The Triumph of Scrooge McDuck

scroogeGovernment can control many things, but it can’t control our minds and, therefore, our economic decisions. This has been a major source of frustration for the last two presidents.

In 2001, President Bush demanded that Americans immediately go out and spend, racking up more debt in the hopes of inspiring economic recovery. President Obama has done this too, and his central banking henchmen have rigged the monetary system to punish anyone who saves.

You might think it would work, and it has, among some classes. But the wealthy are different. New surveys from people who make more than $750,000 per year show a new record level of savings among them.

CNBC says, “According to research from American Express Publishing and Harrison Group, the savings rate of the wealthiest 1% in the second quarter rose to 37%. That’s up from 34% in the second quarter of 2012 — and more than three times their savings rate in 2007.”

In other words, their saving is actually increasing, even given the evidence that the everlasting recession has abated in some ways. The rich continue to act as if it is 2009 — which suggests that this class has little confidence that the high stock market and seemingly good news that trickles out are really sustainable. They are preparing for the next crisis in ways they wish they had prepared for the last one.

It’s fascinating too to consider their investing and spending habits. CNBC further notes that only 40% are looking to invest anything in new companies over the next two years, and only 16% are considering doing that over the coming months.

This is a deep psychology of risk aversion. The Fed has driven interest rates to zero and attempted to put the screws to anyone who undertakes this Scrooge McDuck strategy of financial preservation. But it still doesn’t work. The rich won’t let go. They will not be fooled again.

Economists tend to forget the impact of past events on people’s current behavior. My mind often drifts back to the lady who lived in the house behind mine for years. She grew up in the worst of the Great Depression and recalled just how hard it was to get pans for the kitchen or basic materials for making dresses. Everything was precious. Nothing could be taken for granted. Therefore, she threw nothing away, no matter what. This habit persisted to the end.

After she died, her children went through the house and found hundreds and hundreds of foil pie pans, stacked higher and higher. There was a room with pillars of them. She loved pies and bought many at the store. But she could never bring herself to throw away the foil pans. To her, this was an item of high value. She couldn’t shake the feeling that it would be gravely irresponsible to toss away something that might have cost a week’s wages in 1937.

It’s common to dismiss this sort of attitude as evidence of senility. Surely, it is irrational! Her kids, of course, just rolled their eyes and tossed it off as sheer nuttiness.

I wouldn’t say so. If you live through times of grave privation, you never quite get over it. You come to understand a great truth that people who grew up amid plenty do not understand. You see the physical prosperity around you as a contingent condition that can be wiped out under the right circumstance. You no longer trust those in authority to bail you out. You come to understand the obligation to provide for yourself no matter what.

In short, you come to realize that no economic value is permanent and all is subject to change.

The savings behavior of the rich today is evidence that they are much like the old widow and her pie pans. They were burned very badly in the great collapse of 2008. It affected mainly real estate, a sector every respectable voice said would never fall. This was a safe haven, a permanent asset, and the best investment you could ever make. In a few short months (and in some cases even weeks), all those assumptions were blown away. Then the contagion started: The banks, the stock market, commercial real estate, old-line investment firms — everyone suffered.

That lesson tends to last, and it accounts for why it is so difficult for the federal government to stop this tendency to hoard cash and prepare for another rainy day.

What’s more, this approach is actually socially beneficial. You have to ask the question: Where does investment come from? Of course, people like Obama never ask this question. To him, the answer is obvious: The Fed can just print money and people will invest it. Or the federal government can just tax people and use the money to “invest” in his favorite sectors, like electric cars and electricity-generating windmills.

This is sheer fantasy. There is only one source of genuine investment. That is savings. Savings comes about from forestalling consumption. You have to give up things today so that you can have more tomorrow. There is no other path. The attempt to skirt that savings obligation and replace it with fiddling by the central bank and the government is pure folly. At best, it creates another round of false booms that end in busts. At worst, it destroys wealth and creates nothing at all.

