So, are we saving more or not?

According to the federal Bureau of Economic Analysis, the national annual savings rate fell in 2005 to its lowest point since the Great Depression: negative 0.4 percent. Since then, it has continued to fall, registering at negative 1.6 percent in May 2006 and negative 1.5 percent in June. Compare those numbers with 1985 when the national savings rate hit a record 11.1 percent.

But at the same time, Federal Deposit Insurance Corp., or FDIC, records show that American banks have more cash in their vaults than at any other point in recent history -- with $6.4 trillion deposited in the domestic offices of U.S. banks as of June. Of that $6.4 trillion, $5.23 trillion was in some type of interest-bearing account, such as a money market account, savings account or certificate of deposit, says Ross Waldrop, senior banking analyst for the FDIC. That's up $500 billion from June 2005.

But, we are spending our savings at a record pace. It's the only way the middle class has been able to fill in the gap when real wages can not keep up with the rising cost of goods and services. In 2005, Americans spent a record $9.07 trillion, up 6 percent from 2004 when consumers spent $8.5 trillion. After stocks crashed in 1999 and 2000, homes took over as the appreciation darling. Again flush with paper wealth after the value of their homes ballooned, families had easy access to cash through cash-out mortgages, enabling the buying binge to continue.

The Wall St. Journal reports that data developed by former Federal Reserve Chairman Alan Greenspan and Fed economist James Kennedy suggest consumers "extracted" cash from their homes -- such as through cash-out refinancings or home-equity loans -- at an annual rate of $497 billion in the second quarter. That was down sharply from a peak of $871 billion in the third quarter of 2005.

One problem: According to CNN Money, in 2005, 34.5 percent of homeowners with a mortgage were paying 30 percent or more of their gross income on housing costs, according to Census Bureau's American Community Survey - a level that is widely seen as a limit of affordability. That's up from 26.6 percent in 2000. Read Americans becoming increasingly house poor.

And for renters the news is as bad, according to the Census Bureau's American Community Survey, which said that last year almost 46% of all renters paid 30% or more of their gross income on housing.

source: Bankrate.com