Wittnessing History

"I was there when....". I sometimes wonder what I'll look back on with whimsy when I'm older. I was there when Tiger Woods won the 2000 U.S. Open. I was there when Hands across America linked up in the middle of Washington D.C. I was there when Prince, Chaka Khan, and Dougie Fresh took the stage for an electrifying performance of Loddie doddie. Who knows what stories I'll bore my grand kids with over and over again. I do know that there will be stories that I share over and over again, and some of them will definitely start with "I was there when."

Lately, I can't help but wonder if this won't be one of those stories. "I was there during the roaring 90's and early 2000s. I was also there during the great awakening of the early 2000s. I was there when the world, and the U.S. changed forever." I believe we are living at a historic inflection point in our society. Since the 1970s we have been leveraging up on every dimension. People have borrowed, businesses have borrowed, our country has borrowed, and finally we have reached a point where there is nobody to borrow from and nothing to borrow against.

There is a weird thing happening in this latest recession. If you look backward in time, generally people save during the good times and borrow during the bad times. A key metric called the net savings rate has generally demonstrated this pattern. When times are good, this metric goes up and when the economy gets bad, this metric goes down. This time is different. Heading into the latest recession, the U.S. had a zero to negative savings rate meaning people were spending more than they made...that was during the good times. Now that times are bad, the net savings rate is actually going up meaning people are holding on to more of their money and putting it aside for the future. Its a double whammy given the consumer accounts for a majority of our economy. But, I think its an important symbol of what people are realizing: house prices don't always go up, times are not always good, and living beyond your means doesn't work.

It is going to be a tough lesson with long lasting ramifications; and its just getting started. But, in the end I fully believe that we will persevere. I believe we will learn and adapt and come together to bear one anothers burdens. But, I do wonder what the story will look like once we start looking back on what I believe is a very historic time.