That’s the gloomy impression given by the AP in this article:

WASHINGTON - People once again spent everything they made and then some last year, pushing the personal savings rate to the lowest level since the Great Depression more than seven decades ago.

The Commerce Department reported Thursday that the savings rate for all of 2006 was a negative 1 percent, meaning that not only did people spend all the money they earned but they also dipped into savings or increased borrowing to finance purchases. The 2006 figure was lower than a negative 0.4 percent in 2005 and was the poorest showing since a negative 1.5 percent savings rate in 1933 during the Great Depression.

Not surprisingly, the AP decided to run with this doom and gloom angle in the face of otherwise very positive economic news:

For December, consumer spending rose a solid 0.7 percent, the best showing in five months, while incomes rose by 0.5 percent, both figures matching Wall Street expectations.

In other news, the Labor Department reported that the number of newly laid off workers filing claims for unemployment benefits dropped by 20,000 last week to 307,000. That improvement pushed the four-week average for claims to the lowest level in a year, indicating that the labor market remains healthy.

And what the AP doesn’t get around to telling you until the 6th and 7th paragraphs is that the current savings environment for Americans is much different than it was back in the 1930’s:

During the Great Depression when one-fourth of the labor force was without a job, people dipped into savings in an effort to meet the basic necessities of shelter and clothing.

Economists have put forward various reasons to explain the current lack of savings. These range from a feeling on the part of some people that they do not need to save because of the run-up in their investments such as homes and stock portfolios to an effort by many middle-class wage earners to maintain their current lifestyles even though their wage gains have been depressed by the effects of global competition.

I’d say that American wages aren’t growing as quickly more because of spiraling health care costs which eat into their take-home pay than international competition.  What kind of an anti-free trade protectionist wrote this article?

Anyway, back to saving, I think we need to remember that in 2007 the finances of your average American are much more diverse and complicated than the finances of your average 1930’s American.  In the 1930’s investing in the stock market was something reserved exclusively for white collar Americans.  If a “blue collar” American wanted to save up some money he/she just put it in the bank.  But these days nearly everyone with a full-time job has some sort of a retirement investment plan, and citizens all over the country have even taken to doing their own investing online.  To put it simply, most Americans are worth more than what is in their savings account at the bank.

We also need to remember that a lot of the things Americans purchase these days have equity that they didn’t used to have thanks to a whole new “second economy” of consumerism brought about, primarily, by eBay (along with Craig’s List and other services like that).  That an American can now buy a computer or PDA or plasma television, use it for three or four years, and then turn around and sell it again for maybe a quarter or so of what it was worth new is significant.  Things didn’t used to work that way.  It used to be that if you bought a television you kept it forever, eventually sticking it up in an attic or just throwing it away when it was no longer of use.  You might have been able to get a bit of something for it at a garage sale, but certainly putting some items up for sale in your driveway doesn’t give you access to the sort of used-items market services like eBay can.

Given these new realities, I think maybe it’s time we started to review some of our economic measures that don’t seem to fully grasp the changes in our economy over the last decade or so before we go wringing our hands about a new “Great Depression.”