My Favorite Chart -- February 23, 2023

Locator: 10001MMF.

Based on a random comment from a reader in an e-mail note, this post developed.

Some time ago -- a year ago, two years ago, I said this (see below) was "my favorite chart."

A different reader laughed at me when I posted that, suggesting that I knew nothing about investing -- he/she was probably correct. 

Well, let's take a look at "my favorite chart" in terms of a recession; a pullback in the stock market; JPow's problem with "transitory inflation"; and, the list goes on.

In round numbers, the chart shows $5 trillion in money market funds.

Eighteen months ago the figure was in the same $5 trillion ballpark.

Does anyone recall the Fed rate eighteen months ago? Zero percent. 

Does anyone recall what one's money market was paying? Zeropointone percent. 

One may recall that some countries, Germany being the most notable, were paying a negative rate. "Investors" in money market accounts were willing to pay a slight premium to protect their capital.

So, eighteen months ago, $5 trillion paying zero percent or thereabouts (or less).

Now, four percent.

$200 billion.

Assume that 20% of Americans account for 80% of money in money market accounts.

80% of $200 billion = $160 billion.

20% of 330 Americans = 60 million Americans.

These folks don't need that money; they don't need the interest generated. How can one say that? Because they parked their money in those money market accounts when those accounts were paying zero percent.

So, let's see where we are.

60 million Americans.

30 million couples.

$160 billion / 30 million couples.

$5,000 / year. 

That may not sound like much but I can guarantee you my wife would be thrilled with a check for $5,000 for the holidays. As opposed to $1.98.

My numbers may be way off. That's fine. Plug in your own numbers and your own assumptions.

From a macro-economic point of view, $5 trillion should add $200 billion to the US economy. And this is going to go on for the foreseeable future.

And folks pay taxes on those earnings.  

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Global Warming Smacks Portland, Oregon