Consumers padding their checking accounts
By E. Scott Reckard, Los Angeles Times
With wounds from the Great Recession still fresh, chastened Americans are hoarding more cash in their checking accounts than at any time in the last 25 years.
The defensive stance, uncharacteristic of previous periods of low inflation and an improving economy, reflects how debt-burdened Americans have striven to clean up their personal finances since the recession ended five years ago.
The lack of attractive investment alternatives, with savings accounts paying next to nothing and the stock market already at lofty heights, is another factor, financial analysts said.
A report released this month by bank consulting firm Moebs Services Inc. calculated the average balance for U.S. checking accounts at $4,436 at the end of last year — more than double the average of $2,100 over the 25 years of the annual survey.
The recession ended 5 years ago??? Really???
I agree, Dog. I apparently didn’t get that memo.
according to the definition of recession which is a shrinking economy it did, Though the recovery was very weak if anything for 3 of those years.
The Obama Depression spares nobody.
Dog and others: The definition of a recession and when it begins and ends are based on technical indicators and as determined by National Bureau of Economic Research.
As noted in an article in 2010….
“The recession ended in June 2009, making it the longest downturn since the Great Depression of the 1930s, the National Bureau of Economic Research said on Monday.
The NBER, considered the arbiter of U.S. recessions, said its declaration did not mean the economy had “returned to operating at normal capacity” and cautioned that economic activity sometimes remains below normal well into expansion.”
As Paul Krugman (Nobel Prize winning economist) has long noted, jobs take a long time to recovery after recessions (read that all recessions) and given that the 2007/2008 meltdown was the largest setback in U.S. economy since the Great Depression, then job recovery is expected to be sometime. Sadly, recovery is never equal. For example Nevada is still suffering disproportionately while California (particularly the Bay Area) is coming along. For example, unemployment in the Bay Area is under 6%. Much of the Tahoe Basin (South Shore in particular) seems to me to be at a much slower pace. Other places in the country, unemployment is still in the double digits.
Being mostly based in the Bay Area, my business has recovered nicely as has our portfolio, while I have relatives in other parts of the Country who have not been so lucky.
Rick
AB it sounds like your working on rewriting history with your comment.
You can argue all day whether you think Obama has done a good job or not, but laying at his feet something that happened before he was even sworn in ain’t gonna hold any water.
So you trust a government agency to tell you when the economy is good and when it’s bad?
I’m glad your business is doing well. But the vast majority of folks out here in the lower half of the middle class aren’t feelin’ it.
Dog, the Dow isn’t shattering records on a down economy.
People who failed to invest in education, whether technical or college, will continue to get left behind in the new economy. That is not ever going to change.
http://www.amazon.com/Who-Moved-My-Cheese-Amazing/dp/0399144463
The dow is shattering records on a ginned up phony economy that the government and their cronies are profiting from. It’s phony money. They’ve been printing up billions for years now.
New economy or old, there WILL always be the very poor and the very rich. THIS economy is crushing the middle class.
Dog, your grasp of economics is astoundingly poor. The Dow is improving in large part because companies are selling more products. Apple (part of NASDAQ) today exceeding expectations by selling more product. Last time I checked, I paid real $$ for my ipad and iphone. My clients are paying me in real $$ and I am paying my staff in real $$.
see this blog:
Plutocrats and Printing Presses
April 20, 2012 9:36 amApril 20, 2012 9:36 am
These past few years have been lean times in many respects — but they’ve been boom years for agonizingly dumb, pound-your-head-on-the-table economic fallacies. The latest fad — illustrated by this piece in today’s WSJ — is that expansionary monetary policy is a giveaway to banks and plutocrats generally. Indeed, that WSJ screed actually claims that the whole 1 versus 99 thing should really be about reining in or maybe abolishing the Fed. And unfortunately, some good people, like Daron Agemoglu and Simon Johnson, have bought into at least some version of this story.
What’s wrong with the idea that running the printing presses is a giveaway to plutocrats? Let me count the ways.
First, as Joe Wiesenthal and Mike Konczal both point out, the actual politics is utterly the reverse of what’s being claimed. Quantitative easing isn’t being imposed on an unwitting populace by financiers and rentiers; it’s being undertaken, to the extent that it is, over howls of protest from the financial industry. I mean, where are the editorials in the WSJ demanding that the Fed raise its inflation target?
Beyond that, let’s talk about the economics.
The naive (or deliberately misleading) version of Fed policy is the claim that Ben Bernanke is “giving money” to the banks. What it actually does, of course, is buy stuff, usually short-term government debt but nowadays sometimes other stuff. It’s not a gift.