What’s interesting is how individuals and institutions seem to understand something here that government and its economists do not. Despite every attempt to stop savings altogether — under the misbegotten theory that consumption causes growth — savings in general actually soared after 2008. Only recently has the rate dipped among most of the populace, even as it has continued to increase among the smart set.

LFT_Private_080613

You will note that the same thing happened at the attacks of Sept. 11, 2001. The president went on television to demand that everyone immediately go out and buy something. But Americans were at the point of assuming that whatever the president wants is probably not what is best for them and their families. Savings went up. But this was nothing compared with what happened after 2008. This was when people really started stuffing their mattresses.

The beautiful thing about this example is that it shows that government can’t always get what it wants. In fact, it rarely gets what it wants. The whole of its economic policy models are predicated on the idea that people respond to economic signals like machines. Change the signal and people fall in line. But that’s not how it works in the real world. People have brains and they have memories. The memory of 2008 is still with us, and it’s a good thing, too, for the prosperity of the future can come only from the savings of the past.

Let’s hear it for the Scrooge McDucks of the world. They dare to disobey, and, in so doing, they are building for the future, from which we will all benefit. We might all consider emulating them. Saving money is the ultimate revenge.

Sincerely,

Jeffrey Tucker

Jeffrey Tucker

Written By Jeffrey Tucker

I'm executive editor of Laissez Faire Books and the Chief Liberty Officer of Liberty.me, an innovative private society for publishing, learning, and networking. I'm the author of four books in the field of economics and one on early music. My personal twitter account @jeffreyatucker FB is @jeffrey.albert.tucker Plain old email is tucker@liberty.me

  • Open Windows of Opportunity With Jim Rickards

    Open Windows of Opportunity With Jim Rickards

    James Rickards

    by James Rickards
    On Nov 14, 2014

    Are you a deflationist? Or an inflationist? No matter which way you believe the wind will blow, the truth is this: it’s up in the air. But, as Jim Rickards explains, there are things you can do to cover your assets, no matter which one wins the tug-of-war. Read on…

  • Vote for Nobody, and Don’t Buy Gold - You Have Better Things to Do

    Vote for Nobody, and Don’t Buy Gold – You Have Better Things to Do

    Chris Campbell

    by Chris Campbell
    On Nov 4, 2014

    There are two things you shouldn’t do this Election Day: one, vote; two, buy gold. Why? Chris Campbell explores this and more in today’s Laissez Faire Today. Read on…

  • Washington’s Secret Slave Labor Ring: Coming to a Neighborhood Near You

    Washington’s Secret Slave Labor Ring: Coming to a Neighborhood Near You

    Chris Campbell

    by Chris Campbell
    On Sep 26, 2014

    America has about 4% of the world’s population, yet houses 25% of the world’s incarcerated. What’s going on here? Chris Campbell digs deep into the industry to figure out the truth. While many blame the private prison industry, the real culprit, says Chris, begins right outside your door. Read on…

  • The Other Epidemic (and How to Stop it)

    The Other Epidemic (and How to Stop it)

    Chris Campbell

    by Chris Campbell
    On Sep 16, 2014

    “While I heartily subscribe to your premise of pursuing one’s dream,” one reader, Donald J., wrote, “there are alternate perspectives worth considering.”[We’re listening… go on.]“Some wiseguy once said that life is what happens to you while you’re waiting for something better to come along. Milton put it a little more poetically in one of his […]

  • The Only Way to Get Rich: A Zen Proverb

    The Only Way to Get Rich: A Zen Proverb

    Chris Campbell

    by Chris Campbell
    On Sep 10, 2014

    Want to get rich? Don’t listen to financial “gurus,” says Chris Campbell. In today’s Laissez Faire Today, Chris shares a Zen proverb and shows how understanding it is the only real way to get rich (and live a rich life). Read on…

  • shutterstock_83366287

    The Story of a Reluctant Winemaker

    Joe Maga

    by Joe Maga
    On Dec 15, 2014

    Sometimes life deals you lemons. It’s up to you to make lemonade. This month’s Insider Cellar recommended winemaker had no intention of making wine when his family settled just north of Santa Barbara. When our reluctant winemaker’s father walked his land in the early 1980s, he was probably disappointed when he discovered the soil did not have the nutrients to support his strawberry crop

