The Indexer has been following some macroeconomic trends with great interest (no one else seems to want to, and talking about trillions of dollars is fun). Most interesting is the rapid increase in the money supply and the bank deposits that it represents. The federal government pumped massive liquidity into the economy, and all that money that Americans did not spend during the lockdowns stayed in their bank accounts, paid off credit card debt and otherwise strengthened household balance sheets.
According to the Federal Reserve Board, commercial bank deposits increased by 17 percent from March to mid-June. The broad M-2 money supply, which includes the savings accounts where households stash their cash, increased an astonishing 19 percent during that time. Both measures have leveled off, and M-2 dipped slightly at the end of June, signaling an end to the current round of federal stimulus. Credit card balances, which had fallen 11 percent during that time, have also leveled off. FRED, the Federal Reserve’s data portal, has some nifty charts on bank deposits, money supply, credit card balances and lots more.
So, are consumers and businesses ready to dig into that $3 TRILLION in liquidity–almost 15 percent of GDP–that has built up in the past few months, one foregone latte at a time? We will get some hints at the end of July when we get personal income and outlay data for June. The Indexer will have it to you first!