"Thrift."

We checked the dictionary to see if the word was still there. We thought it might have been tossed out for lack of use.

But no. There it is.

"Wise economy in the management of resources; frugality" says the American Heritage Dictionary.

We looked it up because we thought it might be useful.

To every thing there is a season. Frugality's time may be coming round.

When you hear about deficits, you think of America's great 'twin' deficits
- one in federal finances, the other in its foreign trade. What is rarely considered, is a hidden triplet - America's household deficit.

There are two ways to get rich, dear reader. You can do it the old fashioned way...or you can get lucky. Traditionally, the way to get rich was the same as the way to get a good night's sleep. Families looked at two numbers: One was their revenue; the other was their expense. If the former was larger than the latter, they could sleep well at night. And getting rich was just as easy. It was just a matter of degree; the larger the spread between the former and the latter, the richer a family became.

But the housing boom of the early 21st century, following as it did the great stock market boom of the last century, changed everything. It was a new era, in that people got so lucky, they began to think that luck was the only way to get rich. Suddenly, the difference between income and outgo turned negative. American households began running deficits.

Household deficits are rare in American history. Never before did people have to go running to the dictionary to find out what the word 'thrift' meant. It was one of the first words people learned. Even without degrees in economics or financial management, they were nevertheless able to make sure outgoes did not exceed incomes - except in a few special circumstances.

One of those circumstances was the Great Depression, which pushed down incomes to the point where outgoes couldn't readily keep up. In two years, during the '30s, U.S. households ran in the red.

Another special circumstance occurred directly after WWII. So many new households were formed (returning GI's couldn't wait to get back to civilian life) and so much demand had pent up during the war years, that for four years in the postwar period, households dipped into savings to buy houses, cars, appliances and so forth.

Other than those special cases, from 1929 to 2006, the only other time American households ran deficits was in the last six years. And during these last six years, the deficits have not only been unusual in that they were financed by debt rather than savings, they were also unusual in that they were breathtakingly large. Last year's household deficit - defined as personal disposable income minus personal consumption and residential investment - hit $477 billion. This year, households are on target to beat the $500 billion figure. In other words, American households are running bigger deficits than the U.S. government!

How long can this go on? Not forever. Borrowing against housing has financed the deficits. Now housing is going down.

"Five year rally in home prices ends in Ventura County," says one headline.

"Phoenix: Prices, Sales Tumble," says another.

"Home prices fall in some Calif. Markets," adds the Associated Press.

If they are unable to continue borrowing, what will American households do?

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.