The Tragedy Of America’s $3.5 Trillion In ‘Extra’ Savings

Back in June, I told readers the "sad, sad story" of $3 trillion in pandemic savings. The tale was as predictable as it was tragic. Deposits and money market fund balances ballooned in the US following the onset of the pandemic, leading to speculation about the extent to which so-called "excess savings" and "cash buffers" could cushion the economy from ongoing rate hikes and the drag from generationally high inflation. If the majority of the pandemic windfall was concentrated in the hands of t
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14 thoughts on “The Tragedy Of America’s $3.5 Trillion In ‘Extra’ Savings

    1. It has occurred to me numerous times that if you were truly interested in leveling the playing field between capital and labor, you would at the very least tax them both at the same rate … right?

    2. I wholly agree on the idea of a wealth tax.
      The wealth hide their wealth in stock and property. And do not sell their holdings – so no tax paid.
      Maybe it is time for the wealthy to pay an annual tax on the gain in their holdings.

      But let us not forget the multinational corporations. A common practice for US multinational corporations is to structure their operations so that overseas subsidiaries are the ones reporting income, and profits. This leaves a US operation that generates a lot of sales but with little or no taxable income to report, depriving the government of much needed tax receipts.

  1. “The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover didn’t know that money trickles up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands.” Will Rodgers

    The more things change………

  2. Three rounds of stimulus checks put around 3500$ into the hands of each qualifying American adult and about 2500$ for each child. This does not really impact the financial position of the top 40%. So how to explain this increasing income disparity, inequality and growth of pandemic savings? It is more than just a trickle-up effect.

    Is a possible explanation the transfer of wealth during the pandemic period due to the fact that the top 40% are the primary investors in the stock market. And they could continue to invest and/or remain invested.

    Likely they generated a lot of wealth off the lows of March 2020 until today. And (most likely) some of these gains were converted into cash!

  3. Another tidbit, according to an article in Forbes, total cost of COVID relief in 2020 was 2,607 billion dollars, yes indeed a lot of zeroes. An certainly ran up the US deficit that year.

    But to put that in perspective, US GDP in 2020 was 20,894 billion$ (world Bank figures). This was a decrease from the 21,373 billion $ GDP in 2019.

    1. I do not have a crystal ball. A fed pivot (whatever form that might take) could be an occasion for a ( bear??) market rally.

      But my take is consumers and investors will have a difficult 2023 and maybe even 2024.

      The US is a consumer economy. A combination of persistent too-high inflation in 2023 and even into 2024, the lack of cheap money and a possible stagnant or falling economy are all factors that do not bode well for the consumer nor the investor.

      Internationally, Europe is not in great shape. And we have yet to see the full impact of China’s 0-Covid policy which may have put China’s leadership in a no-win position. Lifting restrictions will cause a wave of infections and deaths. Not changing course risks ongoing protests and will further damage their economy.

  4. H,

    Looking forward to using these charts with a nay-saying friend, the kind who loves a good conspiracy when it comes to plain ol’ facts. (As in, he likes to produce his own.) Could you please supply source data? I found “Fed” in the text and then went back to the March Bloomie article, but is there more? My favourite search engine is producing nothing when I search using terms from your text above. Thanks.

  5. A record-breaking share of Americans are turning their 401(k) accounts into emergency piggy banks, according to Vanguard.

    Dissecting data from a sample of the approximately 5 million employer-sponsored 401(k) accounts that Vanguard handles, researchers said a record number of account holders were making hardship withdrawals in October.

    Vanguard investor pulse: Anxiety and cash needs on the rise
    https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/vanguard-investor-pulse.html

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