Skip to comments.Americans have record wealth, but arenít spending it
Posted on 06/18/2013 5:50:17 AM PDT by SeekAndFind
In the economic history of our time, June 6, 2013, ought to occupy a special place. Thats the day the Federal Reserve disclosed that the net worth of American households the value of what they own minus what they owe hit $70 trillion, a record that exceeded the previous peak before the 2007-09 financial crisis. Higher stock prices and a long-awaited housing recovery are slowly restoring Americans lost wealth. By all rights, this symbolic crossing ought to improve confidence, prompt consumers to spend more freely and increase the economys growth.
Maybe it will. But dont hold your breath.
The wealth effect isnt what it used to be. For those who have forgotten, this refers to households tendency to spend some part of their increased real estate and stock market wealth and thereby boost the economy. During the boom years, Americans borrowed lavishly against rapidly appreciating home values. One Federal Reserve study estimated the extra cash at $700 billion annually from 2001 to 2005. Now psychology has changed. Careless optimism has given way to stubborn cautiousness. Wealth gains dont translate into similar amounts of higher spending.
(Excerpt) Read more at washingtonpost.com ...
Does anyone really believe what the Federal Reserve says?
Does anyone believe what the Washington Post says?
I highly doubt it
Welcome to the Obama Economy. In it, anyone taking these type of loans is a fool. And anyone taking an ARM for more than a year is sitting on a powder keg.
Consumers are up to their eyeballs in credit card debt and are trying to pay off the bills run up during Obama’s never-ending recession. Many have unemployed sons and daughters living back at home, some with children. It will only get worse next year, when ObamaCare robs the Middle Class of what little savings they have.
This is the real world outside the enclaves of the wealthy and government workers with cushy salaries and benefits.
When socialists rule, people hold on to what they have. We can’t spend money that we may need to survive on later.
File under Insult-to-Injury.
You know what will fix the economy and help out of work Americans?
Open the borders, let tens of millions in!
That's the ticket!
.....at least that's what they're voting on soon...
I believe them when they just told us more people are
unemployed- now inching backup- and the biggest
decrease of workers EVER in the work force is really...
A GOOD thing!!
Orwell never wrote fiction- he really saw our immediate Future.
that is exactly what the thieves are thinking
The national debt is a quarter of that and growing every day. We don’t have to spend it. Washington is already doing it for us.
Americans need to re-industrialize our own nation.
We do not have a great deal of time. Forget about Obama. Think of global geo-politics.
Everyone on the world is increasing in productivity, and all the armies in the world are becoming more formidable.
Except America’s. Our industry is being off-shored, and our industry is being sold. Has been now for nearly 30 years.
One after another. Sold. Millions upon millions of formerly productive Americans, now unemployed and on government support.
Forget about Obama. Stop selling off American factories, and start bringing home American jobs once again.
Yes. Record wealth Weimar Republic style. Just wait until gasoline hits $9.00 per gallon like that idiot Steven Chu wanted. Then we will really be wealthy!
And what's going to happen when Bernanke quits pumping a trillion dollars a year of Fed money into the stock market?
Chu, like his fellow travelers, is a misanthrope.
He looks at those peasants out there cluttering up his landscape, depriving him of the Walden paradise he deserves, and he wants them all dead.
$70 trillion isn’t what it use to be
in ‘bush dollars’, that’s about $35 trillion
“By all rights, this symbolic crossing ought to improve confidence, prompt consumers to spend more freely and increase the economys growth. Maybe it will. But dont hold your breath.”
Why would it prompt people to do anything but sew gold into their mattresses, with a Che Guevara want-to-be in the White Hut?
With the EPA and the IRS attacking productivity, why would anybody have confidence in their future earning power?
OBTW, as someone in the midst of moving, we have way more stuff than we need!
Pick a room in your house and make a trash pile and a charity pile.
Do this once a month and you’ll be surprised.
Don’t wait for a move.
Its mostly paper wealth due to overvalued stocks
What are you going to buy? Real estate that has a better than 50-50 shot of declining in value? Crappy eco cars that have been designed by green czars in the Obama Administration? Moochelle-approved Healthy For You foods? Hyper-queer clothing from the overstock sale at JC Penney?
Refi happens today...
Getting out of an arm to a higher rate, but lower than a one year “adjustment”.
There will come a day, and it comes closer, when Mr. Chu, screaming and wetting himself will be judged by the people he so despises.
Protect the seed corn.
Start buying now. Or you may be too late.
i used to put a lot of stuff out for the trash but now, the trash company will only take 96 gallons of trash ea week! I told them if you want a nice city you take all the trash people put out, I told them to bill me for anything I put out that was over the limit, but they said “That’s not how it works.” They further said it was a county “law”. I laughed and said counties don’t get to have “laws” only states do. No matter, they won’t pick it up
tools, land, skills, etc - hard to liquidate to pay off the “gimmedats”.
“You’ve made enough money” -Obama
I’m spending my wealth as fast as I can. The problem is that the shelves that are supposed to hold ammo and guns are nearly empty, so it’s hard to spend on what we need under the current regime.
Maybe. I said exactly that a couple years ago and I was wrong. I won't be wrong forever, but it could be a while longer.
The media (as an arm of the government and business) does everything it can to promote debt based consumerism.
Maybe some portion of Americans are waking up to the fact that there is more to life than endlessly buying stuff.
