Fear and Loathing

Writeindependent.org  – economy – hoarding – job creation – stimulus – economic – hardship – wealthiest – wealthy – production – American Express Publishing and Harrison Group – 2012 Survey of Affluence and Wealth – America – Jim Taylor

The biggest barrier the economy has to bouncing back is this problem of hoarding. It’s not just the biggest companies and banks holding onto too much cash. It’s individuals as well. Read:

The 2012 Survey of Affluence and Wealth in America, from American Express Publishing and Harrison Group, finds that the wealthiest Americans are hoarding three times as much cash as they were two years ago. Their savings rate soared to 34 percent in the second quarter of 2012, up from 12 percent in 2007.

This skyrocketing savings rate is the flip side of lost confidence. A whopping 82 percent of the wealthy respondents said they would increase their spending and investing if they had more confidence in the future.

“[The wealthy are] basically stuffing money under the mattress,” says Jim Taylor, vice chairman of Harrison Group. “This has resulted in people managing their risk to a ‘no loss’ position rather than a ‘real gains’ position,” Taylor said. “That’s not the great tradition of American investing.”

In other words, the wealthiest are saving at a rate that is 3 times the amount they saved a few years ago. This money, if not circulated in the economy, does much to starve the economy of jobs and needs to be put to productive use. It’s a vicious cycle: people lose confidence in the markets, they hoard cash, the cash stops flowing to businesses, and the businesses lay off people, decreasing customer’s ability to pay for goods and services, which causes fear in potential investors.

We are our own worst enemies.



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