U.S. households and small businesses have racked up a breathtaking record cash flow of nearly $ 17 trillion

U.S. households and small businesses have amassed a record cash flow of nearly $ 17 trillion – a mind-boggling estimate that exceeds the $ 16 trillion in tax action taken by governments around the world to keep the global economy at bay. flood during the pandemic.

This national treasury has grown exponentially since February 2020 due to three factors: direct government stimulus payments to individuals, the savings induced by the closure of Americans working from home, and the decisions of small businesses to keep subsidies. or loans, according to Jim Vogel, a Memphis-based manager at fixed-income broker FHN Financial, which tracks cash flow.

The magnitude of cash positions held is surprising given the tendency of households and businesses to dip into their savings during each of the two or three recessions before the pandemic era. After the coronavirus pandemic triggered a two-month deep recession in the United States starting in February 2020, what’s different this time around is that economies have skyrocketed despite the economy reopening . Two reasons have been put forward for this: Small businesses seem to focus on restocking to meet pent-up demand, while individuals choose not to spend money on even the smallest of services and experiences that are available. have now become the norm.

“This is a sign of an unusual economy in which a lot of people are making money or having money, but not spending it,” Vogel said in a telephone interview on Wednesday. “There are two sides of this coin: a lot of people are doing well, while some people who depend on these expenses don’t. And the longer the imbalances last, the longer they take to resolve. “

FHN Financial’s estimate of around $ 17 trillion exceeds the figure of $ 16 trillion that the International Monetary Fund estimated in July as the amount of fiscal measures taken by governments around the world to prevent the collapse economic during the pandemic.

Federal Reserve, FHN Financial


Vogel said his company hit its estimate of nearly $ 17 trillion by taking the most recent data on the Federal Reserve’s money supply, released on Tuesday, and removing the estimated level of demand deposits from corporate and institutional money market accounts. The nearly $ 17 trillion figure has increased by about $ 250 billion in the past three months, he says, in a trend that has shaken his expectations of decline in the current quarter. In February 2020, it stood at less than $ 12 trillion.

More remarkably, the nearly $ 17 trillion represents money that has yet to be deployed in the US stock market, where the benchmark shows SPX,
+ 0.27%

DJIA,
+ 0.18%
advance further into record-breaking territory. In addition to representing available cash that could still flow into stocks, silver acts as a “bar” allowing investors already in that market to avoid selling a lot, according to Vogel.

“Money acts as a zero risk anchor, and there is a reduced need to sell. It’s also why the buy-on-dip model has worked so well, ”he says. “When an external shock puts the economy on its heels, the length of time people hold money is surprisingly long.”


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