A New Set of Priorities

Americans have lately gone on a savings spree. So far this year, they have been salting away 7.10 of each dollar --a nine-year high and far above the 5.50 considered normal. Deposits have been rising at an annual rate of 17% at commercial banks, setting new records for eight months running at savings banks. The nation's savings and loan associations, which were left dry by a net outflow of $1.4 billion in July 1966 because of the money crisis, last week reported a healthy $64 million increase in funds for July 1967.

The savings spurt began late last year, after banks and savings and loan associations raised the interest rates to com pete with the soaring rates offered by the bond market. Recently, consumers have been especially anxious to rebuild accounts shrunken during 1966 in anticipation of a tax increase and out of economy jitters. "The consumer and his family have been expecting the worst," says Chase Manhattan Bank Vice President John Deaver. "It takes them a while to get used to the idea that things are getting better."

In some ways, new-found thrift has helped the economy. For example, the cash piled up in savings accounts has expanded the supply of mortgage money, which in turn has helped revive the home-building industry. On the other hand, the money in the bank has held retail sales and auto purchases to a relatively sluggish pace.

Some Government economists see the trend as a new vice rather than an old virtue. Commerce Department Economist Louis Paradiso looks for a gradual return to normal, notes hopefully that "there never has been a prolonged high rate of savings." But that just may be the way things go in Washington. Walter Hoadley, the Bank of America's chief economist, finds nothing "alarming" in the current tightfistedness. "People are cleaning up their budgets," he says. "Frankly, the private sector is doing what the Government should be doing--establishing a new set of priorities for spending."

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