Conventional wisdom has it that the Federal Reserve's massive easing program has sent investors scurrying to stocks and other assets with the potential for high return.
"It's a nice story, but the data show that U.S. investors are still conservative about where they put their money," writes
MarketWatch commentator Rex Nutting.
Americans have $10.8 trillion of their money in cash, bank accounts and money-market funds that pay very little interest, he says.
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"At the end of the first quarter, low-yielding assets totaled 84.5 percent of annual disposable personal income, the highest share in 23 years," Nutting writes.
The Fed has kept its federal funds rate target at zero to 0.25 percent since December 2008. And it has expanded its balance sheet to $4.4 trillion through quantitative easing.
"In essence, there's $10.8 trillion stuffed into mattresses," Nutting says.
And that's not good for the economy, he points out. "An economy can't really grow if no one's willing to gamble on the future. . . . In theory, the money they deposit in the bank should flow into the economy when the bank makes a loan. But bank lending to businesses has been very soft, up just $160 billion in the past year."
Bottom line: "that $10.8 trillion hoard represents a failure of Fed policy," Nutting writes.
Some maintain that the central bank isn't moving fast enough to raise interest rates — many don't expect a move until at least next April.
"They are making me nervous," Arun Raha, chief global economist for industrial manufacturer Eaton Corp., tells
The Wall Street Journal.
"Given the strength of the job market, manufacturing and non-residential construction, it's about time they got rid of their low-rates-for-an-extended-period viewpoint."
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