the Tale of Bank Deposits

Aug 31, 2022 | Ask "Z" Economist, No Bull Economics

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Executive Summary: Americans usually become savers during recessions, increasing their monthly bank deposits by +8.2% y/y on average vs. a +7.1% average during periods excluding recessions.

This is not always the case, and deposit growth became flat and even turned negative at points after exiting the 1991 recession. This marked the beginning of the “dot-com bubble” when the Nasdaq rose over 10x from 3/1/91 to its 3/9/00 peak. Americans became tired of settling for low deposit rates and started to chase the riches offered by “investing” in the hottest tech companies.

In any case, as we see from this chart, the current deposit growth rate has been steadily declining since early 2021 when it peaked at +23% y/y during the height of the government stimmy money which Americans pocketed (contrary to the idea that stimmy would mostly stimulate spending). This suggests that today’s consumers are nearing the end of living off their savings, especially as they must find a way to pay for unprecedented rent hikes.

Bank Deposits Graph

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