Why Americans Became More Responsible About Spending Money

Alan Greenspan stood before Congress a decade ago and complained that "Children, dogs, cats and moose are getting credit cards." That's how America used to work. You didn't need a job or an income to spend money. If you had a will to spend, someone -- usually a bank -- found a way.

But things have changed. According to Bloomberg, the correlation between Americans' wages and their spending is the highest it's been in almost half a century. "This means consumers are keeping their spending more in line with their incomes," Bloomberg writes. Congratulations!

But there's another point here: The amount of money Americans are saving is still puny. The personal savings rate has averaged 3.7% over the last year, compared with a long-term average of 7% and a 30-year average of more than 5%.

Can we really say Americans are being responsible about their spending when they're saving so little money?

Yes, actually.

Americans may be saving less money today than in the past because we have a larger safety net. And I'm not talking about unemployment insurance or Social Security. I'm talking about bankruptcy.

Take a look at this:

Source: Federal Reserve.

Bankruptcies per 1,000 people have utterly exploded in the last 50 years. That's partly because we have more debt today than we did back then, but bankruptcies have also increased because:

Laws have loosened. Personal bankruptcy used to spell nothing less than the complete ruin of someone's financial well-being. The Chandler Act of 1938, and to a larger extent the Bankruptcy Reform Act of 1978, expanded bankruptcy laws in favor of debtors, making bankruptcy filings more appealing. Attitudes about bankruptcy changed. As law professor Rafael Efrat explains in this paper, the stigma behind filing for bankruptcy shifted noticeably around the 1960s. "By shifting attribution of fault away from the financially troubled individual, American society may have developed a more positive attitude toward the individual that was manifested by less anger and more sympathy with the plight of the individual," he writes.

Americans don't need to save as much as they did in the past because the escape hatch of bankruptcy is now more user-friendly and accessible. Occupy Wall Street laid blame on the credit practices of consumer-centric banks Bank of America (NYSE: BAC  ) and JPMorgan Chase (NYSE: JPM  ) , but credit is a two-way street: Banks supply credit products that consumers demand. And consumers may demand those credit products more today than they did in the past because the downside consequences have been mitigated through changes in the personal bankruptcy process.

What do you think: Is this moral hazard? Are we encouraging risky behavior or providing a vital safety net for consumers? Let me know in the comment section below.