The superrich are hobbling the economy
The top 1% are saving money at a 37% rate, triple the 2007 level. That hurts the recovery as less goes to capital investments and consumption.
If it isn't bad enough that the U.S. is increasingly becoming a land of haves and have-nots, it turns out the haves' recent behavior may be ruining the recovery.
The superrich are saving their money at a rate of 37%, meaning they're putting away 37 cents on every dollar they earn, according to CNBC, citing research from American Express Publishing and Harrison Group. That's three times their savings rate in 2007.
Why is that a problem? Aside from what billionaire Charles Koch says, people in the top 1% aren't earning $34,000 per year. In fact, they control 39% of the world's wealth, or a hefty $52.8 trillion. That will likely increase as wealth continues to concentrate at the top, CNBC notes.
But with the superrich increasingly hoarding those assets as cash, less is going toward capital investments such as new businesses or products (new yacht, anyone?).
It's probably enough to make the late President Ronald Reagan roll over in his grave. After all, Reagan pushed the idea of the "trickle-down economy," whereby tax cuts for the rich would trickle down to the middle class. Of course, that works only if the rich actually invest or spend.
"It's a real problem to the extent that more and more income is going to people at the top and more of that income is not going to places that are productive," Michael Linden, the managing director for economic policy at the Center for American Progress, told The Huffington Post.
The increased savings rate of the superrich might support the idea of raising taxes on the top 1%, although Linden told the publication that higher taxes only encourage the wealthy to move money into less-taxed vehicles.
It's not only wealthy individuals hoarding cash. Corporations are also sitting on piles of money. Apple's (AAPL) $137 billion in cash prompted investor David Einhorn to sue over what he called a "cash problem."
Nonfinancial companies now hold liquid assets of 45% to 50% of their short-term liabilities, compared with a historical level of no more than 30%, The New York Times notes.
For both individuals and companies, cash hoarding might be a result of uncertainty about the economy. But their savings rate, ironically, may be hurting the broader recovery by keeping capital out of the system.
As Linden told The Huffington Post: "If the choice is between putting the money under a rich guy's super super expensive mattress or giving it to a middle-class family who needs to pay for child care, I'd rather pay for child care. That's better for the middle-class family, and that's better for the economy."
Follow Aimee Picchi on Twitter at @aimeepicchi.
They aren't burying it in a coffee can in the back yard, or keeping it under their mattress, their money is in banks, stocks, bonds and other investments. Their money is being used to fund capital projects at the places where their money has been invested, either by them, or by the banks where they keep it.
These commies at MSN have no understanding of the economy, do they?
OF course, when your sources are the Center For American Progress and The Huffington Post, what do you expect?
Wow, where to begin with the stupidity of this article? Let's start with the attack on the trickle-down theory. The author says that tax cuts to the wealthy will only trickle down if the wealthy actually spend or invest their money. He misses the fact that not only have there been no tax cuts, there have been real tax increases through the disaster through the disaster called Obamacare, and there are ongoing threats to bleed the rich with additional punitive taxes.
Speaking of threats to impose additional taxes, let's look at this idiot's next statement that the savings by the rich might support the idea of raising their taxes even more. Does he really think that will make them spend or invest? The rich are not spending or investing because of the combination of taxes and threats of tax increases. Obamcare is choking the economy, and the uncertainty over its impact on employment costs is keeping all of this money on the side lines.
This is more typical liberal bleed-the-golden-goose-while-we-still-can thinking.
If "The superrich are hobbling the economy" it's because superliberal legislation from the Oval office and Senate the past five years has made it so ...
Wait a minute, I'm wrong!!! I forgot the billions/trillions pumped into the economy to help the middle class and poor via the stimulus packages to energize GM, Solyndra, A123 Systems Solutions (Michigan battery company for green energy cars), "Quid pro quo" for Detroit's City Council supporting our POTUS during both elections, "Obama Phones", etc., etc., etc., etc., ad infinitum.
Saving part of your income for a rainy day should be a discipline everyone employs ... especially our elected officials. This bit of "rant" comes from a middle class, hard working blue collar boy!
Welcome to the People's Republic of America.
It is so interesting to see how fast Aimee makes the jump for me managing my money the way I want to as being hoarding rather than saving. Saving is when the "right people" keep money. Hoarding is when the people who don't vote for big government try to keep some more. Because we are hearring of means testing for MediCare and means testing for Social Security, we know that saving more and more is the only sort of security we will have.
Can't wait for the financial version of the death panels in ObamaCare. That will be the group that decides who is most productive with their money, so that they get more. Not those who earned it, heaven forbid.
The writer is echoing the NONSENSE that comes from economists like Paul Krugman and some of the others are not necessarily liberal like he is.
CAPITAL for investment is supposed to come from SAVINGS! There is still NOT ENOUGH SAVINGS. America saves at about 3% overall. We need to save at 15% or even 20%!
This doesn't happen because interest rates are too low and because the cost of living is too high for ordinary Americans.
Can you see how damaging the Fed and the federal government are?
---Inflationary policy that drives up the cost of living, but the Consumer Price Index covers up how high inflation really is. The CPI has become a DAMNABLE LIE!
---Fed lending to the big banks at 0%, then their buying tons of Treasury bonds negates the need to lend to businesses that are NOT POLITICALLY CONNECTED. The bankers already have their profits! They have been laying off bank employees, because they don't need to attract savers or borrowers compared with before.
---Worst of all, the rich people's savings ARE NOT SITTING ON THE SIDELINE. The savings of the rich are heavily invested in Treasury bonds and bills! The money is already being used. If a rich person tried to use a large amount of savings as venture capital all at once, the Treasuries would have to be sold first. President Obama would be begging China or coercing Japan to buy billions more in Treasuries to keep interest rates from rising even more than they have this year.
The writer, Aimee Pichi, shows NO KNOWLEDGE about how money is saved or why money is saved.
Hey I didn't get my QE. How am I going to be protected from inflation? ........... Oh I get it that was the plan.
With enough ambition, dedication and hard work, most people can be a success in America.
Most people who were born into wealth tell me that.
I imagine they're saving up to buy people.
People to housekeep....
People to manage their property....
People to have fun with....
People to hunt....
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[BRIEFING.COM] The stock market began the new trading week on the defensive note with small-cap stocks pacing the retreat. The Russell 2000 (-1.4%) and Nasdaq Composite (-1.1%) displayed relative weakness, while the S&P 500 lost 0.8% with all ten sectors ending in the red.
Global equities began showing some cracks overnight after China's Finance Minister Lou Jiwei poured cold water on hopes for new stimulus measures. Specifically, Mr. Lou said the government has no plans to change ... More
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