It’s really simple....the stock market is not real. It is merely a reflection of the QE policy / printing money policy. It will most likely collapse by up to 30% in the next year or so. Housing is NOT recovering and banks are dragging their feet on issuing new mortgages to people who are AAA credit worthy. PEOPLE HAVE NO CONFIDENCE IN THE FUTURE UNDER OBAMA AND HIS COMMIE POLICIES. AMERICA IS HEADING TOWARDS FINANCIAL COLLAPSE. Simple as that. Only when America becomes fiscally responsible, eliminates the socialist programs and creates jobs by getting us back on track will we stand a chance of resuming America greatness. Otherwise we are DETROIT on a national level.
Wealth gains dont translate into similar amounts of higher spending.
Well, why not. Afterall, we didn’t make that. It’s the government’s money. Sez so right there on the dollar bills. /s
And that number may well continue steadily to increase even as actual assets decrease in real value. The soaring of the stock market and the increase in RE values is arguably merely the primary price effect of the current inflation.
The aren’t spending it because the present trajectory of events and policy scares every rational person stiff. Moreover, this trajectory takes us right into Rampant Inflation Land, that means the direct destruction of all wealth stored in any form of money.
And anyone taking an ARM for more than a year is sitting on a powder keg.
Maybe. I said exactly that a couple years ago and I was wrong. I won’t be wrong forever, but it could be a while longer.
2008 - 2016
Been doing that GL.
I give a bunch of stuff to the vets almost monthly.
No you’re not wrong.
This is why inflation is relatively low. When people do start spending money freely watch out.
You’ve all heard of double-speak. This is at least quadruple-speak.
While this may be true, and I will admit to having a very hard time believing it, it’s like being thrilled for having $1000.00 when by rights you should have had $1333.00.
We have 23.5% of our potential workers out of work. None the less, these entities whoop it up and make happy faces for all to see.
I AM NOT impressed.
Some have barely more than they used to giving strength to this shameful announcement, and one third have nothing. Who heralds that? Certainly not these Orwellians.
I'm typical of retirees and others who worry about future resources. Used to be, money in the bank generated at least 4% interest that could be depended on. That was money that was spent by those on fixed income.
Now, with interest rates so low, the assumption is that you have to hold on to and increase savings as much as possible.
Anything to get your way out of them. Took us 7 years of hard work, a refi was part of the plan. Now it and all financial debts are gone.
You don't want to be in late in life and have a Mortgage around your neck!
That $70trillion is not only inflated dollars but it's spread across a bigger population. Correcting for the CPI and population growth--
--we're seeing per capita real net worth still way behind where we were.
On Individual Mortgages? - your whistling Dixie.
When it does happen it is collapse no matter if you had short or long term debt.
Not for those on fixed interest rates or those having no mortgages or better yet no debt.
Fear of coming inflation, rational or not, plays into the saving over spending mentality. Baby boomers and even younger generations are focused on high tuition costs for their offspring (and are treated to daily horror stories about student indebtedness), and on spiraling medical costs, a big consideration for those who are getting into their 50s and 60s.
A high priority for many, given their fear of a relapse in the overall economy, and/or their fear of rising taxes at the federal, state, and local levels, is to become debt-free -- with the possible exception of a mortgage on their primary home, and even there, some are aggressively paying down their mortgages, and/or refinancing to shorter-term (10 or 15 year) fixed-rate mortgages.
With that sole exception (and mostly because mortgage payments are still treated -- for now, at least -- favorably by taxation policy), the goal for many is to get out of all debt, despite the fact that financing rates on big-ticket items such as cars, home improvements, and appliances are at a near-record low rate. Whether this reflects an overly cautious attitude, or a prudent one, the fact is that many people are absolutely refusing to use their credit. No margin account with their broker; no new car unless or until they can pay cash; and obviously, no credit card balances being carried. And so, spending gets cut across the board -- dining out; vacations; clothing; home furnishings.
At the lower end of the socio-economic scale, such economies are not matters of choice, but necessity. What seems to have changed (if you buy the premise of the column -- and I largely do) is that those who can spend are increasingly opting not to.
Higher still in the socio-economic spectrum, sales of super-yachts and private jets are growing. But I see a great deal of caution in the upper-middle class, and even among those who are economically comfortable, but a notch short of great wealth.
And the elephant in the room: we have $110T+ in unfunded liabilities. It took ~100 yrs. for the ‘promises’ of the 2-party cartel to have stripped each and every one of We the People of any/all Posterity; with nary a peep from Peter nor Paul in the process.
Exactly. That's the customer base for our stores, and they are spending much more carefully than they did even two years ago.
Since it became apparent - around last June - that Obama was likely to be reelected, discretionary retail spending has fallen sharply. Most of the retail sales "up" figures you hear in the MSM are about price increases for gasoline and food.
The last election campaign featured great angst over the loss of manufacturing jobs. The number of U.S. manufacturing jobs has fallen, but it has little to do with outsourcing and a lot to do with technological innovation and its a worldwide phenomenon. During the seven years from 1995 through 2002, Drezner notes, U.S. manufacturing employment fell by 11 percent. Globally, manufacturing jobs fell by 11 percent. China lost 15 percent of its manufacturing jobs, and Brazil lost 20 percent. But guess what. Globally, manufacturing output rose by 30 percent during the same period. Technological progress is the primary cause for the decrease in manufacturing jobs. -Walter E Williams