“I want to say we’re in a recession, but that’s not a strong enough word. In some regions it’s a depression.”

– William Hensler, chief executive, Wickes Lumber

After a record eight-year peacetime expansion, the U.S. is in the midst of a slump that could swiftly spread to America’s trading partners. Japanese investors have lost nearly $2 trillion of wealth as shares on the Tokyo Stock Exchange declined more than 40% since last December. The stunned Japanese are paring back their lending just as Eastern Europe and Third World nations desperately seek cash to pay runaway oil bills. At a time like this, consumers and investors seek signs that people in charge are doing the right thing…While Washington fiddles, the faltering U.S. economy has started imposing hardships that recall the severe slumps of the 1970s and early 1980s. Major American companies are slicing costs to the bone and declaring sweeping layoffs. “It’s going to be brutal. Many businesses are broke, but won’t admit it yet,” says Irwin Jacobs, a Minneapolis financier…In the meantime, consumers and business leaders will have to adjust to a climate radically different from the 1980s, when the economy was reliable and forgiving. “We’re in tough times in a very dicey world. There’s going to be a lot of fallout,” predicts Donald Jacobs, dean of Northwestern University’s Kellogg Graduate School of Management. In large part, the U.S. and the world are paying for the excesses of the 1980s, in which companies, consumers and speculators lived far beyond their means. —Times, 10.15.90

Think about that last sentence: “companies, consumers and speculators lived far beyond their means.” Isn’t living far beyond our means a large part of what triggered the most recent meltdown? Some signs indicate that maybe, just maybe, we’re learning the lesson this time:

• The U.S. savings rate rose to 6.9% in May 2009, an improvement over the 1% rate in 2005, 2006, and 2007. (source)
• “…the number of consumer loan payments, such as credit-cards, mortgages or auto loans, that were 30 and 60 days past due fell by nearly 1.1 million to 13.9 million during the three months ending June 30.” (source)
• “…household borrowing fell to 128 percent of the average family’s after-tax income in the first quarter from a record 133 percent in the same period a year earlier.” (source)
  

One question: can we stick with the good behavior when thinks things get “better” or will we repeat history?