Great post Xin. I think you're absolutely right, people are finally coming to their senses.
But it's more than just that. The way capitalism is supposed to work in world where the government doesn't do bailouts, is that when banks don't have money, they increase interest rates, which encourages people to save. Then, the banks have tons of money, which they then can lend out. That is how money supply is naturally managed, and would be handled under normal market conditions.
Unfortunately we have the Federal Reserve which makes those decision based upon their whim. What's amazing to see is that people are increasing their savings with interest rates at ZERO percent. That means that people are putting money into savings purely because they don't want to spend it, without ANY monetary incentive (i.e. interest) to do so. Imagine if the Fed wasn't handing out free money to the banks and interest rates went up?! Imagine how many people would throw their money into a bank if they knew it would grow at 6% just sitting there?!
And that's why the government is worried, because sooner or later the Fed is going to have to raise rates. If they don't, they'll create inflation and the value of the dollar will plummet. And once that happens, people are going to love saving, not only for the security it brings, but also the interest. And when that happens the good old GDP, which you pointed out Xin, is mostly based on consumer spending, will drop like a rock. The reality is, our economy isn't as real or as glorious as we've been lead to believe. We have a great credit rating, but we're really broke. And sooner or later our creditor is going to do a credit check on us. God knows what they'll find.
