Is America about to become a nation of savers?
My bet: People will save more on average than they did over the past two decades.
The personal savings rate averaged 9.6% in the '70s and 8.6% in the '80s. It dropped to about 5% in the 2000s and rose to an average of 7.8% from 2010 to 2019.
I wouldn't be surprised if it returned to the 1970s average at least in the post-pandemic economy. (The rate jumped early in the pandemic, largely driven by the potent combination of fiscal support and lockdowns.)
Experiences shape how people think about money. In "Exposure, Experience, and Expertise: Why Personal Histories Matter in Economics," economist Ulrike Malmendier of the University of California, Berkeley, writes that research suggests the pandemic will affect our economic expectations post-pandemic.
"The growing research on experience effects implies that the answer is yes — that there will be long-term changes in beliefs and behavior even 'ceteris paribus,' even if we were actually back to a world pre-Covid-19," she writes.
Experience matters. For instance, I worked on a radio documentary that looked back at the double-digit inflation rates of the late 1970s and early 1980s. Inflation is bad for savers, but it's good for borrowers since they pay off loans with depreciated dollars.
Americans embraced debt during the inflationary era and the habit continued long after inflation moderated.