Hey, Big Saver!
01/10/2012 3 comentarios
If you want to know what the future of the American economy looks like, when the unemployment rate will return to below 6%, or when annual growth will climb back above 3%, it’s helpful to stop thinking for a moment about those families in serious financial distress. That’s because the future of the U.S. economy relies, in large part, on another group of people living in fear: millions of Americans who have a little disposable income. The decisions that the twitchy class faces may not be the most challenging, but they are, from a purely economic perspective, perhaps most important. Imagine a couple in their 30s, living in the starter home they bought eight years ago. Their kids have outgrown that tiny shared bedroom, and the den is crowded with toys. The couple are eager to buy a bigger place, they have paid down their debts and built up their savings, but they’re not quite over the terror of financial crisis and sluggish recovery. Even though they can afford it, they worry that now isn’t the best time to splurge. What if one of them loses a job? What if the other doesn’t get a raise for years? The agita still comes easily. Though it doesn’t always seem true, times actually have changed. During the worst of the recession, people were just plain broke. Their debts were at historic highs, and their savings were at record lows. That’s no longer the case. American households have reduced much of that debt and built up some savings. They’re just not spending it yet. So whereas Federal Reserve was once tasked with performing life support on financial sector, it’s new challenge is more subtle but nearly as complicated. It needs to convince consumers that they can trust the economy again, that now really is the time to jump back into stock market or buy that bigger house. To that end, Federal Reserve chairman, Bernanke, has announced a third round of what’s called quantitative easing, the controversial strategy that the Japanese first experimented with in 2001. Then as now, quantitative easing has fairly simple goal (to unstick a stagnant economy, that is), but like nearly everything Fed does, it’s also shrouded in confusing language, technical details. And it’s not exactly most direct stimulus either (…..)