EXCESS SAVINGS AND THEIR IMPACT ON THE ECONOMY: Just in the last week or so I have have seen estimates of the level of excess savings that came about from pandemic-induced government programs that range from $600 billion to $1.5 trillion. No one really knows, and so you get economic forecasts from the same firm that say the excess savings will be spent by anywhere between October of this year and July of 2025. Since the economy is driven by the consumer, this gap will make for a lot of uncertainty in forecasts. Monetary and fiscal policy from 2008 to March 2022 so distorted the economy that some of the old reliable correlations used in economic forecasting are now suspect. The key is to stay nimble whatever the economy does.
What will happen as excess saving run off? No one’s quite sure.
By Thomas K. Brown,
EXCESS SAVINGS AND THEIR IMPACT ON THE ECONOMY: Just in the last week or so I have have seen estimates of the level of excess savings that came about from pandemic-induced government programs that range from $600 billion to $1.5 trillion. No one really knows, and so you get economic forecasts from the same firm that say the excess savings will be spent by anywhere between October of this year and July of 2025. Since the economy is driven by the consumer, this gap will make for a lot of uncertainty in forecasts. Monetary and fiscal policy from 2008 to March 2022 so distorted the economy that some of the old reliable correlations used in economic forecasting are now suspect. The key is to stay nimble whatever the economy does.