Original title: the epidemic ravages the American people and tightens their pockets! The surge in deposits may lead to a shortage of dollars, and there are still upside opportunities for the dollar.
On Saturday, June 27th, market analysts, including Christopher Condon, jointly wrote that the epidemic caused panic among the American people and led to a surge in savings, thus affecting consumption and economic recovery. The US personal savings rate jumped to 32.2 per cent in April and remained as high as 23.2 per cent in May. According to a CBS poll, only 5% of people believe that the United States is making good progress in fighting the epidemic. As the epidemic continues, people tend to hoard cash, which may prolong the dollar shortage and give
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Provide support.
The epidemic has caused panic among the American public and led to a surge in savings, thus affecting consumption and economic recovery
As in 2008, the Fed injected record amounts of cash into the financial system this year to avoid economic collapse. But unlike in 2008, when most of the money was in the Fed's bank accounts, it is now pouring into Americans' own bank accounts, which is a big difference.
When money is deposited with the Fed as excess reserves, it does not shock the economy. But if you put it directly in the pockets of the people, it will have a big potential impact on the economic recovery.
The actual figures are eye-popping. As the chart below shows, the most liquid part of the money supply, as measured by M1, surged 26 per cent in the three months to May. That is three times the three-month increase in the same period in 2008 and more than the full-year increase in any year since the official tracking data was recorded for 60 years.
The question now is whether Americans really go out to spend this money because the United States is slowly and intermittently reopening its economy.
Some, such as Jeremy Siegel, a professor at the University of Pennsylvania, will give a resounding yes and expect consumer spending to rise sharply in the coming months, boosting economic growth and fuelling inflation in 2021. However, others worry that the opposite will happen. Americans, uneasy about the surge in unemployment during the epidemic, will choose to save the money for a rainy day, thereby stifling the economic recovery.
The number of economists in this camp significantly exceeds that of Siegel. In any case, one thing is clear: few factors are more important in determining the pace of US economic recovery than how the money is spent.
The US savings rate is still high.
"if the savings rate continues to rise, US economic growth will suffer," said economist Yelena Shulyatyeva. The biggest worry is that consumers will not start spending again. "
It sounds strange that Americans have more money on their books than ever in the worst economic disaster since the Great Depression. The recession has made people poorer, and more than 40 million Americans lost their jobs during the epidemic. But the federal government has taken huge steps to make up for lost revenue. Since March, Congress has approved $2.8 trillion in aid, including large amounts of money allocated directly to families. At the same time, U. S. consumption has been falling, with retailers, restaurants and other businesses shutting down.
In April, the US personal savings rate jumped to 32.2 per cent. Before the outbreak, the figure had never exceeded 17.3 per cent since 1959 and exceeded 10 per cent only once since 1995. The US savings rate fell to 23.2 per cent in May, according to the latest monthly data released by the Commerce Department on Friday.
As shown in the figure below, the savings rate in the United States has soared in the face of falling consumption and the introduction of government financial assistance.
In addition, companies facing serious uncertainty have used more than $200 billion in revolving credit lines, according to Morgan Stanley. Other companies have been able to take advantage of the bond market. Only a small portion of these loans are used for new projects or investments.
The Fed has responded aggressively to the epidemic, buying more than $1.6 trillion of Treasuries since early March, effectively funding more than half of the government's stimulus package. The Fed's emergency lending program also maintains the flow of credit to businesses.
In fact, America is not alone. Central banks and governments in the world's developed markets have been frantically printing and distributing money to prevent businesses and households from going bankrupt. In these places, with the decline of GDP, people's bank deposits are also increasing.
Inflation fear
Segal, a professor at the University of Pennsylvania, also worries that the United States will experience a consumption boom next year, adding that "we will see inflation rise for the first time in more than 20 years."
Siegel himself admitted that he was in the minority of economists. Others believe that, first, government support for the unemployed is likely to decline at least by the end of July, when benefits approved under the Care Act (CARES Act) expire. The beneficiaries of this assistance, if they can save some money, will start to use their reserves to scrape by.
Roberto Perli, a former Fed economist, said: "truly high inflation requires structural reforms in the economy if it is to be sustained. It is difficult for me to see positive structural changes and more likely negative structural changes. "
Any recovery is likely to be limited by the simple fact that some needs will never be made up.
Worse could happen if outbreaks are repeated, sparking fear and uncertainty, thereby changing consumer behaviour for a long time. Instead of spending when the economy is very clear, American households may think twice and turn involuntary savings into more lasting precautionary savings.
Julia Coronado, president and founder of Macro Policy Perspectives, said: "there are factors in people's behavior in the recession, not just the actual impact." This is about a loss of confidence, which will strengthen the drag on the economy. "
Only 5% of people think that the United States is making good progress in fighting the epidemic.
A new CBS poll shows that Americans are pessimistic about the surge in cases and the recession in many states.
According to the June 23-26 survey, only 5% of people thought the situation in the United States was "very good" and 40% thought it was "very bad." Another 19 per cent said "fine" and 36 per cent said "a little bad".
Most Americans say that when they look back on the past few months, the Trump administration was not ready for the outbreak in early 2020. 72% thought the government was "not ready", while 28% thought the government was "ready".
On the day the poll results were released, the United States had more than 2.5 million cases of infection and more than 125000 deaths, the highest in the world. The number of daily cases in the United States hit a record last week, in sharp contrast to the fact that European countries have almost eliminated the epidemic. Government officials linked the rise in cases to an increase in testing, but health experts disagreed.
Nearly half (49%) of respondents said the epidemic in the United States would worsen this summer. The rest are divided into two groups, one of which thinks things will get better, while the other wants to stay the same.
The CBS poll also showed that the number of people who affirmed Trump's anti-epidemic measures also continued to decline, from 53% in March to 47% in mid-April and now to 41%.
Huitong net reminder
As the epidemic continues, Americans are panicking about the economic outlook and hoarding a large amount of cash, which means that the dollar shortage will continue.
Dollar index
There is still an opportunity for shock to rise in the future, and investors need to keep an eye on it.
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Daily line chart)
15:00 Beijing time on June 29th
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报97.2008。