There seems to be a general belief that in the US, there has been a reset of consumer behavior after the "great recession." I saw a recent Bain consulting study that claims that the new normal is that "consumers transition to a moderately higher savings rate of 7-9%." If the personal savings rate goes up, then the belief is that more of the money will find its way to the banks and the banks will be able to make more money using those cheap funds from deposit accounts.
I quite don't see it that way. I think that the consumer is going to go back to the old ways in the next 18 months as the economy stabilizes, as the US economy stops shedding jobs in aggregate even if it is not adding net new jobs.

I contend that the great recession is a temporary interruption in that trend rather than an instigator of the "new normal." Bureau of Economic analysis report on March 29th on PERSONAL INCOME AND OUTLAYS is a good exhibit. "Personal saving as a percentage of disposable personal income was 3.1 percent in February, compared with 3.4 percent in January." I have calculated the 4 month moving average based on the latest data from St. Louis Fed. The trend in the last 5 months is down.

Karthik
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