U.S. households have saved about $2.4 trillion above and beyond what would have been expected based on the pre-pandemic trend.

In my previous note, I focused on the origins of these “excess” savings. American consumers have spent about $1 trillion less since the pandemic began than would have been expected, but this has been almost entirely offset by a comparable shortfall in income from work and investments. Household saving rose so much more than normal because the federal government disbursed $2.2 trillion in aid in response to the economic consequences of the pandemic—and because consumers effectively saved all of that money, plus a little extra.

This time around, I want to focus on what we know about where the “excess” household saving has gone, and what that might tell us about how things may evolve going forward. I also want to dig into the surprising weakness in official measures of investment income that I highlighted at the end of my previous note.

Next week, I’ll look into how U.S. household savings behavior fit into what we know about U.S. national savings and investment, with a particular focus on how corporate capital spending, the government budget deficit, and the trade balance all add up. (Next week will also feature an analysis of the December inflation numbers published today, including some new disaggregations of the headline figures to supplement my previous work.) Looking further ahead, you should expect similar analyses of the other major world economies—and how they all fit together.

The Dash for Cash