The Federal Reserve reports that, as of August 2014, there is approximately $10.8 trillion dollars held in cash in the accounts of individual and corporate Americans. The financial media too often castigates this “cash on the sidelines” as “hoarding by investors and companies” or as a “failure of monetary policy,” when it is neither.
People own every dollar of that $10.8 trillion, up from just under $5 trillion two years ago. They are waiting and worrying, in large measure over both the quality of the investment opportunities in front of them and about the risks they will bear due to the impacts of the fiscal policies of the U.S. government. (We think they worry too much.)
A recent example is Rex Nutting of MatchWatch: “The 10.8 trillion dollar failure of the Federal Reserve”
Reuters columnist David Cay Johnston wrote a column in July of 2012 recommending that citizens take to their phones to demand that the IRS extract a 15% tax on all uninvested cash on the sidelines. Ahem, not a good idea. Also, a highly unlikely one. Nothing would kill the animal spirits we need to resuscitate the American economy faster than adopting ideas from the Hugo Chavez catalogue of failed policies. In this first 50 Second Theater, we shorten his video version, faithfully, we think to 50 seconds.
You’ll hear the modified, accelerated voice of the Reuters columnist, this time with a jaunty little cartoon you may remember if you were so fortunate as to have grown up with the grandmasters of children’s television at Warner Brothers.