The people who created this country built a moral structure around money. The Puritan legacy inhibited luxury and self-indulgence. Benjamin Franklin spread a practical gospel that emphasized hard work, temperance and frugality. Millions of parents, preachers, newspaper editors and teachers expounded the message. The result was quite remarkable.

The United States has been an affluent nation since its founding. But the country was, by and large, not corrupted by wealth. For centuries, it remained industrious, ambitious and frugal.

Over the past 30 years, much of that has been shredded. The social norms and institutions that encouraged frugality and spending what you earn have been undermined. The institutions that encourage debt and living for the moment have been strengthened. The country’s moral guardians are forever looking for decadence out of Hollywood and reality TV. But the most rampant decadence today is financial decadence, the trampling of decent norms about how to use and harness money.....

There are dozens of things that could be done. But the most important is to shift values. Franklin made it prestigious to embrace certain bourgeois virtues. Now it’s socially acceptable to undermine those virtues. It’s considered normal to play the debt game and imagine that decisions made today will have no consequences for the future.

On the front page of Sunday’s Times, Gretchen Morgenson described Diane McLeod’s spiral into indebtedness, and now a debate has erupted over who is to blame.

Some people emphasize the predatory lenders who seduced her with too-good-to-be-true credit lines and incomprehensible mortgage offers. Here was a single mother made vulnerable by health problems and divorce. Working two jobs and stressed, she found herself barraged by credit card companies offering easy access to money. Mortgage lenders offered her credit on the basis of the supposedly rising value of her house. These lenders had little interest in whether she could pay off her loans. They made most of their money via initial lending fees and then sold off the loans to third parties.

In short, these predatory companies swooped down on a vulnerable woman, took what they could and left her careening toward bankruptcy.

Other people emphasize McLeod’s own responsibility. She is the one who took the credit card offers knowing that debt is a promise that has to be kept. After her divorce, she went on a shopping spree to make herself feel better. After surgery, she sat at home watching the home shopping channels, charging thousands more.

Free societies depend on individual choice and responsibility, those in this camp argue. People have to be held accountable for their indulgences or there is no justice. As McLeod herself admirably told Morgenson: “I regret not dealing with my emotions instead of just shopping.”

If you go to the online comment section affixed to Morgenson’s article, you see advocates of these two positions talking past one another, one side talking the morality of social protection and the other the morality of personal responsibility.....

Free societies depend on individual choice and responsibility, those in this camp argue. People have to be held accountable for their indulgences or there is no justice.

One of the most humbling challenges we scribes face is to attach a meaningful name to an era.

How do you describe a time of obscenely easy credit; stock and housing bubbles; stratospheric Wall Street profits, outlandish banker salaries and general prosperity?

Now that the post-bubble age is prompting painful bailouts as the world economy reels from a credit crunch and writes down bad debts, it's time to consider what I call the Age of Froth.

Not only will the aftermath of this epoch be ripe with bankruptcies, foreclosures and bailouts, it will be a time of great reckoning. Building equity and saving will be vital.....

When Robert J. Shiller looks at the subprime-mortgage maelstrom, he sees more than Lehman Brothers Holdings Inc. and Merrill Lynch & Co. sliding down the financial drain. He sees parallels to the Treaty of Versailles, the Great Depression and the Marshall Plan.

``The subprime crisis is the name for what is a historic turning point in our economy and our culture,'' he writes in ``The Subprime Solution,'' a lucid primer on how we slipped into this money pit and what it might take to clamber out of it.

The Yale economist and author of ``Irrational Exuberance'' says the crisis has unleashed forces that are tearing at America's social fabric and will probably slow economic growth for years. He likens the struggle to the punitive reparations imposed on Germany after World War I.

``Once again, many people, unable to repay their debts, are being pursued aggressively by creditors,'' creating a sense of helplessness and betrayal, he says. We may be witnessing what he calls ``the first act of a long and complex tragedy.''

Shiller is sometimes called a Cassandra, and his prophesies about the dot-com and housing bubbles did come true. Yet in these pages he sounds more like a visionary optimist who considers today's emergency to be a grand opportunity.

