26 02/21 26/02/2021

Excess Savings

According to Jan Hatzius, chief economist at Goldman Sachs, the U.S. has more than $1.5 trillion in forced excess savings thanks to all the stimulus packages, depressed consumption, and containment measures such as lockdowns and travel restrictions. Seeing that all these variables are still at play, the forced excess savings are expected to rise to $2.4 trillion (11% of GDP) by the time we reach a “normal” economic life, said the economist. This is expected around mid-year. 

Goldman Sachs estimated that about 40% of the excess savings are held by people in the top 20% income bracket while only 20% of the excess savings are held by the bottom 40% earners. The bank projected that 10% of the excess savings was used to pay down debt and 40% to buy illiquid assets. The 50% that remains is believed to be deposited. Goldman uses this excess saving estimation to project spending when we go back to “normal”. The bank estimates that about 20% of the excess savings ($500 billion) will be spent in the first year after re-opening which can contribute to 2 percentage points to GDP growth. 

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