In America, 72% of the economy is dependent on the consumer. This means that for every dollar of GDP growth that we have seen or expect to see in the near future, seventy two cents of that will come from things that are driven, eaten, viewed, enjoyed, or otherwise consumed within America by Americans. In 1970, the national savings rate averaged 9.4%; in 1999, it was 0%. Today, however, we seem to be moving slowly back in the other direction - credit card accounts that were in some form of "troubled" status (at least 30 days past due) are at their lowest level so far this year, and the national savings rate has increased to 4.2%, a nine-year high, as of July 1. When I was studying macroeconomics in school, my teacher explained the Keynesian idea of leakage, a concept that evoked thoughtful acknowledgement from the studious and elicited giggles from those who were not. What I did manage to glean, however, was that when an individual saved a portion of their income rather than spending it all, that money "leaked" out of the economy and reduced GDP growth. Consequently, while consumers may be commending themselves for their increased fiscal responsibility, every dollar saved is seventy-two cents that is not being used to fuel economic recovery. 
 
Many people hold on very tightly to the idea that the latest recession was caused by reckless over-consumption. This is not completely inaccurate, but it is dangerously misleading - it seems to say that consumers being more cautious and frugal would lead to quicker recovery. While it may be appealing to believe that fiscal responsibility will soothe the ire of the wrathful gods, a sufficiently large reduction in consumer spending can cripple a central bank's efforts at monetary policy. When a nation enters a financial crisis, the first move of a central bank is often to increase liquidity, causing lower interest rates, which then causes the consumer to consume more - at least, in theory. When shell-shocked consumers begin to save rather than spend, monetary policy loses its effectiveness as a way to stimulate economic activity, because the incentives given originally to increase spending are no longer working. To illustrate, the Fed Funds rate is currently at the lowest level it has been since the inception of the Federal Reserve (between 0 and 0.25%), yet outstanding credit card debt has decreased this year for the first time since 2004. For a stronger example, consider that Japan, a country known for a high consumer savings rate, is just now beginning to emerge from a cycle of recession and stagnation that has lasted nearly twenty years.
 
As the United States emerges from the worst recession since the great depression, it is quite often asked, what's next: what type of recovery can be expected?
 
And the answer is:  the one we feed.