The resident communist at MarketWatch weighs in here:
Sure, people need to keep some money handy to pay their bills and some folks might have a few hundred or a few thousand in a rainy-day fund, but no one needs immediate access to the equivalent of 11 months of income. In essence, there’s $10.8 trillion stuffed into mattresses. That $10.8 trillion hoard represents a failure of Fed policy. Since the Fed began quantitative easing in September 2012, U.S. households have socked away $1.17 trillion in their low-yield accounts. That means that 95% of the Fed’s $1.24 trillion QE3 ended up not in bubbly markets but in a safe and boring bank account.
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The $1.17 trillion since September 2012 is nicely represented in "excess reserves of depository institutions", which are up $1.21 trillion since that time. So sorry, Rex, the banks are holding on to that cash, not households. The reason? They must, to help comply with increased capital requirements under Basel III rules in the wake of the panic of 2008. That's the reason for QE, but no one wants to call it the continued bank bailout that it is while the rest of us continue to suffer without bailouts of our own. People might actually revolt if they did that, so it's best to call QE and its evil twin ZIRP necessary measures to prop up housing, employment and the like. To call it a bank bailout would just give it away, and we can't have that, now can we?
Savings deposits, meanwhile, are up less than $1 trillion since September 2012, to which, by the way, no one has "immediate access". Savings deposits are not "demand deposits" like checking accounts. It can take up to 30 days to get all your money out of savings, which now totals $7.38 trillion. Demand deposits at commercial banks, on the other hand, are up just $220 billion since September 2012, to $1.18 trillion, and total checkable deposits are up just $320 billion to $1.66 trillion. Not exactly a lot of money in a $17 trillion economy.
These savings, such as they are, aren't a failure of Fed policy. They are actually a repudiation of it by a part of the population which still possesses a cultural memory of the basis of capitalism.
Wake up and join the revolution, Rex.
