Fed says Americans are Hoarding Cash. NO SHIT!

[T.G.G. Moogly]

Link to article

Is it just me or this article stating the obvious? People just aren't spending like they used to because they are financially insecure. That's my take and my experience.

If I thought I'd have enough cash and assets to tide me over in retirement I would be spending. If I thought my company wasn't ever going to need massive liquidity because of an economic downturn I'd be spending. But I'm not spending, at least not spending as much. My take anyway.

 

[dismal]

That article is an attempt to explain why we are not getting massive inflation due to the fed printing a ton of money.

It's somewhat tautological that this is explained by the velocity of money going down.

 

[T.G.G. Moogly]

That article is an attempt to explain why we are not getting massive inflation due to the fed printing a ton of money.

It's somewhat tautological that this is explained by the velocity of money going down.

What's your take on why the money hasn't enjoyed the same velocity?

 

[ksen]

Unless they're hoarding it in jars shouldn't putting the money in a bank still cause it to circulate by being loaned out?

eta: lol, like banks still bother loaning money instead of just using it to invest for themselves.

 

[Nice Squirrel]

There is this thing we call "Retirement" which none of us can afford anymore and we are not spending our money to try to fund it.

 

[Cobalt]

There is this thing we call "Retirement" which none of us can afford anymore and we are not spending our money to try to fund it.

Some of us still are trying. Are we missing something?

 

[Horatio Parker]

Unless they're hoarding it in jars shouldn't putting the money in a bank still cause it to circulate by being loaned out?

eta: lol, like banks still bother loaning money instead of just using it to invest for themselves.

If banks loan it out. Which they aren't. Which isn't really a problem because no one is investing. Which is because demand is low, which is because people don't have money. I would guess that any increase in savings is not coming from the lowest quintiles, maybe only the top 20%.

 

[arkirk]

Unless they're hoarding it in jars shouldn't putting the money in a bank still cause it to circulate by being loaned out?

eta: lol, like banks still bother loaning money instead of just using it to invest for themselves.

If banks loan it out. Which they aren't. Which isn't really a problem because no one is investing. Which is because demand is low, which is because people don't have money. I would guess that any increase in savings is not coming from the lowest quintiles, maybe only the top 20%.

The entire system is unstable and current financial rules allow for rich people to take huge chunks of our economy out of circulation. This tends to constipate the system and concentrate wealth in the hands of speculators and crooks. You won't find Walmart or McDonalds workers buying new fuel efficient cars or homes or anything more than a new pair of shoes. The same applies to fresh college graduates with huge student debts and people who are either underwater or close to that on their home mortgages. The same applies to the unemployed. The entire economic system trends only in one direction.

 

[dismal]

That article is an attempt to explain why we are not getting massive inflation due to the fed printing a ton of money.

It's somewhat tautological that this is explained by the velocity of money going down.

What's your take on why the money hasn't enjoyed the same velocity?

My sense is there has been delevering at the household level and among banks. However, it is worth noting that this "ZMFOG there is no demand" line of argument is not supported by things like "facts" and "data".

The govt data shows consumer spending is at record highs.

 

[EricK]

When I hear about people hoarding money, I imagine a conversation like this:

Mr A:It was cold last night - I had to put the central heating on.
Mr B: yes it was cold - although I just put a sweater on. I tend not to put the heating on until the temperature gets towards freezing. I don't like to waste energy.
Mr A: Anyway, did you see the iPhone 6 is coming out. I gotta get me one of those beauties. I'll be queuing up as soon as it's released.
Mr B: Don't you already have the iPhone 5? I'm still happy with my old phone. It does just what I want; I don't need all those bells and whistles.
Mr A: What do you spend your money on?
Mr B: Well the first thing I do each month is put some money into my pension fund.
Mr A: Pension?! I can't afford one of those. I have difficulty enough making my money last to the end of the month. Anyway, what's the point? I might die before I retire, and the state won't let me starve anyway. Oh well, I'm off to get a pizza from that new take-away that's just opened, want to join me?
Mr B: No thanks, I took a batch of my homemade chili out of the freezer this morning. I better go home and eat that.
Mr A: That all sounds too healthy to me! I can't be bothered with this all that cooking, anyway. See you later.

Now Mr A is many things that a lot of people on this forum profess not to like. He's wasteful, materialistic, selfish, lazy, only thinking short-term etc. Whereas Mr B is the opposite - He's "green", not into the consumerist lifestyle, socially aware, thinking of the future etc. Would we prefer people to be like Mr A or Mr B? Because for all his good qualities, Mr B is committing the ultimate economic sin (at least according to the same people on this forum) - he's hoarding his money, and not helping to increase demand.

 

[Horatio Parker]

What's your take on why the money hasn't enjoyed the same velocity?

My sense is there has been delevering at the household level and among banks. However, it is worth noting that this "ZMFOG there is no demand" line of argument is not supported by things like "facts" and "data".

