Wary Americans Saving More, Even as Government Encourages Risk
Wary Americans Saving More, Even as Government Encourages Risk
Americans are pouring record amounts of money into savings even though interest rates on those accounts are at historic lows, new federal data show, a sign that ordinary people are missing out on a booming stock market and recovering real estate sector.
Researchers at the Federal Reserve say total savings climbed nearly 5 percent to $6.9 trillion in the spring, the highest level ever recorded since 1945. At the same time, other data show that Americans are fleeing the stock market and avoiding the purchase of new homes.
A new economic study looks at how much the “revolving door” is worth to companies. Defense firms that see their executives tapped for top government jobs immediately see an abnormally large boost in their stock price.
The pattern suggests that Americans, wounded by the financial crisis and scared by an uncertain job market, don’t want to take any risks with their money at the exact moment when the government is encouraging risk-taking.
The Fed recently announced an unprecedented plan to pump hundreds of billions of dollars into the financial markets to reduce interest rates, which should have the effect of boosting stock prices and making it cheaper to buy homes.
But if consumers remain on the sidelines, it means the policies may benefit only the most well off and secure — and fail to help both average Americans and the broader economy.
“People have lost their appetite for risk,” said Karen Dynan, co-director of the economic studies program at the Brookings Institution. “They’ve been burned by the stock market. They’ve suffered through capital losses on their homes. And so they’re hunkering down in what they view as the safest place to store money.”