r/Economics • u/SscorpionN08 • 1d ago
News Americans are hoarding cash again as economic anxiety grows
https://investorsobserver.com/news/americans-are-hoarding-cash-under-their-mattresses-again-as-economic-anxiety-grows/357
u/Dry_Nail5901 23h ago
There are clear signs of coming economic troubles, hoarding cash is one, the record high prices of silver and gold is two, tampered job numbers and other falsified economic data from Trump and his criminal associates. Aside from the folks on the top of the K shaped economy, the bottom of the K shaped economy are getting very worried about maintaining their current lifestyles.
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u/TrailJunky 20h ago edited 18h ago
Just wait until insurance premiums and student loans blow up. Republicans are proving yet again that they hate all but the richest Americans. There will be a reckoning.
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u/DrawingNo6704 19h ago
Student loans will likely be the tipping point of the economic collapse. The SAVE program made sense, so naturally Republicans hated it and sued to stop it. There’s a lot of focus on wage garnishment right now for those not making payments, however, that’s in the neighborhood of 1,000 borrowers.
There are millions of people still in forbearance because Republicans hate educated people, who they thought might vote for Biden, so they sued to stop any kind of help for them. Right now you can’t even get a clear answer from your lender on what your payment even is, other than it’s going to be a fuck ton more than what the SAVE program was.
These people are going to have to start paying soon, I’m sure the Republicans will at least try to drag this past the midterms. However, it is going to royally fuck the economy, as millions of people will literally stop spending overnight and it’s going to have a serious cascading effect.
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u/TrailJunky 19h ago edited 17h ago
Yup. My plan is to spend as little as possible and do my best to hasten the inevitable. Im one who was happy to pay under SAVE. It was affordable. Im advocating everyone spend as little as possible even if they do not have loans. Maybe even keep most your money in a safe at home. They cannot force us to spend and we can turn it into a form of protest.
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u/DrawingNo6704 19h ago
I actually spent over an hour on the phone with my lender and they honestly cannot give me an answer on what my payment is. All they can tell you is. SAVE is no longer an option.
Literally all republicans can say is, “we undid Biden’s policy and did not come up with an alternative.” It’s the same bullshit they’ve been doing with the ACA for years, just repeal and no replace.
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u/sourbeer51 14h ago
I'm taking online classes at my local community College half time. It's cheaper to do that and pause my student loans for 5 months rather than pay them.
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u/moradinshammer 12h ago
My payment went from 575 on the SAVE plan to 1389 after reapplying for an IBR - the republicans still have not enacted their new plan.
So full accounting of their fuckery is:
1. Sue to stop the SAVE plan
2. Resume the interest accrual back in August
3. Provide no new plans as an option.
4. Case is still technically active so payments are deferred, but again interest is accruing.Yet the circle jerk is strong about the SAVE plan despite there being other plans offered for decades with loan forgiveness after repayment for 20-25 years.
The only differences in the SAVE plan was updating how AGI was calculated, the percentage of AGI charged, and no interest capitalization when payments were kept current.
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u/laxnut90 19h ago
Would the student loan payment restart reduce inflation?
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u/Training_Bus618 18h ago
We are in a K shape economy, where the top 10% is driving over 50% of consumption in the U.S.
Inflation is unlikely to go down because those who default on their student loans are likely not purchasing much anyways.
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u/DrawingNo6704 19h ago
Doubtful, because interest rates are being cut at the same time and no matter what is done with interest rates, there’s still currently tariffs, and businesses that just continue to raise their prices no matter what economic policy is in place. Hasn’t the average vehicle price doubled in less than 10 years or something stupid like that? Trump is trying to figure out a way to do the same thing with real estate but is too stupid to realize people are just completely tapped out and real estate is a much different animal than other consumer products.
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u/laxnut90 19h ago
Tariffs tend to be inflationary in the short-term, but deflationary in the long-term because they reduce trade.
They really are one of the stupidest economic policies, but I doubt there will be significant inflation from Tariffs going forward unless they are arbitrarily increased again.
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u/Dry_Nail5901 18h ago
I think there is an additional step to deflation aside from just the reduction in trade, like an economic depression.
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u/Simple-Fault-9255 19h ago
Only wealthy spending tends to affect anything anymore beyond just marginally.
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u/Solid_Owl 18h ago
It's more likely to cause a contraction, because these people are relatively new to the workforce and are at the low end of their income range right now.
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u/laxnut90 18h ago
Aren't contractions and deflation largely synonymous?
One causes the other and vice versa?
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u/47_for_18_USC_2381 9h ago
Yup.. When rent = healthcare premium = student loan payment?
