How did the rich react to the 2008 financial crisis?
Mike Dolan of Reuters finds they started hoarding massive amounts of cash:
Dolan points to a recent survey, which shows rich investors are storing a humongous 27 percent of their portfolios in cash — a greater amount than they held in any other asset class — including stocks, bonds and real estate — and double pre-crisis levels.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Hoarded cash loses purchasing power due to inflation. But that is a price worth paying for keeping wealth in a liquid and mobile form, which cash is.
Dolan argues that fear of higher taxation due to rising inequality is what is bugging corporations and the ultra-rich. That may be one motivating factor, but a larger one seems to be that the 2008 collapse unleashed deep and lingering fears of investment in general and the stock market in particular. With bond prices having remained ultra-high for years, and with stock markets having recovered from the 2008 crisis, and now making new highs, investors — who want to buy cheap and sell expensive — just don't see much that looks cheap to buy.
This has driven some investors and firms into alternative (and bubbly) markets like gold, Bitcoin, fine art, and London, Dubai and New York real estate, but the vast bulk is just sitting as cash, waiting for better opportunities to appear.
Create an account with the same email registered to your subscription to unlock access.