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1. Bank Deposits have not kept up with MMFs. I transferred about 85% of all my cash into a money-market fund to keep up with the Fed Benchmark rate (currently 5
by dragontamer 3y ago
1. Bank Deposits have not kept up with MMFs. I transferred about 85% of all my cash into a money-market fund to keep up with the Fed Benchmark rate (currently 5%).
2. Fed has been purposefully destroying money through its policy decisions. This is on purpose, because the Fed's only tool to combat inflation is to destroy money (either directly, or indirectly).
3. In regards to #2: Mortgage rates are higher, car loans are higher, etc. etc. People in practice have relatively lost a lot of money because of this and have to tap their savings. Note that this FDIC document has noted that somehow, we have less delinquencies right now. So it seems like Americans are remaining responsible and paying off their debts.
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Frankly, I'm surprised that "only" ~$500B of deposits have fled classic banks. People really should be moving their money to MMFs to take advantage of these much higher interest rates and the current Fed repo rate.
- bubbleRefuge 3y agoFed does not destroy money. The Fed swaps one asset for another in order to execute interest rate policy.
- dragontamer 3y agoNot directly destroy money, no. But when their policies cause M2 to go up or down, its got an effect that largely can be described as "Destroying M2", or "Destroying Money" in more colloquial terms.