The subprime crisis, he says, ``can be transformed in its aftermath into a better environment for extending the financial franchise, for further democratizing finance.'' He draws an analogy to what happened after the housing crisis of 1925-33.....

Some of us—especially those under 60—have always wondered what it would be like to live through the kind of epochal event one reads about in books. Well, this is it. We're now living history, suffering one of the greatest financial panics of all time. It compares with the big ones—1907, 1929—and we cannot yet know its full consequences for the financial system, the economy or society as a whole.

I'm betting that, in the end, the world's governments will win this battle against fear. They have potentially unlimited tools at their disposal, especially if they act in concert. They can nationalize firms, call bank holidays, suspend trading for weeks, buy up debt and equity, and renegotiate home mortgages. Most important, the American government can print money. All of these tools have long-term effects that are extremely troublesome, but they are nothing compared with the potential collapse of the financial system. And Washington seems to have recognized that it must do whatever is required to shore up that system. Big questions remain. What will it take to stop the fall? How costly will it be? How long before the rescue plan starts to have an effect? But at some point, the panic that gripped world markets last week will end. Of course, that will not mean a return to growth or a bull market. We're in for tough times. But it will mean a return to sanity.

Amid all the difficulties and hardship that we are about to undergo, I see one silver lining. This crisis has—dramatically, vengefully—forced the United States to confront the bad habits it has developed over the past few decades. If we can kick those habits, today's pain will translate into gains in the long run.....

Former Federal Reserve Chairman Paul Volcker said the U.S.'s $700 billion bailout of banks is necessary and will help mitigate the effect of an almost inevitable recession.

The bailout measures were ``distasteful'' and ``not consistent with a capitalistic system,'' Volcker said at a lecture in Singapore today. ``But however distasteful, they are necessary to restore stability to the financial system.''

Global equity markets rallied, with Japan's benchmark index jumping the most on record, as the Bush administration prepared to invest $125 billion in nine of its biggest banks. France, Germany, Spain, the Netherlands and Austria yesterday also pledged 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders.

The bailout will help turn an ``inevitable recession into something more manageable and that will last not too long,'' said Volcker, chairman of the Fed from 1979 to 1987. The global financial system is in ``intensive care'' and will remain there for a considerable time before things return to normal, he said.....

The global financial crisis of 2008 comes as no great surprise to people who study human behavior and decision-making. As with love and sex, financial decisions made by individuals, corporations and governments are emotional and tend toward the irrational.

Couple that with the fact that economies are cyclical, and occasional meltdowns are inevitable, researchers say.

"Our reactions to money, like many other decisions in our lives, are guided in part by intellectual experience and in part by our hearts," said Ellen Peters of Decision Research, which recently polled Americans to learn their level of fear and frustration with the present crisis.....

The U.S. may be on its way to becoming a nation of savers, whether Americans like it or not.

With home and stock prices declining and credit hard to come by, consumers who have fallen out of the savings habit are being forced to curb borrowing and rein in spending.

That is bad news for companies catering to them, which will have to retrench as well. Detroit automakers may need to slash costs and merge as Americans hold onto their cars longer. Shopping malls might be forced to shut as retail traffic trails off. Hotels may have to shelve expansion plans as vacationers become stingier with their dollars.

The big concern is that households, spooked by the turmoil in financial markets, will cut back rapidly and sharply, plunging companies into bankruptcy and deepening a recession that many economists say has already begun.

``If we did have a quick cut in spending, it could turn a pretty nasty recession into possibly the worst downturn we've seen in the postwar period,'' says Michael Feroli, a former Federal Reserve official now at JPMorgan Chase & Co. in New York. Even without a collapse of consumer spending, Feroli expects the economy to contract by 2 percent in both this quarter and the next.

There are signs that consumer spending is already giving way. U.S. retail sales fell in September for the third straight month, the longest slump since the government began keeping records in 1992. And consumer confidence as measured by the Reuters/University of Michigan index fell by the most on record this month. Fed Chairman Ben S. Bernanke will give the central bank's latest assessment of the risks to the economy when he testifies before the House Budget Committee today.....

We interrupt this recession to bring you news of another crisis that is much more pleasant to deal with. Now that shoppers have sworn off credit cards, we’re risking an epidemic of a hitherto neglected affliction: saver’s remorse.

