Saturday, November 28, 1998

Savings go negative

Americans just keep spending and spending, and when their paychecks have failed to provide enough to foot their mounting bills, they have dipped into their savings. The consequence is what is known as a negative savings rate. What that means is that, on the average, people are borrowing from themselves more than they're saving.

That may sound bad, but it isn't, at least not entirely. All that spending has kept the American economy humming despite Asia's financial turmoil. The problem is that at some point people will have taken as much from their savings as they find reasonable. Spending will then slow down, and less demand will mean less growth.

Few if any economists are predicting depression, a sharp recession or anything nearly that gloomy next year, but many are saying this economy is due to slow down. Not to panic. The worst response would be unneeded governmental intervention. The powerful engine free enterprise has wrought can be counted on to restore itself in time and could do so quickly if Asia should soon find its way again.