Posted on 11/03/2023 7:16:53 AM PDT by SeekAndFind
"You can't have a recession if everyone has a job and everyone is spending money," I told the audience in Las Vegas.
We hosted our annual Stansberry Conference last month. And I had the honor of sharing my most up-to-date thoughts on the markets and the economy.
Everyone is still on edge, waiting for a recession to take hold in the U.S. Many of our analysts at Stansberry Research are exploring the possibility, too.
It's good to be prepared. But you shouldn't lose sleep over this fear. The reason why is as simple as what I said in Vegas...
Consumer spending accounts for roughly two-thirds of the U.S. economy. So a major slowdown isn't likely if people have jobs and cash to spend.
Importantly, folks have more cash on hand right now than you probably realize. And until that changes, a recession is unlikely from here.
Let me explain...
Spending money is as American as baseball or apple pie. It keeps the economy humming... And folks simply won't stop spending until they're out of cash.
The pandemic stimulus pushed thousands of dollars into the average American's bank account. It's what kept us from falling into a much more painful and prolonged recession in 2020. But now, the narrative in the financial media is that most people have spent all their savings.
That couldn't be further from the truth.
We can see it by looking at checkable deposits. These represent the total cash held in checking, savings, and money-market accounts here in the U.S.
Specifically, we're looking at the personal-sector checkable deposits. This is money held by households, nonprofit organizations, and nonfinancial, noncorporate businesses. You can think of it as cash that individuals and small businesses have on hand.
If the economy were about to crash, we'd expect these folks to be hurting. But the numbers don't lie. And today, they tell us that Americans are holding a near-record amount of cash... trillions of dollars more than before the pandemic. Take a look...
This group had less than $2 trillion at their disposal before the pandemic. Today, that figure has soared to nearly $5 trillion.
Now, it is true that the figure has dropped by a few hundred billion from last year's high. But it still amounts to trillions of dollars in excess cash, versus just a few years ago. And that means consumers will keep spending... heading off a potential recession.
Another interesting detail is that it isn't just the wealthiest consumers holding that extra cash. The most well-off do have a majority of these savings. But even the less well-off are in a much better position than they were before the pandemic. Take a look...
This chart shows the checkable deposits for the bottom 50% in overall wealth. These folks have nearly $300 billion in cash available. That's a staggering amount – triple what they had before the pandemic began.
Both charts tell the same story... The average American has plenty of cash on hand right now. Consumers will be able to keep spending. And it's hard to have a recession if everyone is spending money.
Sure, that situation can't last forever. But it's the reality for now – and it isn't something that will change overnight. So while everyone is worried about an economic downturn, remember... it probably won't happen until this excess cash disappears.
Good investing
Check out the usurious interest rates on your cards. Anyone with high card balances is paying exorbitant fees. Its damn close to loan sharking.
Right-o.
And it’s said there is no problem also b/c there’s so much cash in the economy. Well, as we’ve witnessed for several years now, all that cash is causing high inflation.
The wealthy suffer not but regular folk struggle at the grocery store and paying for other essentials.
“it is obvious by their recent purchases and vacations that they all received quite a bit of money.”
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Easy come, easy go. A fool and their money soon part.
People who don’t earn their own money have no respect for it.
Agree.
Seeing demand AND business destruction everywhere.
Looks like 2007-2008 except we have multiple other issues going on.
Yep, I am with you on that.
“Easy come, easy go. A fool and their money soon part.
People who don’t earn their own money have no respect for it.”
Yep. Our’s went immediately into interest-bearing accounts. We live a simple life-style and have no need or desire to change that. And of course, we would greatly prefer to have our parents instead.
I spend a lot of time in grocery stores and see prices steadily rising on everything. I’ve noticed more people comparing prices rather than just throwing items in the shopping cart like they used to. Grocery prices are starting to take a real toll on household budgets.
“Our’s went immediately into interest-bearing accounts.”
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You can actually get some decent yields these days on treasury money funds.
Best of luck to you.
Vanguard or Fidelity money market funds is something you might want to consider.
Look it up...ridiculously low fees—great interest rates—and virtually zero risk.
If you think there will be future inflation (like I do) you can stay very short term (which is the same bet you are placing with high yield savings accounts).
If you want to lock in current rates for the mid or long term that is an option as well.
They will send you emails to try to convince you to let them manage your money—don’t do that because it means higher fees—self manage—and you will be in great shape.
I’m single, minimal bills to pay and just automatically buy what I like/need with not too much splurging on fun foods and the like. Being Type II, I have a sort of routine of meals that I prepare.
That said, my regular items are considerably higher in cost and frequently for a smaller amount. I’m sure it’s even worse for the costlier speciality foods than for the staples.
Anyway, I am thankful I don’t have to choose between food, medicine, heat or which bills not to pay. I plan my life that way and I don’t understand those that intentionally spend as much (or more) as they have each month.
“They will send you emails to try to convince you to let them manage your money—don’t do that because it means higher fees—self manage—and you will be in great shape.”
Oh we definitely self-manage our money. I’m not giving it to Blackrock!
As long as we can keep spending money our great-grandchildren have not earned yet, we can keep postponing the recession until after the next election - every time.
“I have a sort of routine of meals that I prepare.”
Same here due to hubby’s diabetes. I rotate between pork, steak, and chicken for protein, and peas or beans along with broccoli, asparagus, or brussel sprouts on the side.
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