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July 06, 2009

Have we changed our ways?

Consumers were on a spending binge for much of the last two decades, but this has come to a sudden halt with the recession. Have consumers seen the financial light and begun to put their financial house in order?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Yes they have. Since this recession began not only have consumers curtailed their spending, but they've also paid down on debt. For example, they have paid off $300 billion of debt since early 2008. Virtually every kind of debt - consumer debt, mortgage debt - is down. So consumers have been trying to rebuild their balance sheets, and this is certainly good for many consumers and many households. But there's a flip side. The flip side is that it's bad for business. To the extent that we're paying down our debt, we're not buying things. So this is one reason economists expect the economic recovery, when it does come, to be very modest."

Posted by Dave at July 6, 2009 08:17 AM