The victims won’t evoke much sympathy — don’t expect any telethons — but their condition is real enough to merit a new label. Consumer psychologists call it hyperopia, the medical term for farsightedness and the opposite of myopia, nearsightedness, because it’s the result of people looking too far ahead. They’re so obsessed with preparing for the future that they can’t enjoy the present, and they end up looking back sadly on all their lost opportunities for fun.....

Americans so far have stubbornly refused to spend their way out of this economic crisis. It’s time to acknowledge that’s about as likely to happen as actress Tara Reid is to sign up for more breast-implant surgery.

Reid’s problems started the way ours did: with buying -- not too little -- but too much. Two years after she got her implants in 2004, Reid told US magazine that her doctor gave her 34-Cs instead of the “big Bs” she says she wanted.

Her doctor may have felt his upsizing was in keeping with the spirit of the times. Between 1998 and 2007, U.S. consumers added $2.4 trillion onto our former spending level to buy overstuffed furniture for oversized houses; seasonal Coach handbags in multiple colors; timeshares in Park City, Utah, and Costa Rica; bigger, smaller and reshaped body parts; humongous flat-screen TVs.

Consumer spending over this period made up 86 percent of gross domestic product growth, which was averaging a healthy inflation-adjusted 2.8 percent a year. This was the “consumer economy,” which we lauded as a wonderful thing.

Reid was open about how she rationalized her faux façade. “I figured, I’m in Hollywood, I’m getting older,” she said.

We weren’t as savvy about how we justified this spending at a time when inflation-adjusted average wages over the decade increased only 0.6 percent a year, and the savings rate was almost zero. It made no sense to look at the GDP numbers and think, “Wow, those babies are impressive” -- but we did.....

In his Labor Day weekend address on the American worker, President Obama, with little fanfare, announced some initiatives to help Americans save more money. One such step will allow employees to receive their tax refunds in the form of U.S. Savings Bonds instead of in cash. Another will promote automatic enrollment in retirement funds for workers at medium and small firms so that employees will have to opt out of saving, rather than opt in. Studies show that this results in more saving.

All these steps should add to the national savings rate. It is a goal Obama campaigned on — and one that policy wonks and pundits have been screaming about for years. The United States is staring at frightening retirement deficits, infrastructure needs and health care liabilities. How else to meet them but to start saving and stop borrowing money?

Here’s the funny part. The American consumer kicked the borrowing habit more than a year ago. The country, you may have noticed, is in an economic crisis, and most economists say the only way out is for consumers to start spending money. Spending is the opposite of saving.....

We have an apology to make: We were wrong.

These words don't come easily to us, but the season has got us thinking about Charles Dickens' A Christmas Carol and the cleansing act of repentance. We feel impelled to acknowledge our errors in the hopes that, like Mr. Scrooge being reborn, we might change our own ways.

Sorry if you're confused. But walk back with us, if you will, to meet the Ghost of Economy Past. Can you recall the autumn of 2008? It may seem, from this vantage point of Dow 10,000/TSX 11,000, a strange and unfamiliar place. The thing is, we said some things back then that, at the time, seemed very reasonable. Across the economic landscape had come portents of doom, and so across the media landscape we and our colleagues made predictions of radical change. In BusinessWeek and Time and Maclean's and research papers from economists, there was word of a new frugality taking hold.....

A two-bedroom apartment. Two cars. Enough wedding china to serve two dozen people.

Yet Tammy Strobel wasn’t happy. Working as a project manager with an investment management firm in Davis, Calif., and making about $40,000 a year, she was, as she put it, caught in the “work-spend treadmill.”

So one day she stepped off.

Inspired by books and blog entries about living simply, Ms. Strobel and her husband, Logan Smith, both 31, began donating some of their belongings to charity. As the months passed, out went stacks of sweaters, shoes, books, pots and pans, even the television after a trial separation during which it was relegated to a closet. Eventually, they got rid of their cars, too. Emboldened by a Web site that challenges consumers to live with just 100 personal items, Ms. Strobel winnowed down her wardrobe and toiletries to precisely that number......