Thrift paradox: Is America's debt repayment slowing GDP?
After a decade of hyper-consumption, in which Americans bought and consumed at unsustainable rates, consumers cut back massively in 2008 and 2009. Some of this was due to cyclical belt-tightening that inevitably had to occur, and some of it was driven by a record 6.5 million layoffs that were part of the worst U.S. recession in at least two decades.
The consumption drop wasn't completely unexpected; earlier this decade, most economists saw that lower consumption period coming. However, what few economists or policy forecasting firms foresaw was the magnitude of the belt-tightening. Americans are paying down debt at a record rate, according to data compiled by Goldman Sachs (GS).