Not So Negative Savings

This week's "the sky is falling" news was the fact that the personal savings rate dipped into negative territory in 2005 -- down 0.5% -- for the first time since the Great Depression.

While the nation grappled with financial collapse and massive unemployment, personal savings fell by 0.9% in 1932 and by a record 1.5% in 1933, according to Commerce Department statistics. Little surprise, the pundits pounced on this latest downturn.

One camp held that Americans are maxing out their credit cards in quiet desperation, spending all their after-tax income and dipping into savings just to keep up with rising fuel and food costs. This group points to the fact that consumer spending for December rose by 0.9%, more than double the 0.4% rise in income for the month. But minus food and energy costs spending rose by only 0.1%. ...