By Ron Scherer
The Christian Sciences Monitor
New York – The dramatic changes in the US financial system – the debt write-downs and consolidation of corporate balance sheets – are now mirrored at kitchen tables around the United States.
Households are cutting spending, paying down debt, and rebuilding their personal balance sheets. The belt-tightening may have been spurred by two years offollowed by surging energy and food prices, but the effect could be longer lasting.
Americans are now trying to live within their incomes. If they succeed, it would boost the anemic US savings rate and signal a shift in the way Americans view their finances.
A customer pushes her shopping cart past a display at a Wal-Mart Supercenter in Rogers, Arkansas, June 5, 2008.(Jessica Rinaldi/Reuters)
“As the US economy boomed, people thought of credit as savings,” says Dennis Jacobe, Washington-based chief economist at the Gallup Organization. “They saw it as something they could fall back on…. Now a lot of people are finding out they do not have the money they felt they had.”
One indication of this new world: On Tuesday, Federal Reserve data showed that consumer credit contracted 3.7 percent in August, the first drop in 10 years.
For many Americans, the belt-tightening began when the price of gasoline surged past $3 a gallon 1-1/2 years ago.