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Old 12-11-2008, 06:10 PM   #1
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Americans cutting back

Americans cut back, but permanent thrift elusive | U.S. | Reuters

By Andrea Hopkins

CINCINNATI (Reuters) - Single mother Kelly Dukes has lost her house, her car and her salary, but rather than curse the U.S. recession, the Cincinnati mom said she's grateful to have learned a whole new way to live.

"Now I understand the difference between want and need," said Dukes, 27, as she shopped for a pared-down Christmas for her 3-year-old daughter at discount retailer Target.

"I used to go shopping every other day ... but now I know I don't need the same pair of shoes in three different colors," said Dukes, who worked at a nonprofit organization helping children until it lost funding and couldn't pay her salary.

"Even though a recession is hard on people, I think maybe it'll shake a lot of people up and force them to think and educate their kids -- even if you want something, you can't always have it, and it's not important anyway."

Spending less, saving more and eschewing consumerism were out of fashion just a year ago in America, where "more" often means "better," but the loss of 1.3 million jobs in three months, foreclosures on millions of homes and the prospect of a deep recession has made thrift the new mainstream.

Dukes has cut her expenses by using public transportation, buying store brands instead of name-brand goods, looking for sales and simply buying fewer things. She moved from a huge house to a small apartment, changed to a cheaper day-care and has pledged to save more money for the next emergency.

These signs of change, backed by economic data showing U.S. consumers buying less and saving more, have excited David Blankenhorn, president of the Institute for American Values, a New York-based think tank.

"The way of thinking about money that has characterized most of us Americans for the past several decades, a debt-oriented way of thinking, spending more than we earn ... that way of thinking has come to an end," said Blankenhorn, whose 2008 book, "Thrift: A Cyclopedia," was dreamed up when the idea was a quaint throwback but published just as Americans started talking about clipping coupons again.

Data released in November showed U.S. consumer spending dropped 0.5 percent in October, its fifth straight monthly decline, while the personal saving rate climbed to 2.4 percent. That means Americans are saving $2.40 for every $100 of disposable income. As recently as April 2008, Americans were saving none of their after-tax income.

'THRIFT CULTURE?'

But even Blankenhorn is skeptical the belt-tightening represents a permanent change in American values.

"My hope is that the debt culture will be replaced by the thrift culture, but it remains to be seen," he said. "The thing about thrift is it's not just in response to necessity, but it's actually a positive value -- a wise use of resources ... not just medicine for hard times."

Economists, too, have mixed feelings about whether the dramatic drop in consumer spending and increase in the nation's saving rate are temporary or permanent.

"It's both," said Richard DeKaser, chief economist at National City Corp in Cleveland.

DeKaser said the sharp rise in saving had come because Americans feel economic insecurity -- a fear that may pass when the recession eases. But because personal assets like homes are not going to rise in value like they did during the housing boom, Americans are also going to change permanently the way they save for education or retirement.

"I see a long-term trajectory of increased savings because asset appreciation is not going to be able to provide for financial goals as it did in the past," DeKaser said, adding that people would spend less in order to save -- perhaps by driving a car for an extra year or forgoing luxuries.

Because consumer spending has traditionally accounted for as much as two-thirds of U.S. economic activity, consumption has sometimes been portrayed as patriotic, such as after the September 11 attacks when U.S. President George W. Bush urged Americans to go shopping.

If the new thrift takes hold long term and consumers do not return to spendthrift ways, economists say the United States will have to find a new engine for growth, such as exports.

'SPENDING ...THE AMERICAN WAY'

DeKaser warns against assuming the thrift consumers are now displaying will last once employment picks up again and the sense of crisis has passed.

"I think it is tempting to extrapolate the present forever into the future," DeKaser said, noting that Americans had long had a tendency to judge their own well-being by comparing themselves to friends and neighbors -- and trying to compete.

"If they view themselves as falling behind society as a whole, there is a desire to fill the gap and fill it with debt," he said. "I think there is still going to be that perceived desire to keep up with the Joneses."

For her part, Dukes said the changes she had made were permanent, because she has seen the folly of relying on material things for happiness. But she laughs when asked whether her fellow Americans will stick to tight budgets when the economy booms again.

"They'll go right back to it, all the spending," said Dukes. "That's the American way."
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Old 12-15-2008, 12:22 PM   #2
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People should try to get back to thriftiness as a way of life. I've been a lot more thrifty lately and I think it's fun. It gives you a great satisfaction to get things for less and to recycle things.

