(Community Matters) Krugman in today’s NYT column points out his concern about the duration of this recession, or more specifically, pointing out that there is no obvious catalyst to spur us out of the recession, a concern that resonates.
There are those, however, who predict the pent up demand for investment of dollars – i.e., idle money (previously existing and the trillions recently printed) sitting on the sidelines awaiting investment opportunities – and the swift deployment will spur the economic recovery and growth. hmm, I hear this and it sounds plausiable.
Yet, if consumer spending drives our economy and consumers had been driven by their increase in wealth . . . . the fact that the 17% gain in American household wealth between 2004 and 2008 turned out to be a mirage (Fed) and that we’ve lost 3.2% . . . that over 30% of family assets were in paper profits. . . . and that we have to increase from a ZERO savings rates . . . Who’s going to be spending money & when?
The Feds estimate we’ve lost $12 trillion in wealth since 2006 – poof, gone, evaporated – $6 trillion in housing wealth, $6 trillion in stock gains. Should we expect much of the stock gains to be recovered? If so, over what period of time? The housing wealth? Maybe over a much, much longer period of time, if some of that ever.
I’m certainly not an economist and the one who normally sleeps on the other side of my bed is currently in Amsterdam, so I can’t ask. Nevertheless, I’m stuck with Krugman wondering what’s going to spur growth and spending. I continue to think investors, bankers & managers should think long and hard about good money after bad (politicians too if they can: our automobile industry for instance).
Community Matters 