Individual investors, in terms of financial assets they control, are the largest and most important players in the U.S. capital market.

Therefore, when Federal Reserve Flow of Funds data shows household personal savings for the quarter running a negative $132.0 billion (annual rate), as occurred in Q3 2005, we need to ask, “Does this matter?”

The media often cites these statistics, claiming that Americans are throwing prudence to the winds, spending more than they make:

“Americans saving less than nothing: Spending could outstrip income in 2005, which hasn’t happened since the Depression” (San Francisco Chronicle, January 8, 2020)

“Spendthrift nation: Americans have stopped saving for a rainy day“, (Christian Science Monitor, August 3, 2020)

“Monetary Zombies: If individuals and families continue to spend more than they make, millions of us may also end up in the land of the living dead.” (The Nation, January 20, 2020 )

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On December 16, 2020, the Financial Accounting Standards Board issued rulings on the expensing of stock options.

According to the FASB, this rule:

"addresses users’ and other parties’ concerns by requiring an entity to recognize the cost of employee services received in share-based payment transactions, thereby reflecting the economic consequences of those transactions in the financial Statements".

Although the concerns of some may be addressed, the underlying problem is ignored.

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The problem with finding a way to expense stock options lies in the reluctance of company executives and market intermediaries to acknowledge the true cost and to the meddling of theoretical economists in areas best left to practical accountants. This can be illustrated with a simple example.

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