To claim that it’s effectively a gift you have to claim that the prices the Fed is paying are artificially high, or equivalently that interest rates are being pushed artificially low. And you do in fact see assertions to that effect all the time. But if you think about it for even a minute, that claim is truly bizarre.
I mean, what is the un-artificial, or if you prefer, “natural” rate of interest? As it turns out, there is actually a standard definition of the natural rate of interest, coming from Wicksell, and it’s basically defined on a PPE basis (that’s for proof of the pudding is in the eating). Roughly, the natural rate of interest is the rate that would lead to stable inflation at more or less full employment.
And we have low inflation with high unemployment, strongly suggesting that the natural rate of interest is below current levels, and that the key problem is the zero lower bound which keeps us from getting there. Under these circumstances, expansionary Fed policy isn’t some kind of giveway to the banks, it’s just an effort to give the economy what it needs.
Furthermore, Fed efforts to do this probably tend on average to hurt, not help, bankers. Banks are largely in the business of borrowing short and lending long; anything that compresses the spread between short rates and long rates is likely to be bad for their profits. And the things the Fed is trying to do are in fact largely about compressing that spread, either by persuading investors that it will keep short rates at zero for a longer time or by going out and buying long-term assets. These are actions you would expect to make bankers angry, not happy — and that’s what has actually happened.
Finally, how is expansionary monetary policy supposed to hurt the 99 percent? Think of all the people living on fixed incomes, we’re told. But who are these people? I know the picture: retirees living on the interest on their bank account and their fixed pension check — and there are no doubt some people fitting that description. But there aren’t many of them.
The typical retired American these days relies largely on Social Security — which is indexed against inflation. He or she may get some interest income from bank deposits, but not much: ordinary Americans have fewer financial assets than the elite can easily imagine.And as for pensions: yes, some people have defined-benefit pension plans that aren’t indexed for inflation. But that’s a dwindling minority — and the effect of, say, 1 or 2 percent higher inflation isn’t going to be enormous even for this minority.
No, the real victims of expansionary monetary policies are the very people who the current mythology says are pushing these policies. And that, I guess, explains why we’re hearing the opposite. It’s George Orwell’s world, and we’re just living in it.
Dog, here is another blog pointing out the feds are not printing money. That is the mantra of the ill-informed, or duplicitous.
Debt in a Time of Zero
January 2, 2013 3:24 pmJanuary 2, 2013 3:24 pm
I’ve had communications from a number of people asking an interesting question relating to the debt ceiling and other issues: why does the Federal government have to borrow at all? Why can’t it just print money to pay its bills? After all, haven’t people like me been saying that this isn’t actually inflationary?
Now, it turns out that there really is a problem, or actually two problems — but they’re a bit subtle.
First, as a legal matter the Federal government can’t just print money to pay its bills, with one peculiar exception. Instead, money has to be created by the Federal Reserve, which then puts it into circulation by buying Federal debt. You may say that this is an artificial distinction, because the Fed is effectively part of the government; but legally, the distinction matters, and the debt bought by the Fed counts against the debt ceiling.
The peculiar exception is that clause allowing the Treasury to mint platinum coins in any denomination it chooses. Of course this was intended as a way to issue commemorative coins and stuff, not as a fiscal measure; but at least as I understand it, the letter of the law would allow Treasury to stamp out a platinum coin, say it’s worth a trillion dollars, and deposit it at the Fed — thereby avoiding the need to issue debt.
In reality, to pursue the thought further, the coin really would be as much a Federal debt as the T-bills the Fed owns, since eventually Treasury would want to buy it back. So this is all a gimmick — but since the debt ceiling itself is crazy, allowing Congress to tell the president to spend money then tell him that he can’t raise the money he’s supposed to spend, there’s a pretty good case for using whatever gimmicks come to hand.
But leaving the debt ceiling on one side, isn’t it true that since spending can currently be financed by Fed money printing, we shouldn’t care at all about the notional debt owed to the Fed? Alas, no.
It’s true that printing money isn’t at all inflationary under current conditions — that is, with the economy depressed and interest rates up against the zero lower bound. But eventually these conditions will end. At that point, to prevent a sharp rise in inflation the Fed will want to pull back much of the monetary base it created in response to the crisis, which means selling off the Federal debt it bought. So even though right now that debt is just a claim by one more or less governmental agency on another governmental agency, it will eventually turn into debt held by the public.
We are living in weird economic times, where many of the usual rules don’t apply and there are big free lunches to be had. But not everything is a free lunch, even now. Sorry.
In the interest of brevity I got two words…
Irrational Exuberance.
Make that three words…
Fraudulent
Sorry your thoughts are fraudulent CJ, but it was rather obvious wasn’t it.
