Yahoo Finance reports that the much lauded return of personal savings dipped slighly in July as incomes remained flat:
"With incomes flat in July as spending rose, the personal savings rate dipped slightly to 4.2 percent from 4.5 percent in June. The savings rate was 2.6 percent a year ago."
Are U.S. households really saving more? Micheal Hudson explains that the "savings rate" is not what it seems. Rather, much of what is represented as "savings" is really debt de-leveraging by households no longer able to role over debt. Here is an excerpt from his June article linked above:
(Hudson) "I put the word “savings” in quotation marks because this 6.9% is not what most people think of as savings. It is not money in the bank to draw out on the “rainy day” when one is laid off as unemployment rates rise. The statistic means that 6.9% of national income is being earmarked to pay down debt – the highest saving rate in 15 years, up from actually negative rates (living on borrowed credit) just a few years ago. The only way in which these savings are “money in the bank” is that they are being paid by consumers to their banks and credit card companies."
The important issue here is that savings really means de-leveraging for most households.
This has important implications for U.S. citizens' financial security, consumption, and standard of living. With credit scarce, citizens must pay down debt. With incomes declining or stagnant, citizens must forgoe current consumption in order to pay down debt. That means standards of living will erode because Americans' have masked stagnating incomes for 80% of the population with easy credit for 3 decades.
This de-leveraging also means that financial emergencies may lead to personal crises, including bankruptcy and homelessness.
The U.S. population is now faced with the real implications of deteriorating wages and benefits.