According to Bloomberg, investors pulled more money out of mutual funds invested in U.S. government securities last week than in any previous week this year.
Investors last week pulled more money from money-market mutual funds than any week this year as U.S. lawmakers failed to resolve the impasse over raising the debt ceiling.
Withdrawals reached $37.5 billion, with about 70 percent of the redemptions coming from institutional funds that invest in U.S. government securities, according to data from the Investment Company Institute, a Washington-based trade group. Investors poured $3 billion into German stock funds in the week ended July 27, the most since mid-2008, and $1 billion into gold and precious-metals funds, according to EPFR Global, a Cambridge, Massachusetts-based research firm.
“This is a unique situation and people are afraid of the unknown,” said Peter Crane, president of Crane Data LLC, a Westborough, Massachusetts-based firm that tracks the $2.6 trillion money-market fund industry.
People are afraid of the unknown. They’re afraid of uncertainty. And just who exactly is causing that uncertainty right now?
Meanwhile, GDP growth for the second quarter of this year was 0.4 percent lower than expected.
Gross domestic product climbed at a 1.3 percent annual rate following a 0.4 percent gain in the prior quarter that was less than earlier estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 1.8 percent increase. Household purchases, about 70 percent of the economy, rose 0.1 percent.
If you want to know why we can’t escape the iron-grip of the still-lingering recession, pay close attention to that last statistic.
Household purchases, which account for 70 percent of our economy, only rose 0.1 percent. It rose only 0.1 percent because there is no demand. And the only force with the power to create demand right now is the federal government. This is why the Republicans will stomp their feet and demand austerity until their last dying breath.
We can’t depend on the business community to hire more people, or pay higher salaries, to create demand. They have very little reason to do so long as they continue to profit while downsizing their work forces. Their sole function is to profit. To make money. Their function is not to create demand. Their function is to service demand. That is why government should NOT be run “like a business.”
With economic growth chugging along at a level of only 1.3 percent, it wouldn’t take very much to send us back into another recession, and you know the Republicans would just love that.
Their campaign of economic sabotage and obstruction will continue from now until next November. And if people don’t get out there and vote, it will continue beyond next November.