Approximately 15 months ago on a panel at the Colorado Graduate School of Banking, I indicated that the U.S. economy was coming into an extended period of economic moderation. My comment raised many eyebrows in the audience because the financial crisis was about to begin.

There are telltale signs that my prediction is becoming reality. Consumers have cut their annualized rate of debt by 10.4%, with a six-month consecutive decline according to Federal Reserve reports.

Consumers, particularly Baby Boomers, are curbing spending and paying down debt. A visit in the gym locker room at Virginia Tech after a rigorous game of noontime basketball confirmed this. Many individuals have increased their savings rate to 5-10% of income to make up for the losses over the previous year. As one Boomer stated, “We are a decade older compared to other crashes, and time is not on our side in the catch-up up game.”

Of course lenders, including the credit card companies, are tightening credit standards, offering lower credit limits on credit cards and fewer credit cards. Another factor fueling this decline in debt is the inability to use home equity as an ATM card as home values bottom out. Truly the wealth effect is in reverse.

When 70% of the U.S. economy is dependent on consumption, perhaps it is no surprise that people are reprioritizing. That is, saying no to all the frills and consumer goods, and simplifying life. Maybe the reset is not all that bad.

Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.