     

  • HappyFamily

    One Free Website to Keep Your Family Safe

    Chris Campbell

    by Chris Campbell
    On Sep 9, 2014

    Ben Franklin once said, “An ounce of prevention is worth a pound of cure.” In today’s Laissez Faire Today, you’ll learn about one FREE website that has the potential to not only keep your family safe – but also open your eyes to what’s happening in your own neighborhood. Chris Campbell has all the details. Read on…

  • Youre_Incredible

    Use “Power Gaps” to Build Your Own Empire

    Chris Campbell

    by Chris Campbell
    On Sep 8, 2014

    All over the world, power is dying. The dictators and tyrants of the world are no longer able to wield it like they once used to. And they’re losing it to the “little guy.” Chris Campbell shows you how to be the king of your castle by taking advantage of this fact. Today, you’ll learn how to grab “power gaps” in the market and channel them into your product idea or project. Read on…

  • Free Markets and Malaysian Fireflies

    Free Markets and Malaysian Fireflies

    Chris Campbell

    by Chris Campbell
    On Sep 3, 2014

    The fireflies along the tidal rivers of Malaysia show "feats of synchrony that occur spontaneously, almost as if nature has an eerie yearning for order." Chris Campbell tells you where else this might occur in the world. Also, new technology may revolutionize the agriculture industry and what we think of as a farm.

  • Smoking Pot in the Governor’s Mansion

    Smoking Pot in the Governor’s Mansion

    Chris Campbell

    by Chris Campbell
    On Sep 2, 2014

    Jeff Davis is running for Governor in Hawaii and has an interesting campaign strategy. Also, what motivates hackers is revealed and the findings might surprise you. Finally, Ferguson is discussed in a new light. Chris Campbell has more...

  • SHI0115

    The Only Path to the American Dream

    Ryan Cole

    by Ryan Cole
    On Dec 10, 2014

    This month, I’m going to tell you a hard truth. It’s one that Wall Street brokers and financial analysts try to hide. It’s one that most newsletter writers choose to ignore. In fact—when it comes to the financial world—this is a “secret” that everyone knows… but no one will mention.

     

  • The End of Money

    The End of Money

    Bill Bonner

    by Bill Bonner
    On Aug 22, 2014

    When the government pumps trillions of dollars into the economy, they’re not actually printing the money. It enters as digital entries in banks across the country. It’s made the system fast, responsive, and, unfortunately, vulnerable. Now our money is no longer something we hold in our hands, but something that exists on a very susceptible network.

    An article in , ,

  • 4 Ways the Government Is Set to Take Your Money

    4 Ways the Government Is Set to Take Your Money

    Byron King

    by Byron King
    On Aug 21, 2014

    The so-called recovery is only built on debt and printed cash declares our own Byron King. In the long term, the only option for the government to continue financing it's operations is to print too many dollars. Money printing has it's limits, however. It's Byron's opinion that at some point, perhaps very soon, the government will have to turn to more desperate measures. Namely, capital controls. In the following featured essay, Byron outlines 4 probably ways the government will take your cash and one play you can buy through your broker to prepare today. Read on...

  • America Needs More Tax Inversion

    America Needs More Tax Inversion

    Clem Chambers

    by Clem Chambers
    On Aug 20, 2014

    Americans expatriate because they want to get out of the country. Corporations expatriate for similar reasons. Clem Chambers explains...

    An article in ,

  • Central Planning by Central Bankers

    Central Planning by Central Bankers

    Gary North

    by Gary North
    On Aug 15, 2014

    In a 2009 article, the Huffington Post went into considerable detail about the number of people with PhD degrees in economics employed by the Board of Governors of the Federal Reserve System. This is the government’s branch of the Federal Reserve. It is not one of the 12 regional Federal Reserve banks, all of which […]

  • TimeBomb

    Three Time Bombs in Your 401(k)

    Dave Gonigam

    by Dave Gonigam
    On Dec 4, 2014

    They lurk somewhere in everyone’s 401(k) program. Tick, tick… And it might be years before you discover them. Tick, tick… By the time you do… Kaboom! It’s too late. They’ve already blown up your retirement.

