Quote:
|
Originally Posted by insite
encouraging people to spend when they're leveraged to the hilt & their personal asset bubble (HOUSE) just popped is ludicrous. the thing i don't understand is this:
why do people assume that if money is SAVED, it is not working in the economy?
if people aren't spending, they are either:
a) placing it into some type of savings account, whereby it can then be loaned out to others. this has a multiplier effect.
b) investing it, whereby it can provide needed capital for future production
c) de-leveraging
the real problem is that right now, most people fall into category C. they are paying down debt rather than saving. encouraging spending when, in aggregate, the populace is leveraged to the hilt, is not only irresponsible, it won't work! we pulled forward too much future demand with borrowed money. that leaves a consumption gap. at some point, we will have to pay the piper. the longer we wait, the worse it will get......
|
Now this is an assumption on my part, but maybe this is why your investors are not investing. I am 65 and I am retiring in January 2011. I lost about $75K in the bubble burst so I am not investing in any risky stocks and I want to preserve my basic capital left so I can use it during my retirement years. There are many more like me because we are the War babies and we have entered into our retirement days. Now as for the others go, I think they over extended and cannot help in the short term, but we baby Boomers invested for more than 30 years...so it my take a long time to rebuild the economy.