Dang...the last chart looks like the early 60'S...Hello Mad Men....
Get this last quarter's personal savings rate was 6.1%...the last time we were at that rate was the 1st qtr 1995. 12 month bill now .25 1st qtr 1995 6.03%
Excellent post.No doubt investors are worried, and no doubt Obama has not made things better.Still, we are less taxed and regged compared to previous prosperous eras, such as the 1960s. Also seemingly forgotten now is that a real and well-armed enemy, the Soviet Union, collapsed it military in the 1990s, and the world has been much safer ever since. We face a few punks with homemade bombs today--loathsome creeps, but not a threat to our national security (despite the hysteria you hear). In short, it is not a bad environment today. Jeez, the top tax rate used to 90 percent, then 70 percent. (thru the 1970s). I think an excellent sign was the Burger King buyout. This says to me there is a floor on prices going forward. If the public has no faith, private investors will takeover. The right-wing is selling doom-and-gloom, and maybe that is depressing the market. I think we see a sustained bull market in equities and property, just don't know when. Get used to low interest rates. The globe generates too much savings. Nowhere to put it all.
Oh, and we the Japan Wing of the Fed to realize that 20 years of zero infaltion is not a good idea.
I'm not sure how you can credibly call holding cash an embarrassment. If you would have kept your money in a standard savings account since 2001 or so you would have earned far superior inflation adjusted returns over the stock market.And if the economy is going to do so well in your eyes, short rates should head north and eventually beat inflation so the zero threshold will not last.Holding equities while they fell off the cliff in 2000 and 2008 was an embarrassment while the holders of cash were laughing all the way to the bank.Sad to see you resorting to CNBC style headlines.
It's not hard for me to imagine a "melt-up" scenario, in which risky asset prices rise significantly, and that in turn causes the demand for cash to collapse. The two reinforce themselves. Also, the decline in the demand for money would boost velocity and nominal GDP, and this could be the source of rising inflation. The Fed might get caught with its pants down, unable to react fast enough to keep the declining demand for money (i.e., the rising demand for loans) from expanding the money supply. There are a trillion dollars of excess reserves just waiting to get turned into loans if the demand for money declines by enough.
Public: I never said cash over the last 10 years was an embarrassment. I have only said that holding cash that yields almost zero is a problem, since it only makes sense if you expect a lot of bad news.
Benjaman...the "right-wing selling doom and gloom" is our problem? Really?Obama has socialized (to some degree or another) student loans, healthcare, autos, AIG, banking, insurance, etc. He wants big income tax increases, a new national VAT, inheritance/gift taxes going back to 55%, not to mention a HUGE energy tax in Cap and Trade.They ignored historic and legal capital structures in the auto deal; threw out the constitution in trying to deem and pass health care; took congressional authorized TARP money and used them not for TARP (toxic assets) but for capital "investments".The left is DOING doom and gloom! That's what has people fearful.
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