How to get money flowing again
TEXT OF STORY
KAI RYSSDAL:The federal government can and has flooded this economy with stimulus money. But try as it might, it just can’t make us spend. We learned from the Commerce Department today that that $787 billion stimulus bill has had at least one desired effect: a 1.5 percent jump in personal incomes last month. Which is great, but it didn’t really stimulate many of us to go out and buy.
Seems we replenished our shrunken nest eggs, instead. Americans stuck money under their mattresses at the highest rate in more than 15 years. But if consumers are being tight-fisted and if banks still aren’t lending as much as they used to, how then to get money out into the economy?
Here’s our senior business correspondent Bob Moon.
Bob Moon: You go first. No, you go first. An economic recovery has to start somewhere, but that’s the face-off that’s developed between consumers and banks.
Given today’s word that a lot of us are putting their money away, right along with the banks, TD Bank chief economist Joel Naroff says we’re in for a long, slow recovery. But he says the extra cash in the pockets of consumers could be just what’s needed to change attitudes.
JOEL NAROFF: Consumers and businesses have assumed what I call “the turtle position,” where basically they just pulled themselves into their shells and didn’t want to do anything. Slowly but steadily, confidence is rising and they’re starting to go back in.
UCLA economics professor Ed Leamer says the government has done what it can to kindle a recovery — and now just needs to stay positive.
ED LEAMER:We don’t need to be frightened into saving more. We need to slowly improve our savings rates. So a leadership that evidences understanding about what the problems are, and a confident and clear statement of what the solutions are, will make us all feel better about the future. And then we can return to more sensible spending.
But Harry Dent isn’t so sure. He’s an economist who focuses on demographics, and says it makes sense Americans are saving more:
Harry Dent: This baby boom switch from spend, spend, spend to save, save, save is just too big a tide for the government to counter. And in fact, what’s the big thing? It’s natural for people to save in their 50s and early 60s.
For Dent, that leads to the same familiar conclusion: He says it still means a long, slow recovery.
I’m Bob Moon for Marketplace.
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