Fed: US consumers have decided to ‘hoard money’

Fed: US consumers have decided to ‘hoard money’

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 only great mystery involved with this notion that we are in a low inflationary period is why the myth persists despite all the evidence our grocery bills post to the contrary. The Fed, however, may be partially correct but not at all in the particulars. Savings does not amount to hoarding as the money in those accounts is constantly being invested and reinvested by way of providing capital to banks making loans. What does amount to hoarding is 80 billion dollars a month being created and then placed into the non consumer economy. To be sure inflation would be far worse were those funds directly injected into the general money supply. And that is something we will likely find out when the bubble bursts and we are all told that “nobody could possibly have seen this coming”.

25 Comments
newest
oldest most voted
Inline Feedbacks
View all comments
I HATE THE MEDIA ™
Verified by MonsterInsights