had a savings rate of zero, relying on the rising price of their homes. Now they’re saving money for the future instead of spending it.”

I’m not entirely sure what to say.  When I hear that saving rates are up and debt is down it makes me happy.  But I know that these changes are what’s driving this horrible economy.  While my family has been negatively affected, I know that others have been hurt much worse than us.  But over the long term I think it will benefit our country if we keep up these trends.

An economy built on debt is not sustainable.  At some point the house of cards will come crashing down.  Is that what’s happening?  I have no idea.  But when the whole thing folds in on itself a stronger economy will emerge.  I’m willing to sacrifice my net worth, my retirement accounts, and my fancy things so that my children will have a strong economy.  It’s unfortunate that people who didn’t create this mess are going to be the ones picking up the tab.  But someone is going to have to pay for it, and if I have to choose between me or my kids.  I choose me.

pic by: The Jamoker

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