Lots of people missing the core thing here: savings rate.
When the propensity to save increases it reduces consumption. Falling credit card debt, reductions in mortgage delinquency, those are all trailing results of the increase in savings.
People are spending less with most people's income staying steady. This money is flowing into assets and reducing debt.
In normal times this would be a welcomed reversal of the American trend. Yet this effect is temporary and instead will only serve to hurt the velocity of money.
"Why is there no inflation despite massive printing?" is also a common refrain. Here to the savings rate is to blame. With less consumption the velocity of money has shrunk and the effective money supply shrank with it. Thus the FED's insane money printing is in part only there to counter act the deflationary pressure. Again: everything comes back to the savings rate.
When the propensity to save increases it reduces consumption. Falling credit card debt, reductions in mortgage delinquency, those are all trailing results of the increase in savings.
People are spending less with most people's income staying steady. This money is flowing into assets and reducing debt.
In normal times this would be a welcomed reversal of the American trend. Yet this effect is temporary and instead will only serve to hurt the velocity of money.
"Why is there no inflation despite massive printing?" is also a common refrain. Here to the savings rate is to blame. With less consumption the velocity of money has shrunk and the effective money supply shrank with it. Thus the FED's insane money printing is in part only there to counter act the deflationary pressure. Again: everything comes back to the savings rate.