It's hard to find anything to smile about in the economy these days. Portfolios are in tatters. Jobs are being slashed. The market can't find a floor. National debt can't find a ceiling. Inflation, oil, home prices … it's not hard to see why the myriad issues draw comparisons to the Great Depression.

Yet beneath the ruckus, one statistic -- perhaps the most vital component of getting back on a sustainable track -- is doing better than it has in years.

People are saving money again.

And in a big way
The Bureau of Economic Analysis reports consumers saved an annualized $297 billion in the second quarter -- more than 10 times higher than the first quarter, and the highest quarterly savings since 1995. From 2004 through 2007, the average rate was around $85 billion. In the third quarter of 2005, things got really out of hand, with a negative savings rate … meaning that as a collective body, living paycheck-to-paycheck meant you were ahead of the pack.   

Thank goodness those overextended days are gone.

It's about time
As was the case with oil prices, people don't start changing their ways until the problem is shoved down their throat. It took $4 gasoline to get people to wake up, and to get innovation from companies like Sasol (NYSE:SSL) and electric cars from Toyota (NYSE:TM) and General Motors (NYSE:GM) to start being taken seriously. Necessity is the key to innovation, the proverb goes.

The same goes for saving. As Lehman Brothers, AIG, and Bear Stearns will tell you, greed clouded by optimism can be an awesomely overwhelming force. Saving went out of style because, at the rate things were going, few saw a need to. Why save when your house went up by 20% every year?

That's all changed in the past few months as people are realizing that Visa (NYSE:V), MasterCard (NYSE:MA), and American Express (NYSE:AXP) will make you richer in your brokerage account than they will in your wallet. As reality sets in for millions of Americans blindsided by home foreclosures and job losses without a safety net to fall back on, people are scrambling to rebuild and replenish their personal balance sheets by saving again.

And that problem was yours and yours only
Which brings up another point: Can we really put all of the blame for our current woes on Wall Street? Of course, the army of Harvard-stupid Wall Streeters (thanks, Bill) were leading the charge, orchestrating the disaster we're now facing. They screwed up. They should pay the price. And they are.

But the larger picture is that it wasn't just Wall Street gorging on more debt than they could handle and taking excessive risks. It was nearly everybody. By 2005, over a quarter of Americans' income went toward revolving debt payments. Debt was the lifeblood of the economy, and the chickens have come to roost.

I dug up a few headlines from major newspapers and magazines, all published between 2001-2006, that might remind us how overextended we were. Here are a few:

  • Saving in 2005 Worst Since 1933
  • Equity Shrivels as Homeowners Borrow and Buy
  • As Personal Savings Fall, a Comeuppance Is Due
  • The Way We Live Now: Home Sweet Debt
  • Our Vanishing Savings Rate
  • Overwhelming Majority of Americans Feel Consumers Are Taking on Too Much Debt

So, yeah, maybe it wasn't just Wall Street
When AIG (NYSE:AIG) gets in over its head, it's a sin, and they're a criminal. When John Q. Citizen gets in over his head, it's a tragedy, and he's a victim. That blame game is an irony to this debacle that'll likely only prolong our recovery.

But enough pointing fingers. For once, let's focus on the good news: People are saving again!

How does that help the economy? Countries, like people or business, grow wealthier over time by saving money and investing it wisely. It really is about as simple as that. True, our economy managed to grow over the past decade with little or no savings. How? We borrowed. And that's why it's falling apart today.

When an economy saves money, it has the resources it needs to invest without borrowing from someone else (Chinese and OPEC nations), and it creates real wealth. Domestic savings creates a pot of money borrowers can turn to for investments in projects that eventually create jobs, keep interest rates low, and push the economy along at a sustainable pace. The important part is that it's our savings -- not savings from foreign nations we became beholden to over the years to sustain our lavish lifestyles.

The bottom line is simple: people -- and economies -- that work hard and spend less than they make will grow wealthy. People -- and economies -- that borrow heavily and spend more than they make will grow poor.

It doesn't get much easier than that.

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