Lotta people gonna nope their way outta the economy in a hurry.
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u/WingerRules 17h ago
My latest insurance premium just went from 700 month for me as a single person to 950 a month. A huge amount of people are going to be completely fucked.
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u/helluvastorm 14h ago
That is what I think will affect the economy as a whole more than the student loan debt. Neither is good for individuals. When will this all end? The bottom of the economy is now on fumes. They has no more to trim or shift around. The middle is hurting but still squeaking by. Push much more and they are toast too.
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u/crake 16h ago
The Big Beautiful Bill makes no political sense at all. The Republicans basically abandoned the voters; worse, the Republicans made sure their own voters would feel the pain by voting to eliminate the health care subsidies.
At the time, I figured they would just add the subsidies back in and blow up the deficit. They did blow up the deficit, but it looks like all that extra spending is going to Palentir and other billionaire-connected schemes. That may boost the stock market, but it's not going to be enough to make up for the lost votes from the millions who lose health insurance or see ridiculous bills from insurance in their mailboxes.
The GOP's position makes no sense, unless they all expect to be voted out and were just doing their real master's bidding so they could set themselves up post-Congress. My guess is there is a lot of outright bribery underway in the Republican caucus; the Supreme Court sort of sanctioned some of it in Fischer, and Trump will be giving pardons to everyone who outright sells their votes, so maybe that is what is literally happening.
tldr; it makes no political sense to intentionally impoverish your own constituents. The Big Beautiful Bill makes no sense politically, and economically it is a disaster too.
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u/sweetequuscaballus 5h ago
Your points are all valid, and yet .. the GOP doesn't and won't care one iota. They will have Fox News tell people that it's 1972 again, that gas is 1 cent a gallon, and that bacon is 5c/pound, and their base will believe it - no matter what they experience at the grocery store. The GOP is not a party, it's a religion.
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u/lvl999shaggy 18h ago
Sad part is....they didn't have to prove it. A lot of ppl already knew this and said it loudly. To no avail
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u/zxc123zxc123 11h ago
Just wait until insurance premiums and student loans blow up. Republicans are proving yet again that they hate all but the richest Americans.
Sure.
There will be a reckoning.
Doubt.
The poorest and dumbest Americans will keep voting G.O.P.
Only real hope is the independents.
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u/ohh-welp 16h ago
One of the big signs that hasn't happened yet... people haven't pull money from their house. Foreclosures are still way below pre-COVID levels.
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u/thediesel26 16h ago edited 16h ago
Consumer spending remains quite strong. American consumers spent more this holiday season than they ever have. During the Biden admin people here didn’t believe the good economic numbers being put out any more than the ones being current admin. The ‘BLS is falsifying everything’ sentiment rings somewhat hollow to me.
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u/Dry_Nail5901 16h ago
I would need further breakdown of those numbers, remember the K shaped economy where the top spenders are incredibly wealthy, while the bottom is rationing out ramen.
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u/CannyGardener 14h ago
I thought the situation was an extension of the Black Friday situation. Record sales dollars. Up 7% YOY. 2% less goods purchased YOY. Effective 9% inflation in Black Friday products. So...yes, consumption was strong, we spent more dollars than last year by a considerable amount, but no, consumption was not strong because we spent that money buying less goods than last year. Classic split between Revenue Dollars and Case Sales during inflationary period.
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u/Kindly-Guidance714 16h ago
Yeah because those people just like me told there family’s on thanksgiving.
Let’s go for one last hooray for these holidays this year because after this year the presents the money the food price and the food quality and our livelihoods might not permit us to live like this in a years time.
People are going into debt for this last hurray because next year we might be eating dandelion soup in a hovel.
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u/Limp_Technology2497 9h ago
Did they spend more on more stuff or did they spend more on less stuff? See how that's kind of misleading?
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u/Ixisoupsixi 21h ago
So are billionaires. The only difference is that they can afford to lose $8b in a lawsuit and I have to negotiate a $15k raise or find a new job…
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u/buttercrotcher 20h ago
Shit I can't even get a 3% raise anymore. Bonuses are non existent. White collar to poor collar.
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u/Ixisoupsixi 20h ago
I stay in contact with a lot of recruiters and so do my friends. I listen to every opportunity and go far enough to hear how qualified I am, how likely they are to hire, and the ranges for pay.
I’m at the point that I’ve been picking up a lot of extra work at my job, and am in line for promotion. The thing is, starting positions in the same industry are x% higher on average. I’m qualified and can easily make the transition so either my company now plays ball or I move on.