Rick
Rick,
The fed buying all those bonds with its Quantitative Easing, is in essence printing money. The money isn’t in the form of currency, but rather bank balance sheets.
The total is over $3 Trillion worth of debt the Fed has created! It’s scaled it down from originally purchasing $85B/month, down to $35B. But if the economy was on solid footing, the Fed wouldn’t be purchasing any bonds at all, and in fact would be working to unwind its multi-$Trillion balance sheet.
And all that debt buying and money creating has caused inflation. I refer you to gas & food prices. So how would the Dow be doing if the Fed hadn’t created over $3Trillion in new money. And how will it do when it takes it out, not to mention when the Fed puts interest rates back to normal levels?
Rick deserves a break.
Parker, this was the result of 30 seconds on google.
Sorry to bring facts into this Parker.
Inflation 2004-2014
http://www.usinflationcalculator.com/inflation/current-inflation-rates/
http://www.pimco.com/EN/Insights/Pages/US-Inflation-Outlook-2014-Signs-of-Life.aspx
30 second investment into your reputation. Try it.
parker as you well know food is not included in the core inflation rate as they have a tendency to change seasonally or be influenced by other things as in the case of gas going up because of things like a aircraft being shut down, this brings out the speculators.
Parker, inflation is running extremely low. Only conspiracy nuts believe other wise. way ahead of you. see.
http://www.nytimes.com/2014/07/18/opinion/paul-krugman-addicted-to-inflation.html
Rick
Also, if you need other information why we are recovering see Krugman’s column yesterday on the lack of a debt and budget crisis.
In other words, relying on simple narratives because they fit a preconceived notion is usually wrong. To truly understand economic theory requires a deep knowledge of the behavior of various algorithms. It is precisely why Krugman won the Nobel Prize in Economics, and is considered on of the most important and influential economist of the 21st Century. I will trust his analysis over the range of numnuts on this forum (myself included).
http://www.nytimes.com/2014/07/21/opinion/Paul-Krugman-An-Imaginary-Budget-and-Debt-Crisis.html
Rick
Rick,
Ever hear of the story of the woman who walks into her bedroom and catches her husband in bed with another woman?!
The husband’s response, “Now are you going to believe me, or your lying eyes?”
Can your eyes read the prices at the gas pumps? Seen the price of food lately? Food & Gas, you know things people need? You can believe your own eyes, or govt. statistics. Which, by the way, while they’ve failed to show the true picture, are also showing a noticeable uptick!
And Paul Krugman, cite him if you want. Many do, and seems like a good, sincere individual to me. But even that right-wing CNN, note I didn’t say Fox, I said CNN, has identified him as a far-left economist. Not some neutral wonk. (Nobel Prizes have been given out all types of ‘characters’ shall we say.)
In other words, relying on simple narratives because they fit a preconceived notion is usually wrong. To truly understand economic theory requires a deep knowledge of the behavior of various algorithms. It is precisely why Krugman won the Nobel Prize in Economics, and is considered on of the most important and influential economist of the 21st Century. I will trust his analysis over the range of numnuts on this forum (myself included).
The truth of Krugman’s economics can be summed up with the statement “if you accept my assumptions you cannot question my conclusions.” But it is always possible to question fundamental relationships represented in the algorithm and that opens the door for robust conversations from…well, numnuts I guess.
Milton Friedman won a Nobel Prize, and 5 Nobel Prize winners in Economics Science endorsed Mitt Romney for Pres. So, cause they all won Nobel Prizes in Economics what they say is fact?
Great! Cause they won a Nobel Prize what all those Conservative Economists say is fact!!
Yeah, and I’m a numnut because I have a problem with $4/gallon gasoline?!
I don’t need an economist I just check my bank account it will tell me the truth.
Krugman was the one that wanted Obama to make a Trillion Dollar coin to give to the Fed., he was serious. That was good for laughs.
Obama received the Nobel Peace Prize.
The people that think these organizations demonstrate un-questionable wisdom are fools.
Anybody the DC political class puts forth as their authority on anything is suspect. There is always an agenda behind it.
Parker gas costs $4 a gallon because oil and gas trade in as a close to an actual market as exists on earth today. Note, American production does not influence the price, that is a good thing. That means the product is flowing nearly perfectly into the international supply system. That is great because in theory there should be consistent prices which if far more important that low prices.
What a bunch of gobbledygook! So $4/gallon is better $3 or $2/gallon. FYI, real people have to pay for that gasoline with their own hard earned money.
And FYI, when you pump the economy with $, inflation occurs. Prices go up. The Fed has pumped the economy with $ with the stated purpose of creating ‘moderate’ inflation. The price of gas and other items has shown inflation has shot well passed ‘moderate’!