Bank Deposits Could Drop for First Time Since WWII

Bank Deposits Could Drop for First Time Since WWII

(ConservativeStar.com) – There are a lot of moving parts when it comes to an expert trying to predict where the economy of the United States is heading in the future. Many factors play a role in the direction the economy goes, including Federal Reserve Bank’s interest rate, inflation, rushes for Ukraine, the pandemic stretching into its third year, and the amount of cash banks have available. Experts are now predicting bank deposits might decrease for the first time in almost eight decades.

Bank Deposits

Imagine the banking system as a retail store — yes, they do still have those, Amazon hasn’t completely killed the concept — where they stack their shelves with deposits they receive. When a person borrows money in the form of a car loan, mortgage, or credit card, they take some of the deposit funds and put them into their shopping cart, and the interest rate is what they pay at the checkout.

As it stands now, the system, as a whole, is holding $8.5 trillion more in deposits than loans. According to the Wall Street Journal, Barclays analyst Jason Goldberg put it this way, “these are deposits they don’t really need.”

Some experts in the field believe the country’s biggest banks will see a collective decrease in deposits of 6% for the year, marking it the first time since World War II that this will happen. One reason for this decrease could be the easing of restrictions put in place because of the COVID-19 pandemic, with deposits rising 35% during that time frame as both businesses and individuals saved cash.

Uncertainty

No matter how many “experts” claim that they know what’s going to happen, there’s always another segment that holds the opposite opinion and there are some forecasters that believe the original 3% growth predicted at the beginning of 2022 will still happen. In fact, the Federal Deposit Insurance Corporation (FDIC) addressed the issue in their quarterly report 3Q2021 and the authors essentially shrugged their shoulders and said, “we’ll see what happens in the future.”

To be honest, it’s hard to blame them when it’s impossible to say if another variant of the virus will drive the country back into the lockdown or if the Russia/Ukraine war will have the impact that some predict, or if… any number of other factors come into play. It seems like all these experts picked up a Magic 8 Ball toy and when they looked at the little triangle at the bottom they received the answer, “reply hazy, try again” or “better not tell you now.”

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