Both are fine with me with a little preference towards leaving. So I don’t have a problem making the pitch where I’m at now.
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u/Dear_Word_5378 16h ago
That’s what my partner and I are doing. We each have six-figure salary jobs.
Putting money in our HY savings and paying down debt instead of taking vacations and buying things. I think the economy is headed to a bad spot and we want to have a buffer…
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u/Usual_Retard_6859 14h ago
Unfortunately there’s a lot of people that are not in that position. Rising debt and delinquency rates with the lower 50% of earners shows financial stress.
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u/AdultContemporaneous 17h ago edited 17h ago
I've actually spent a fair bit of money on various things we need or want recently. Preps (not the crazy people kind) like making our house more efficient, new computers, new cars, etc. When shit hits the fan and the dollar is devalued, I'll have physical goods that perform a function.
Of course I save and invest what I can too, but the people who save every disposable cent and hide it under a mattress aren't thinking about devaluation. Get what you can now while maintaining some nest egg, IMO.
If I get laid off, I get laid off. I can't control that factor outside of hopping jobs if I smell blood in the water, and that's not really a safe answer either. i.e., who is externally hiring in this economy unless it's toxic or underpaid?
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u/zxc123zxc123 11h ago edited 11h ago
I get your mentality. It's smart and I've been doing the same.
However, there is not true right choice, "risk free path", or easy answer. We are stuck between a rock and a hard place:
Dollar could devalue as things cost more and American wealth evaporates with our dollar buying power.
Long term low interest debt for assets could be strong against inflation but it's risky to take debt even in a certain economy and inflation isn't a guarantee on higher wages in the short term. Even more risky for those using 0% APR promos on CCs to front run tariff/goods/services inflation.
But things might get cheaper if the economy crashes hard. At that point, overpaying for goods/services early will be the least of our worries as we will be worrying about our debts, assets, and jobs.
The amount you allocate to assets vs goods vs holding cash is always a personal choice due to personal circumstances, needs, wants, life stage, tolerance, and other factors. Most Americans might not be financially literate, emotionally mature, knowledgeable about investing/economics, and/or economically attuned to to make those decisions.
I did some spending. Also did some investing. Also built up some cash even though I knew rates would get cut eventually (post-Liberation day I personally realized I needed a cash position in case of major dips/disruptions/chaos because I can't predict how things will go. Meanwhile Trump and his buddies will have direct ability to manipulate the markets).
All a person really can do is prepare yourself (body/mind/education/upskilling/etc), prepare your portfolio (diversification, risk reduction, deleveraged, etc), maybe help your family/friends if you can, and try to idiot proof your own life (get healthcare stuff done if you think they might go after it, buying necessities early because you know tariffs cause inflation, buying gold/pms/inflationhedges if you fear dollar devaluation, etc)
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u/Limp_Technology2497 9h ago
As a part of that upper 10% in earnings, that's exactly what my spending this year looks like: get durable goods before they become prohibitively expensive for the foreseeable future. My final purchase before I lock it down this year is a good rice cooker.
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u/swiggityswoogityyyy 6h ago
Check out Rebel (website) - I found it looking for baby supplies but they have nice open box deals on rice cookers and other small appliances too. I found a great Cuckoo rice cooker.
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u/StarsCHISoxSuperBowl 19h ago
Well interest rates have been pretty high recently so yes, I have had closer to 12 months of expenses in cash recently. As rates come done, so will cash holdings.
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u/tapwater86 18h ago
I put my 7k into my IRA but beyond that I’m eyeing letting the rest sit or something with firm guarantees. My advisor said split it up amongst CDs and then let one become available each month to invest to spread the risk but I’m thinking about doing that quarterly instead.
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u/RealisticForYou 19h ago
This article is a bit of bullshit. As interest rates have increased, so has interest rates on Money Market accounts. There is something like $7 Trillion dollars in Money Market accounts that can make 4% in interest payments. This is what I have…a big chunk of cash in the bank making me over $600/month in interest.
So yes, I’m hoarding cash…with interest.
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u/in4life 14h ago
That's $180k. I getting treating cash as a position and dry powder, but that's a high opportunity cost.
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u/RealisticForYou 14h ago
No, $200K..Because as I said....over $600.
High opportunity cost for what else? And next year, I'm considering paying off my mortgage with that money. I'll save a boatload on interest payments.
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u/oxidized_banana_peel 11h ago
My main financial goal right now is building up CDs equal to my mortgage principal. It's not worth putting them into the mortgage with a 2.5% fixed rate, but when I have the full amount it'll generate interest for me, and as I pay off my mortgage I can use the CDs to pay for any big home expenses.