One good thing to do is to clean out your closets and realize what you have-shop out of your closet. The consignment shops are so swamped these days that I couldn't find any local ones that were taking stuff to sell. But my mother and I donated clothes to a local Dress for Success type program. You can donate to Goodwill and those types of programs, or have a yard sale if you still have warmer weather now.
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Old 12-16-2008, 06:58 AM   #3
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well shit, I've been wearing the same coat for a decade and I'm not even American. It's a ncie coat. I'm actually Larry David, guys.
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Old 12-16-2008, 11:01 AM   #4
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"Now I understand the difference between want and need," said Dukes, 27, as she shopped for a pared-down Christmas for her 3-year-old daughter at discount retailer Target.
sorry, but that made me really laugh!!!
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Old 12-16-2008, 11:25 AM   #5
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Target is actually a pretty nice store. I love their things for the home, such as shower curtains, bath towels and etc. I also like their Boots skin care collection. It is great for sensitive skin.

Back to topic. My family and I have cut back on spending. Since, I have been layed off from my job. But, we are lucky in a sense, our modest town home is payed for and we have no credit care debt. We purchase what we actually need and we pay for it in cash. This year for the holidays we will give each other a small gift. And I think it will be one of the best holidays ever. Because, Christmas, besides the spiritual aspect, is about love, family and friends. Not how much did you spend.
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Old 12-16-2008, 11:30 AM   #6
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Someone should write an article about all the gazillions of other Americans who didn't need to lose a job and a home to figure out a "want and a need".
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Old 12-16-2008, 11:36 AM   #7
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Someone should write an article about all the gazillions of other Americans who didn't need to lose a job and a home to figure out a "want and a need".
That's exactly what I was thinking. A lot of people live like that on a daily basis, and always have. They just don't happen to fit into purpleoscar's rampant consumerism generalization.
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Old 12-16-2008, 11:40 AM   #8
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Someone should write an article about all the gazillions of other Americans who didn't need to lose a job and a home to figure out a "want and a need".
yup, that's exactly what I thought when I read the first sentence of that article...
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Old 12-16-2008, 01:00 PM   #9
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Someone should write an article about all the gazillions of other Americans who didn't need to lose a job and a home to figure out a "want and a need".
If you read most of my economic posts you will see that. I rant about savings a lot.
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Old 12-16-2008, 01:02 PM   #10
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That's exactly what I was thinking. A lot of people live like that on a daily basis, and always have. They just don't happen to fit into purpleoscar's rampant consumerism generalization.
I assume that it's rampant consumerism because people used to save much more in prior generations and current ones almost exclusively don't. The savings rate has been at historical lows for a long time now.
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Old 12-16-2008, 01:13 PM   #11
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I assume that it's rampant consumerism because people used to save much more in prior generations and current ones almost exclusively don't. The savings rate has been at historical lows for a long time now.
On average, yes, but that doesn't mean that you should automatically assume that everybody subscribes to that sort of lifestyle. Some people live frugally as it is, and when job loss or extra, unexpected debt occurs, it can be devastating.
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Old 12-16-2008, 01:30 PM   #12
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I assume that it's rampant consumerism because people used to save much more in prior generations and current ones almost exclusively don't. The savings rate has been at historical lows for a long time now.
Yes, but it also depends on where you live. In Germany the savings rate is extremly high. We have a discussion about those consumption coupons. Most people find that ridiculous and say that the government is squandering....not easy to encourage the germans to spend more money...
On the contrary it seems like some americans don't know the word 'saving'.
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Old 12-16-2008, 02:04 PM   #13
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there's nothing wrong with spending as long as you have the funds to do so
to buy the same shoes in a different colour with you credit card - never a good idea
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Old 12-16-2008, 04:01 PM   #14
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I assume that it's rampant consumerism because people used to save much more in prior generations and current ones almost exclusively don't. The savings rate has been at historical lows for a long time now.
And how has the cost of living skyrocketed?

Maybe savings is also at an all-time low since it cost people like me some $100K to finish my 2 degrees.
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Old 12-16-2008, 04:47 PM   #15
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Maybe savings is also at an all-time low since it cost people like me some $100K to finish my 2 degrees.
So you got a student loan, then?

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