     

  • 6 Major Flaws in the Fed’s Economic Mode

    6 Major Flaws in the Fed’s Economic Mode

    James Rickards

    by James Rickards
    On Aug 12, 2014

    The U.S. dollar is the dominant global reserve currency. All markets, including stocks, bonds, commodities, and foreign exchange are affected by the value of the dollar.The value of the dollar, in effect, its “price” is determined by interest rates. When the Federal Reserve manipulates interest rates, it is manipulating, and therefore distorting, every market in […]

  • How to Die Poor

    How to Die Poor

    Bill Bonner

    by Bill Bonner
    On Aug 8, 2014

    The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance or the get-rich-quick adventurer. They will die poor.– Jesse Livermore, How to Trade in StocksThe trouble with capitalism’s guardians is that they have no […]

    An article in , ,

  • Will Mandates for Doctors Come Next?

    Will Mandates for Doctors Come Next?

    Barton Hinkle

    by A. Barton Hinkle
    On Aug 6, 2014

    John Foust, a Democrat running for the 10th congressional seat in Northern Virginia, is — like Gov. Terry McAuliffe and other state Democrats — gung-ho to expand Medicaid. His wife’s position is, shall we say, a bit more nuanced.Foust has slammed his opponent, Republican Del. Barbara Comstock, for her opposition to expansion. He has spoken […]

    An article in , ,

  • No Matter Who Wins, a Sociopath Is Elected

    No Matter Who Wins, a Sociopath Is Elected

    Doug French

    by Doug French
    On Aug 5, 2014

    The midterm election season is upon us, and it’s a tossup whether the Republicans will win the Senate, or if President Obama, seemingly oblivious as conflict flares up around the world, will, through his continuous campaigning, keep Harry Reid in his majority leader seat.The only thing we know for sure is that sociopaths will be […]

    An article in ,

  • SHI_December2014

    This Sector Is Ready to Explode 1,000% Higher

    Ryan Cole

    by Ryan Cole
    On Dec 1, 2014

    One industry is expected to grow from an estimated $77 billion sector by the end of 2014… to around $700 billion in 2024. And that, frankly, is a conservative estimate, as you’ll see below. This isn’t because of some resource boom or new discovery. This isn’t because of funny business or a trader play. This is real spending, done by real companies to combat a very real threat. It’s already an established industry but poised for exponential growth. Because the problem it combats is growing exponentially.

     

  • Linking The Dollar To Gold: The Recipe for an American Economic Boom: Part 1

    Linking The Dollar To Gold: The Recipe for an American Economic Boom

    Peter Ferrara

    by Peter Ferrara
    On Aug 4, 2014

    Alexander Hamilton was America’s first Secretary of Treasury under President George Washington. When he first entered office in 1789, America was an agricultural nation of just 4 million still broke from its financially costly victory over the British Empire in the Revolutionary War.The states had accumulated relatively massive debts to finance that war, which mostly […]

  • The Bitcoin Dinner Solution

    The Bitcoin Dinner Solution

    Jeffrey Tucker

    by Jeffrey Tucker
    On Jul 29, 2014

    A great technology solves a problem that we didn’t know we had. It makes us aware of deprivations we didn’t know existed until we discover the new thing. Once discovered, we can’t go back.People in the 1950s, for example, never missed the smart phone. They were pleased to have a phone at all. But today, […]

  • Advance Notice of the Next Market Crash

    Advance Notice of the Next Market Crash

    Chris Mayer

    by Chris Mayer
    On Jul 28, 2014

    Fifty years after the 1929 crash, a group of money managers and investment thinkers put together a collection of essays looking back at that experience. The result was a distillation of some pretty fine investment wisdom. Timely, I think, to review now.One of the contributors was Arthur Zeikel, then with Merrill Lynch. The title of […]

