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Isn't it a bit naive to think that the average American consumer CAN save, even if they wanted to?

With oil and food costs inflating, the end of importing deflation from China, and that capitalism has made them such an efficient a labour force, that both parents working is a necessity rather than a choice - where is the free capacity to save?

And even if they had any, surely they'd be using it to pay their freshly repriced mortgage anyway - if they've not been foreclosed yet?

I suspect that any element of choice will just compound the unavoidable effect of those who no longer have one.

Evan, so did the lure of the £/$ finally compell you to fabricate a visit/ reporting 'live' from NY? We look forward to seeing your new wardrobe soon.

Here are the numbers. The US economy is about 13 trillion dollars GDP. Two thirds of it is driven by consumer spending, that's nearly 9 trillion dollars. Much of this drives the world's economy as spending causes a cascade of manufacturing to meet demand creating jobs and wealth around the world. The US has an enormous trade deficit every month which means it buys more from the rest of the world than it sells to it. Therefore, even small changes in American consumer demand can have a profound effect overseas. There's an old saying, when the US catches cold, the rest of the world catches pneumonia. That's what it means. Changes in the American economy or trade policy can make or break the economies of other nations, even inadvertently. One example is Cuba whose economy has been crushed by a trade embargo lasting over 45 years.

Americans are generally optimistic usually have a very positive outlook often spending more than they can afford hoping things will get better. They frequently run up big credit card debt which they pay off over time. When times are tough because they see people losing their jobs and are afraid they will lose theirs too, they tend to tighten the reins. The Federal Reserve Bank can nudge the consumer and industry one way or the other by raising or lowering the "prime rate" the short term rate it charges the best banks. This affects short term interest rates to speed up or slow down the entire economy by making it easier or harder to get credit. They can also adjust the money supply. This is the fine tuning performed between a growing and inflating economy and a recession or contracting economy. The goal is to grow the economy for the longest time at the highest sustainable rate, the so called Goldilocks economy, not too hot, not too cold. However, it takes months for any change in the federal rates to be reflected in the economy as a whole as the change ripples through it. They cannot affect long term interest rates. It's been described as being like pushing on a string. Right now there is worry over inflation in the cost of energy. It will cost Americans more to drive their cars and heat their homes this winter leaving less for discretionary spending. The increased cost of fuel is an inflationary factor. On the other hand, the credit crunch caused by among other things the drop in the value of houses and the sub prime lending debacle is a contracting factor. The board of the Federal Reserve Bank meets regularly to assess the conditions around the country in different regions and in different sectors of the economy to come up with one number for interest rates that they feel works best. They use vast quantities of data, very complex mathematical models, and often reassess data from prior months as further updates to them generate revisions. They've gotten pretty good at it. The last recession was in 2000 and was shallow and mild compared to others. European economists said Europe would be immune to its effects as they saw it coming. In fact, except for Great Britain, all of the European economies were affected and they did not recover until long after it was over in the US. It will be interesting to see the effect of a recession in the US on the rest of the world if we have one. I think the EU economies are far more fragile than they were 7 years ago. I think China's is too.

I think it would be a great idea for us to save more then ever before! clip coupons, cancel trips (for now), take note of the way the French work and do the opposite! Work harder, longer and more efecentley. We need to get back to what America was, what made America great! Blood, Sweat and Tears, it didn't come easy... Tough, thats what we are. We will bounce back

You really wouldn't have thought the US had an economic crisis brewing on their doorstep. Judging by the hundreds of people waiting in line by my local 'Best Buy', some for over 13 hours, I would say it's going to be option 1. What with there being 4 weeks of Christmas shopping left which will be quickly followed by the January Sales, it'll be well into the next year before US consumer spending begins to slow. Of course, by then, the number of foreclosures on houses may have already hit record levels. So why aren't people saving...? Perhaps they don't quite understand the implications or maybe things are not quite as bad as they seem....

On pensions "materializing out of nowhere", how do house price increases contribute to this? i.e. how, practically speaking, would a homeowner turn the equity into cash? More debt? Sell-up and move into a caravan?

Seems to me that this is a widespread fallacy and house price inflation, on balance, reduces people's ability to set aside funds for retirement.

