As we rapidly approach Christmas and the Holiday Season, it will be interesting to see what happens to checking account and credit card balances after it is over.
It is interesting to note the surge in demand deposits at commercial banks since the end of 2008.
A similar measure, Total Checkable Deposits (TCDSL), has also surged.
Between anemic GDP growth and the rapid growth in bank deposits (at incredibly low deposit rates), it is no wonder that M2 Money Velocity is dead.
Of course, the crash of the housing market and the loss of consumer confidence in the economy may explain the hording of currency at commercial banks.
While it is true that house prices are beginning to rise again in many parts of the country (in large part due to The Fed’s generous monetary stimulus), there seems to be a mentality of hoarding among consumers. Note that consumer confidence remains low after the housing market crash.
Let’s see if Dodd-Frank regulations and Obamacare taxes and healthcare rationing improve America’s mood after January 1st.
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