Posted on 09/04/2014 12:10:11 AM PDT by Citizen Zed
One of the great mysteries of the post-financial crisis world is why the U.S. has lacked inflation despite all the money being pumped into the economy.
The St. Louis Federal Reserve thinks it has the answer: A paper the central bank branch published this week blames the low level of money movement in large part on consumers and their "willingness to hoard money."
The paper also cites the Fed's own policies as a reason for consumers' unwillingness to spend.
Though American consumers might dispute the notion that inflation has been low, the indicators the Fed follows show it to be running well below the target rate of 2 percent that would have to come before interest rates would get pushed higher. That has happened despite nearly six years of a zero interest rate policy and as the Fed has pushed its balance sheet to nearly $4.5 trillion.
Much of that liquidity, however, has sat fallow. Banks have put away close to $2.8 trillion in reserves, and households are sitting on $2.15 trillion in savings -- about a 50 percent increase over the past five years.
"So why did the monetary base increase not cause a proportionate increase in either the general price level or (gross domestic product)?" economist Yi Wen and associate Maria A. Arias asked in the St. Louis Fed paper. "The answer lies in the private sector's dramatic increase in their willingness to hoard money instead of spend it. Such an unprecedented increase in money demand has slowed down the velocity of money."
(Excerpt) Read more at money.msn.com ...
You’re not saving money, comrade.
You’re hording it.
Step out of your house with your hands up.
A big fluffy market bubble kept inflated with $80B in printed paper every month, a collectivist tax and spend white house, massive unemployment, out-of-control alphabet agencies, and an open border.
It’s a perfect time to walk out the door ready to throw liquid cash all over the place. I might just wake up in the morning and go buy a brand new Volt, I feel so sanguine.
Lies, lies and more lies. The Feds just aren’t measuring inflation where it actually lives, which is in our gas tanks, the price of energy (utilities), and the price of food in the grocery stores. There inflation is sky high. But they know that, which is why they don’t count it towards inflation. Disgusting liars.
I don’t get it. Economics is way over my head, but isn’t this equivalent to hoarding something that Obama can make worthless with a snap of his fingers, and why would anyone do that? Far better to hoard precious metals, no?
Hoarding *what* money?
We’re barely scraping by.
Thanks, Obeyme!
Lot of people are hording toilet paper too!
No when interest rates are 0.5% or less on savings... not really investment at that point!
The article does clarify things a little though, As my income has gone to where I cant stash any extra away... so I was not thinking it was good enough for people to do that. I never took any economics classes, besides just basic high school economics, but I could not figure how with the printing of money going on that there was not rampant inflation numbers. I know the numbers are now rigged with food and energy costs removed from inflation index... But if this is true and people are saving cash (not stashing it in the bank) and taking it out of circulation as fast or even nearly as fast as the government is printing it... well that clarifies the issue some.
That said, it makes the future seem even darker than I have been expecting, as this administration is just propping up our entire economy with this influx of cash and now this news of people saving that cash, the upcoming inflation on top of the crash when they stop printing and start raising rates again, will make both the great recession and 2008 look like a slight blips compared to our upcoming crash... and surprise, surprise, Soros recently bet $2 billion on it...
Most people that I know are NOT saving ... they are paying off debt if they can.
Bingo !
Only an idiot would hoard Fed Reserve Notes.
Which means they want more inflation.
My rainbow colored unicorn completely agrees there is no inflation, though he is pissed the price of skittles went up....
I was hording mine until the wife decided to fix meatloaf, took the last twelve bucks I had in the sock drawer.
There’s practically no yield on savings anymore so money needs to be invested (wisely), spent or hidden.
In a nutshell.
I hoard dog food.
At least my ‘kids’ will always eat well.
:D
a nice big fat tax reduction would do wonders for peoples pay checks plus the leadership of fiscally conservative people.
Their excuse for new currency, they must rob the citizens ya know
Saving/hoarding..yeah, okay..my mattress is loaded. My husband has had the least amount of (union tile) work since June 2009 in his entire life. Yeah, we’ve been saving, riiiight. We’ve lost thousands and thousands of dollars, lost pension contributions for all these years, let alone social security. Lost our medical coverage, will never sign up for O’Shitcare. Hanging on by a thread for 6 years, always facing total ruin right around the corner.
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