    An article in ,

  • Obamacare… A Caring Solution for Opting Out

    Obamacare… A Caring Solution for Opting Out

    Jud Anglin

    by Jud Anglin
    On Jul 25, 2014

    Although the mainstream media have turned its attention away from the wreckage of Obamacare, don’t think for a second that all is well.As the politicos in D.C. focus their attention on the midterm elections in November, now is a great time to study, prepare, and seek out the most affordable, accessible, and highest quality options […]

  • EightUnusual

    8 Unusual Rules for Investing

    Chris Mayer

    by Chris Mayer
    On Nov 4, 2014

    Where do great investors come from?I’m not sure what the hurdle rate for greatness is, but Guy Spier has put up impressive results. His Aquamarine Fund has returned 463% since inception in 1997, versus just 167% for the S&P 500 (a broad proxy for the market). Put another way, $1 million invested at inception is […]

     

  • The Battle Against Economic Stupidity

    The Battle Against Economic Stupidity

    Doug French

    by Doug French
    On Jul 24, 2014

    Turn on the tube and economic ignorance seems to be everywhere. There is constant shilling for more government. Business is demonized. Man is said to be trashing the environment. “Workers and women are oppressed” is the constant mantra.And members of the clueless media nod their heads in unison.Only John Stossel has provided the fresh air […]

  • The Dollar’s 70-Year Dominance Is Coming to an End

    The Dollar’s 70-Year Dominance Is Coming to an End

    Liam Halligan

    by Liam Halligan
    On Jul 22, 2014

    In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.The U.S. was already the world’s commercial powerhouse, having eclipsed the British […]

  • Free Market Capitalism v. Crony Capitalism

    Free Market Capitalism v. Crony Capitalism

    Richard Ebeling

    by Richard Ebeling
    On Jul 21, 2014

    In the minds of many people around the world, including in the United States, the term “capitalism” carries the idea of unfairness, exploitation, undeserved privilege and power, and immoral profit making. What is often difficult to get people to understand is that this misplaced conception of “capitalism” has nothing to do with real free markets […]

  • Big Banks Look To Cash In Using D.C.’s Revolving Door

    Big Banks Look To Cash In Using D.C.’s Revolving Door

    Richard Osborne

    by Richard Osborne
    On Jul 16, 2014

    Some people are saying it is just what the doctor ordered. Others are saying that the cure is worse than the disease.The Affordable Care Act? Reengagement in Iraq? Tea Party bullying in the GOP?Not this time. Just as protracted in the corridors of Congress and the White House is the debate over the proposed reform […]

    An article in , ,

  • SHI_November2014

    A Double-Digit Winner That’s Attacking America’s No. 1 Killer

    Ryan Cole

    by Ryan Cole
    On Nov 1, 2014

    I made a choice five months ago. And that choice has saved my life. This wasn’t some instantaneous decision, with danger near. It wasn’t some great “eureka” moment, either. There probably isn’t a person out there who would question what I did. In fact, more and more people are making the exact same choice every day. And each one does it to the sound of applause.

     

  • The Only Prescription for a Real Economic Recovery

    The Only Prescription for a Real Economic Recovery

    Dan Amoss

    by Dan Amoss
    On Jul 15, 2014

    In 2012, money mandarins running the European Union chose stagnation over restructuring. Here’s a consequence of that choice: expectations for a self-sustaining economic recovery keep getting crushed.Two years ago, European Central Bank (ECB) chief Mario Draghi promised to do “whatever it takes” to hold the eurozone together. He bluffed nervous investors into believing in a […]

  • Allowance

    The Family Is A Machine For Destroying Wealth

    Phil Demuth

    by Phil DeMuth
    On Jul 9, 2014

    People jacked up about income inequality can find a new hobby. The 1% are victims of a doomsday machine, and the countdown is ticking. Machine, thy name is “family.”This came to mind as I was reading a preview of Columbia Professor Andrew Ang’s forthcoming, must-read book on Asset Management. Ang is that oxymoron, an exciting […]