Record savings and banks with too much money - economic update

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Banks have an increase of over $2 trillion in deposits. Home prices continue to go up even though we’re officially in a recession, and the US personal savings rate has increased.

So banks have hit record levels of cash deposits with commercial banks in total having over 15 trillion dollars in deposits. The majority of the $2 trillion spike in deposits went to the largest banks. In fact, more than two-thirds of the gains went to the 25 biggest institutions

Now there are two main components to banks have so much cash. Individuals saving more, and corporations having more cash on hand due to the overall current situation and uncertainty for the future.

The personal savings rate hit an all time high of 33% mean the ratio of personal savings to the amount of disposable income. Now normally this number sits between 5% and 8%, with not even in the past 25 years has that number been anywhere near 15%.

Part of the reason it's so high is people can’t even go out to spend that money, but part of it is just the overall uncertainty. People are worried about if they’ll have a job, there are many people getting pay cuts or demotions.

The other part of banks having so much money is that corporations have a lot of money parked at banks. Companies are raising massive amounts of cash through debt securities because of record low interest rates. However, these companies have nothing to spend the money on as the opportunities for capital reinvestment is low. So the only option is to have this money kept at a bank. These low interest rates also have the consequence of pushing up demand for mortgages and in turn drives up real estate prices.

Ultimately, it seems that uncertainty is the head line for the foreseeable future.

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Видео Record savings and banks with too much money - economic update канала Financial Lift