Why aren’t Americans still saving?

James Saft is a Reuters columnist. The opinions expressed are his own.

A look at the fall in the U.S. savings rate raises one crucial question: are Americans crazy, or just broke?

The answer may hold the key for whether the country is headed for another recession or a policy-engineered recovery.

The personal savings rate fell in September to 3.6 percent, the lowest since December 2007. Given that household balance sheets are still under stress from tumbling housing prices — and tiny rates of savings for much of the last decade — this makes little sense as a strategy.

If anything, the past 20 years should have taught Americans that their expectations about how fast their assets can grow, and how likely they are to be dealt a financial blow like illness or unemployment, were too rosy. Conventional wisdom in the wake of the great financial crisis was that savings were headed higher and would stay high for a long time. Many people in the U.S. were working a financial high-wire act without a net and needed to reduce risk.

Things have not turned out that way. The savings rate did claw its way higher in 2008 and 2009, ranging mostly in the 5 to 5.5 percent range, but started to head south this summer and has now been falling for three straight months.