David Goldman, always with an original perspective, writes An Economic Primer: Why Americans Won’t Invest in Themselves in Pajamas Media, 9/27/12


Pension and retirement funds in the United States control $16 trillion in assets. That’s more than double the total assets of the whole U.S. banking system, and more than five times the total assets of hedge funds world-wide. The retirement savings of ordinary Americans dominate the capital markets, not the sort of fat-cats caricatured in the press. Add another $4 trillion in life insurance assets, which mainly reflect the retirement savings of the middle class, and the middle class investment fund now stands at $20 trillion.

Americans won’t take risks on each other. That’s our problem.  A decade ago, at the peak of China’s investment in American securities, I quipped that a rich Chinese won’t lend money to a poor Chinese, unless the poor Chinese moves to America. That’s starting to change. China’s huge trade surplus has shrunk to nearly zero as the Chinese consume more at home. The problem now is that middle-class Americans won’t invest in themselves.


We’re not talking about greedy Wall Street cheating Main Street: The plain fact of the matter is that $20 trillion of middle-class retirement savings refuse to invest in the sweat and ingenuity of the same people who own the savings. Corporations have about $2 trillion of cash on hand, and a lot has been written about the risk-aversion of U.S. companies. But that’s a tenth of the money available to pension funds.

The other explanation is that something is preventing us from investing in ourselves. Why won’t we use our $20 trillion in retirement savings to build factories and stores and offices and generating stations and oil rigs and mines?

Let me count the ways.

We have the highest corporate tax rate in the world.

We have an administration that sandbagged one of the biggest contributions to energy independence to become available in decades, namely the Keystone project.

We have a regulatory environment that makes it next to impossible to build a nuclear power plant.

We have a health care program that puts the biggest weight of a new entitlement program right on the economy’s weak spot — firms with fifty workers.

We have an administration that can’t get its act together to steer the economy away from a fiscal cliff.

We have an out-of-control budget deficit as far as the spreadsheet can extend to the out-years, which means much higher taxes in the future.


The real power is in the hands of the 99% and guess what? They have the same demand and expectations for risk and reward as the wealthiest Wall Street fat cats.  This administration has done everything possible to reduce the returns for the middle class.  Small savers are penalized by cheap money and low interest rates.  The large public companies are the ones that benefit from it.

This administration remains clueless about what they are doing to this economy, and it appears that the voters do not care.