The govt data shows consumer spending is at record highs.

Which govt is that? The Ministry of Truth?

Many analysts point to the deficit in consumer demand in G20 countries as one of the main factors behind the current shortfall in global demand.

- G20 summit

 

[dismal]

My sense is there has been delevering at the household level and among banks. However, it is worth noting that this "ZMFOG there is no demand" line of argument is not supported by things like "facts" and "data".

The govt data shows consumer spending is at record highs.

Which govt is that? The Ministry of Truth?

Many analysts point to the deficit in consumer demand in G20 countries as one of the main factors behind the current shortfall in global demand.

- G20 summit

The US govt, which would seem to be the relevant one with respect to this thread.

 

[Horatio Parker]

Which govt is that? The Ministry of Truth?

Many analysts point to the deficit in consumer demand in G20 countries as one of the main factors behind the current shortfall in global demand.

- G20 summit

The US govt, which would seem to be the relevant one with respect to this thread.

Link?

 

[dismal]

Which govt is that? The Ministry of Truth?

Many analysts point to the deficit in consumer demand in G20 countries as one of the main factors behind the current shortfall in global demand.

- G20 summit

The US govt, which would seem to be the relevant one with respect to this thread.

Link?

http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1

Section 2, table 2.3.4

 

[TV and credit cards]

What I have sits and rots in the bank at dismal interest rates because I'm done with investing. I do not trust Wall Street. I believe the game is rigged for the 1%. The only good play that always was and I dare say always will be is being a landlord.

Economist Michael Pento, a frequent and harsh Fed critic, believes the St. Louis group has some of its assumptions wrong, particularly its understanding of why people aren't spending money. He sees it more as a function of high levels of debt that are constraining spending.

Well then show me these high levels of debt. To have an article stating people are hoarding money indicates to me this comment would walk hand in hand with people are reducing their levels of debt. Why would people hoard cash at bank interest rates and pay the interest rates of consumer debt at the same time. Seriously, does that make sense?

 

[Horatio Parker]

Which govt is that? The Ministry of Truth?

Many analysts point to the deficit in consumer demand in G20 countries as one of the main factors behind the current shortfall in global demand.

- G20 summit

The US govt, which would seem to be the relevant one with respect to this thread.

Link?

http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1

Section 2, table 2.3.4

That's a price index. Are you sure you don't mean table 2.3.5, Personal Consumption Expenditures by Major Type of Product?

Anyway isn't it to be expected that the raw number for spending would be the highest? There are more people buying at higher prices because there are more people and higher prices.

 

[dismal]

Which govt is that? The Ministry of Truth?

Many analysts point to the deficit in consumer demand in G20 countries as one of the main factors behind the current shortfall in global demand.

- G20 summit

The US govt, which would seem to be the relevant one with respect to this thread.

Link?

http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1

Section 2, table 2.3.4

That's a price index. Are you sure you don't mean table 2.3.5, Personal Consumption Expenditures by Major Type of Product?

Anyway isn't it to be expected that the raw number for spending would be the highest? There are more people buying at higher prices because there are more people and higher prices.

Actually I meant 2.3.6 - that shows PCE adjusted for inflation.

 

[dismal]

What I have sits and rots in the bank at dismal interest rates because I'm done with investing. I do not trust Wall Street. I believe the game is rigged for the 1%. The only good play that always was and I dare say always will be is being a landlord.

Economist Michael Pento, a frequent and harsh Fed critic, believes the St. Louis group has some of its assumptions wrong, particularly its understanding of why people aren't spending money. He sees it more as a function of high levels of debt that are constraining spending.

Well then show me these high levels of debt. To have an article stating people are hoarding money indicates to me this comment would walk hand in hand with people are reducing their levels of debt. Why would people hoard cash at bank interest rates and pay the interest rates of consumer debt at the same time. Seriously, does that make sense?

The personal savings rate is not particularly high by historical standards.

http://research.stlouisfed.org/fred2/series/PSAVERT/

 

[T.G.G. Moogly]

What I have sits and rots in the bank at dismal interest rates because I'm done with investing. I do not trust Wall Street. I believe the game is rigged for the 1%. The only good play that always was and I dare say always will be is being a landlord.

Economist Michael Pento, a frequent and harsh Fed critic, believes the St. Louis group has some of its assumptions wrong, particularly its understanding of why people aren't spending money. He sees it more as a function of high levels of debt that are constraining spending.

Well then show me these high levels of debt. To have an article stating people are hoarding money indicates to me this comment would walk hand in hand with people are reducing their levels of debt. Why would people hoard cash at bank interest rates and pay the interest rates of consumer debt at the same time. Seriously, does that make sense?

Something is missing in the equation. It may be the change in per capita GDP over time. But even that measure might not reveal the problem. With the wealth gap we have today the average may look good but that money is concentrated at the top.

Also, so much of our economy depends not on consumption but on over-consumption. The people I work with are too busy paying for essentials.