Tim Geithner to World: Get Used to Americans Spending Less

It's a conundrum. Americans have been told for years they need to save more, but America been a society of spendthrifts. In this global recession, many have said that a recovery will not occur, including job recovery, until America starts spending again, yet here we have Tim Geithner, Treasury Secretary, saying that, as a matter of course, Americans will save more, and spend less in the future.

It's a confusing message. However, this is what U.S. Treasury Secretary Timothy Geithner was quoted as saying on Wednesday, in German weekly Die Zeit. The interview was conducted on Sunday in Istanbul, and is scheduled to appear on Oct. 8.

What Geithner was actually saying, was that not only do Americans need to save more, the global economy needs to get used to the fact that Americans are already saving more. Right now, those who are unemployed are definitely not spending, and that's a huge number of people. At the same time, those who are employed are also not spending, because not only have they lost a significant amount of their savings when the stock market declined, they fear for their jobs.

In the German translated text, Geithner said:

"Everyone is going to have to come to terms with the fact that we are going to save more in the United States. If the U.S. starts saving more, that changes the whole world's economic reality."

This is a stark reality for the world, and one that many have warned about for years. After all, even before the recession began, American jobs were being shipped overseas, and the question was who could pay the prices that Americans did? After all, you would be hard-pressed, even with China's accelerating economy, to find a Chinese citizen who could buy a $4,000 (or more) large-screen HDTV.

This is also why many have said that, despite the issue of deficit spending, the U.S. government needs to step up and spend, and worry about the deficits later, when the recovery is fully in place. As Robert Reich said in a recent op-ed piece:

So why is unemployment and underemployment so high, and why is it likely to remain high for some time? Because, as noted, people who are worried about their jobs or have no jobs, and who are also trying to get out from under a pile of debt, are not going do a lot of shopping. And businesses that don't have customers aren't going do a lot of new investing. And foreign nations also suffering high unemployment aren't going to buy a lot of our goods and services.

And without customers, companies won't hire. They'll cut payrolls instead.

Which brings us to the obvious question: Who's going to buy the stuff we make or the services we provide, and therefore bring jobs back? There's only one buyer left: The government.

That is, of course, controversial. Geithner, however, noted that China is already moving to push domestic spending, and not rely on exports (to the U.S. and others), as significantly in the future.

"In China, the government is at the forefront of thinking about new ways to reduce the dependence of the economy on export and investments."

Not only China, but other nations need to realize this stark fact as well. The U.S. is going to buy a lot less in the future, and all have to get used to it.