If I'm right, the ´óÏó´«Ã½ should not be perpetuating this.

The lure of the £/$ finally compelled you to fabricate a visit/ reporting 'live' from NY? We look forward to seeing your new wardrobe soon.

Dear Evan
You poor Englishman....you really don't know middle class Americans, do you...they are largely 'jam today' people...so while those of us in the rest of the world may be affected by their declining dollar and the credit crunch (thanks to dumb bankers relying on the equivalent of used car salesmen posing as mortgage brokers), I don't think we have too much to worry about from them turning much more than 5 degrees from their current lack of savings proclivities...retirement is just too far away to have them imposing that kind of serious discipline on themselves...and after all besides there's always Uncle Sam to bail them out, haha...good luck finding any exceptions while you're there....

Your forgetting that we Americans are addicted to buying things, we will spend the World to ruin. So I hope the World has a back up plan to my desire to own shiny new things.

It really is so American. The Thanksgiving edition of the daily paper is crammed full of "deals." Some stores open at midnight. A local mall had a line a mile long (down the highway) even though it was 45 degrees outside (7 degrees celsius).

But don't mistake this for Christmas spirit--One man was arrested about 4 a.m. for punching another man who was attempting to break up a scuffle over a teenager selling his place in line for $100.

It's not my thing. It never will be.

Of course, conversely, whilst you're spending-it-up over in NY, it's Buy Nothing Day over here in the UK, when small retailers trying to make a living increasingly get hammered by the 'worthy' organisations trying to stop the consumer spending their money. Instead of Buy Nothing Day, why can't we have "Buy Local" or "Buy Independent" day, to help support local businesses?

Of course, conversely, whilst you're spending-it-up over in NY, it's Buy Nothing Day over here in the UK, when small retailers trying to make a living increasingly get hammered by the 'worthy' organisations trying to stop the consumer spending their money. Instead of Buy Nothing Day, why can't we have "Buy Local" or "Buy Independent" day, to help support local businesses?

As we look at American consumer spending, or lack of it, in late 2007 and its possible effects on the world economy, we might just be making a mistake about the model we are employing. The epicentre of the world's consumerism has moved East, China and India, with almost half the world's population between them, are hungry for consumer goods and goods that they actually manufacture themselves. It is not surprising that both countries seem to be shaking off the current crisis, could this be the end of USA inc.?

As we look at American consumer spending, or lack of it, in late 2007 and its possible effects on the world economy, we might just be making a mistake about the model we are employing. The epicentre of the world's consumerism has moved East, China and India, with almost half the world's population between them, are hungry for consumer goods and goods that they actually manufacture themselves. It is not surprising that both countries seem to be shaking off the current crisis, could this be the end of USA inc.?

I would wager that the average American consumer will keep spending until they run out of credit. Unfortunately that is a worse situation than the three you listed above, since your scenarios rely on the good judgment of the average Joe, which if the past two elections are any indication, they don't have any. Therefore, defaults will rise, foreclosures will rise, and fewer people will be able to afford housing. I live in an apartment and after chatting with my management he said that they've stopped looking at defaults to determine whether a person is suitable for tenancy. That indicates to me that had they not done that, tenancy would decrease and the homeless rate would rise. I fear the American dream will have to deflate for a few years more before a recovery is seen.

Unfortuately, we, as Americans, will just keep on spending until we run out of credit cards. Americans will stop at nothing and just shop and spend so the world need not worry. We need a good slap in the face but we have no willpower nor restraint when it comes to spending. Its terribly sad really...

Americans are indoctrinated early and often to believe in two important things: 1) That they are at their best when they consume the most and 2) That they participate in the direction of the country. What is amazing is the awesome, coordinated pull on the middle and lower classes to spend for the good of the economy, the country and now (it seems) the world. For example, after 9/11 we were encouraged to get out there to spend and travel, lubricating the gears of the economy and keeping the bad guys from winning. It was the patriotic thing to do. Now each economic quarter has its own nervous tension, "Are we doing our part? Will the economy continue to grow? Couldn't we use another plasma TV in the bedroom?" The creaking and groaning of a overstressed system is all around us. Better get out there and spend some more!