Time for Bankers to Become Spendthrifts
If you’re wondering why the unemployment rate has remained stubbornly high, look at your bank account and ask yourself: Isn’t it time to buy a Lamborghini?
According to a new Federal Reserve study, lack of consumer spending amid uncertainty is what’s keeping the economy, and job growth, in the doldrums. When consumers save instead of shop, they keep the economy from growing and prevent businesses from creating employment.
"Our model estimates that uncertainty has pushed up the U.S. unemployment rate by between one and two percentage points since the start of the financial crisis in 2008," wrote the researchers. "Had there been no increase in uncertainty in the past four years, the unemployment rate would have been closer to 6% or 7% than to the 8% to 9% actually registered."
With interest already hovering just above zero, Fed chief Ben Bernanke has few bullets left to boost growth, say authors Sylvain Leduc and Zheng Liu, hence last week’s decision to encourage borrowing by purchasing billions of dollars in mortgage-backed debt and other assets.
It may be left up to us. Go out and buy some bling.