From the WSJ: Consumers Hoard Gas Savings; Banks Experience “Shrinkage”

The Wall Street Journal informs us that people are saving the $10 extra they don’t need to spend on gas these days!

Basically the article says that the economy is better, blah blah blah, and we should, by all measures, be running out to spend money.  Because that is the foolhardy knee-jerk reaction exhibited by Americans at all other points in history when the economy went from calamitous to terrible.  But… we are not running out to the stores!  We are taking our $50 and saying “I can do something better with this than blow it immediately!”  People are paying down credit debt: a sign that the credit problem in this country has reached an all-time low.  It is like when druggie celebrities finally give up and turn themselves in to rehab.  But this is probably for the best.  Good for America!

Amazingly, banks are witnessing this turn of events with horror.  But this shouldn’t be so surprising: what is good for banks is bad for everyone else, and vice versa.  People paying down their credit debt naturally is bad for banks.  Discover Company actually “blamed lower gas prices for ‘lowering its growth rate.'”  Which I believe is financial talk for “I was in the pool!”  I anticipate lots of flashy credit card sign-on bonus offers arriving in the mail before too long.

I have some observations about this whole thing:

  • If you are seeing $60/month savings as the article’s statistic suggests, I feel sorry for you.  It sounds like you are driving around a lot, or have an overly large or highly gas-inefficient automoile.  Both of those situations seems undesirable to me.  I have seen about a $20/month reduction in gas costs myself, and drive 6 miles to work in a moderately sized Subaru.
  • The idea that $20 or $60 in a month would be a windfall is kind of shocking to me.  Although it sounds like the rest of America had the same reaction.  How much money would have to arrive at your doorstep before you would consider spending any of it lavishly?  For me that sum would be about $1,000.  So at my rate of monthly gas savings, the gas prices would need to stay low for about 4 years before I would get excited.
  • It is also really sad to expect that people would run out and spend an extra $50 in an economy like this.  I remember the Bush Stimulus and getting an actual large check in the mail around 2007.  The economy was doing well at the time, but I wasn’t, and I spent the money paying down debt.  But I could see that move stimulating commerce on the larger scale.  These days however, it is not surprising that people are stuffing bills under the mattress.  Consumer debt is higher than ever, and wages are historically stagnant.  Not to mention our economy is incredibly inflated with bond purchases, and people are losing confidence in our Treasury Notes and the stock market.  There is every reason to be nervous right now.

Anyway this article brought a smile to my face, with the triple punch of consumers being sensible, analysts being silly, and banks being sad.  Happy snow shoveling for everyone in the Northeast!

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