Extinguished Consumer Surpluses: CFS money supply measures

Wall Street Journal reporter, Rachel Louise Ensign, wrote a terrific piece on the consumer yesterday – “Americans Finally Start to Feel the Sting from the Fed’s Rate Hikes.”  The story highlights how:

– “Consumers‚Ķ are discovering that, because of the Federal Reserve’s rate increases, their money gets them a lot less than it would have a few years ago.”

– “Consumers are carrying much higher [credit card] balances than they were two years ago.”

Interestingly, CFS Divisia M2 reveals another core issue regarding the sting from higher rates and tighter policy.  Swollen consumer surpluses in the aftermath of the essential post-Covid fiscal and monetary response are now extinguished.

To view “Extinguished Consumer Saving Balances – CFS Divisia M2, actual and predicted
www.CenterforFinancialStability.org/research/Extinguished_Balances_20230927.pdf

Note: The CFS Divisia M2 measure of consumer liquidity includes currency, demand deposits, other liquid deposits, and retail money market funds.