For years there was much bemoaning in academia and government that Americans' saving rate was abysmal.

But our economy is 70% consumer-driven.

This past year Americans have dramatically altered their behavior -- much higher saving rate and significant paying down of household debt.

And that worsens the unemployment situation.

Consumer confidence tanked last month and home sales in January were the lowest in a half-century. GDP at the end of 2009 finally went into positive territory in a significant way but in the 4th quarter that was mostly a consequence of replenishing inventories that had been drawn down in the previous quarters.

A rocky road ahead for America's workforce, probably for at least a few years. The last economic bubble is still deflating.

Deflation does seem the greater near-term threat to the economy. Inflation will surely shoot up at some point in the next several years.

If the government would exercise even a modicum of restraint when the economy next begins a sustained expansion then we could begin to get a handle on the deficits.