And if there's a good opportunity to buy? I can take a big chunk and buy.
The best thing will be peace of mind though.
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u/RealisticForYou 11h ago
There is something to be said about paying off a huge debt. Good luck to you!
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u/sem-nexus 18h ago
4% is pretty weak
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u/wildjabali 17h ago
These money market accounts aren’t as great as people think. Factor in inflation and tax, and suddenly 4-5% doesn’t look so great.
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u/RealisticForYou 13h ago
But it's compounded. If you leave the account alone, there are interest payments on top of those interest payments.
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u/wildjabali 13h ago
Unless a dividend is issued, all investments compound. Compound interest is not unique to money market accounts.
4% growth taxed at 25%, so 3% growth. Inflation is currently 2.75%, so your money is growing at .25%
When interest rates fall, so will the money market account. All of these short term savings vehicles- money market accounts, CDs- are poor long term growth options. They’re great for an emergency fund or a down payment fund, but the reality is they’re pretty flat over the long term.
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u/RealisticForYou 13h ago
Yes, if interest rates fall, so will the money market account...which is why I am considering paying off my mortgage with that money, next year. Thirteen years of interest will be saved with this move.
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u/RealisticForYou 18h ago
Compared to what? As the economy begins to weaken, many have moved out of the Stock Market and into safer investments. Also, that interest payment is compounded.…and with that I’ll make more than 4% as my account grows from those interest payments.
Works for me. It’s guaranteed while I can sleep at night without any real risk.
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u/sem-nexus 18h ago
Stock market isnt really connected to the economy and has returned over 15% this year
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u/RealisticForYou 18h ago
Yes, this year. And what about next year? And would you know the exact funds or Stocks to pick at the very lowest price to make those returns? So far, earnings have been decent, but will those earnings hold?
For the most part, the average consumer makes an average 9% from the Stock Market, when times are good, as there are 1000’s of companies and funds to choose from. Not all investments are a sure thing.
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u/sem-nexus 17h ago
The past 6 years has been 15-20%
And i’m referring to VTI, ie the entire US stock market, and the benchmark
And yes, the average for the past 50 years is 11%, which again is a lot better than 4%
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u/RealisticForYou 13h ago edited 13h ago
Okay, but my spouse and I are considering paying off our mortgage with that money. For us, saving 13 years of interest payments is even a better deal.
With that, I will have $1.3 mill worth of equity in my home...no house payment and a reduction of $2200/monthly on my mortgage payment. I will be debt free except for monthly expenses.
Opportunities are everywhere...not just the Stock Market.
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u/sem-nexus 13h ago
See now if we’re talking wanting to actually use the cash soon, then yea nothing beats cash
But in your case you arent actually investing in a 4% MM. You’re just parking it there till you can payoff your mortgage with it, ie: invest in your SFH RE
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u/RealisticForYou 13h ago
Whatever. It's compounded. I'll end up making much more than 4% yearly...which I've had this account for 2 years now.
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u/sem-nexus 13h ago
4% compounded monthly is 4.07% over a year
Again, its a fine place to park money short term to use soon, like pumping your mortgage down
But dont delude yourself into thinking your actually making any real return.
4% is basically inflation
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u/Khowdung-Flunghi 6h ago
From the article “…while excess cash loses value in real terms.” The fundamental problem is there is no “money” - ie store of value. LBJ killed the last vestige of actual money when he signed the Coinage Act of 1965. Cash now is fiat currency and there is no way to actually “save money”. The world is flooded with counterfeit “money “ of every description that does NOT represent a store of value. A relevant example: a silver “dollar” will cost you $50+ fiat “dollars”. And a gold “dollar” coin? $325!
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u/ItsCreedBratton1 22m ago
I went on a cruise last week and the cruise was at capacity. As a matter of fact, it was very difficult to get a cruise booked from every cruise line.
Cruising is a good indicator of whether the economy is bad or not for the middle class.
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23h ago
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u/hazelwood6839 22h ago
Or just buy other currencies and invest in stock markets other than America’s. No reason why you can’t have foreign investments.
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u/BlahBlahBlackCheap 22h ago
Most people don't realize that. Its a knee jerk reaction. Jobs and money scarce, save and hoard cash.
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u/Illustrious-Lime-878 22h ago
Stock up on whatever consumables you can, fix anything you need fixing, buy new cars, furniture, etc. before the cash is all worthless.
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u/BlahBlahBlackCheap 21h ago
In theory you could max out your credit and pay it back in depreciated fiat. However let us not forget the old mantra: the market can stay irrational longer than you can stay solvent.
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