Wednesday, September 3, 2014

The Fed Thinks You are Hoarding Cash

The folks at the St. Louis are out with a research paper, as reported by CNBC, claiming that U.S. consumers are hoarding cash and that has made the Fed's QE efforts infective. I guess the economists at the Fed don't take a look at their own data.

The personal savings rate has remained largely flat over the last five years. So unless consumers are shoving cash under their mattresses. I guess the economists also forgot to look at the banks reserve holdings, which have exploded over the same time frame.

This is nothing to the fact that financial inter-mediation makes the whole argument (that is unless the cash is literally going into mattresses) of cash on the sidelines, savings as negative, reserves lockup, and hoarding cash a red herring. But great job trying to make the argument that consumers are hoarding cash.

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