For One Bank, This Is ‘The $3 Trillion Question’
In "Epic, Extreme Analogs' And Ostensibly Stingy Banks," I speculated about what might happen in the US economy in the event pandemic-era savings dynamics reverse as the services sector reopens following the assumed achievement of herd immunity.
To quickly recapitulate, some suggest that once the pandemic abates, quite a bit of liquidity could be unleashed. When you consider the prospect that elevated savings levels (e.g., due both to consumer retrenchment and stimulus checks) could be drawn do
Ethan Harris was US Economist for LEH in 2008, just to make that point, which is not at all relevant to the article, but just crossed my mind, because I am also part of the Lehman diaspora.
Along with the notion of more direct to spender fiscal stimulus, tihen tighter output gap, millennium employment demographics, the resulting velocity given the money supply – may finally tip the probability scale to short term inflation at least
I think it depends who has the savings.
Rich, richer and richest will keep savings as savings. They have not been deprived too much during covid- still buying whatever they wanted. Uber Eats works is a decent, and still expensive, substitute for eating out (so I am told). Presumably, their travel/entertainment budget will increase- but doubtful they have to draw down savings to fund.
Middle class, who were able to save- they might or might not spend it- it might depend on whether or not they are worried about losing their job, or being able to find a replacement job, if needed. Having savings definitely reduces stress- but there are so many “siren calls” to spend.
Below middle class has not likely saved- so no draw down.
Banks will not lend (unless ordered to do so), until the easy/fast money can not be made in Investment banking fees, etc.
Thanks.
I forgot to mention- I think the work from home portion of covid will survive, at least in part – because it is financially beneficial to employers/bottom line and companies have learned that employees who work from home are “productive enough”!
This remaining work from home trend will result in a big decline in work lunches/after work socializing, work attire, and commuting/parking. Maybe even big, expensive conventions will not return to the same extent, either.
We do have new and very pressing problems that have to be addressed or we won’t exist. There’s a lot of work that needs to be done and we need educated minds to address them. According to Bill gates almost everything from what we eat to what we use to transport goods to producing energy to making steel and cement have to be changed. Retooling everything we do will take time but is necessary and will take a lot of work.