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Illustration: Aïda Amer/Axios

Americans are locking away greater shares of their money — especially big businesses and the wealthy — a trend that has increased thanks to the coronavirus pandemic and is likely to stick around for some time.

Why it matters: The U.S. economy is built on our propensity to spend and the past decade's environment of stubbornly low interest rates, low growth and economic inequality all could be exacerbated in the future as the country leans further into the savings trend.

What's happening: Thanks to the pandemic, the tendency of the wealthy socking away their money appears to be getting worse.

  • A recent survey from Pew Research found that Americans have cut back on spending, especially at upper-income levels, over the past year.
  • 32% of "upper income" adults said they were saving more since the pandemic began, compared to 23% of all respondents and 17% of "lower income" adults.

Where it stands: Data from Albion Financial Group show Americans have now socked away around $1.5 trillion in excess savings.

  • "The savings rate is probably at a fairly high plateau — I don't know if it's a permanent plateau, but it's one that will stick around for longer than just the next 12 months or 18 months," Jason Ware, partner, chief economist and CIO of Albion Financial, told me on the latest edition of the "Market Banter" podcast.
  • "We saw this in the years after [the Great Recession]; human behavior is difficult to change."

Why you'll hear about this again: A similar study from Oxford Economics and Barclays found $1.8 trillion in excess savings over the last 11 months, and Gregory Daco, chief U.S. economist at Oxford Economics, estimates the number could rise to $2.5 trillion by this summer.

  • "I’d expect the savings rate to surge in March and stay quite elevated in April given the economic impact of payments and other transfers" from the $1.9 trillion American Rescue Plan, Daco told me in an email.

This hoarding also is happening at large companies, which have feasted on cheap debt since the Fed announced QE4ever in late March, and kept much of it in cash reserves.

  • Cash holdings for S&P 500 companies rose to a record $1.9 trillion, while cash and investments held by U.S. nonfinancial companies rated by S&P Global rose 30% to a record $2.5 trillion in the first half of 2020.
  • The cash ratio, which compares companies' cash against current liabilities, was 34.3% in Q3, up 15 percentage points from the third quarter of 2019, S&P Global noted in a December report.
  • For junk-rated companies, cash ratios have more than doubled in a year, to 50.1% in the third quarter of 2020 from 24.2% in the third quarter of 2019.
Data: U.S. Bureau of Economic Analysis; Chart: Axios Visuals

The U.S. savings rate is growing, but largely as a result of savings by the wealthy, the continuation of a long-running theme.

  • A paper published last month in the National Bureau of Economic Research called "The Saving Glut of the Rich" found that the wealthiest Americans have increasingly hoarded their money over the past 40 years, while investment has decreased and governments along with middle- and working-class people have had to increase their debt loads.

Go deeper

Right-wingers making McCarthy sweat for future Speaker post

House Minority Leader Kevin McCarthy stands with his Republican colleagues outside the House on Nov. 17. Photo: Stefani Reynolds/Bloomberg via Getty Images

Right-wing elements in the Republican Party are complicating House Minority Leader Kevin McCarthy's attempts to become the next speaker of the House should the GOP take back the majority in 2022.

Why it matters: While McCarthy has worked carefully to build trust among the conservatives who tanked his chances at clinching the speakership in 2015, they're still circling ahead of the next Speaker vote in January 2023.

Congress sprints to meet crush of deadlines

Illustration: Aïda Amer/Axios

Congressional leaders have been pushing off vital action for months — and a lot of it will catch up with them in December, which begins Wednesday.

Driving the news: Funding for the federal government is set to expire at midnight on Friday. There are also consequential deadlines related to the debt limit, President Biden's agenda and annual actions like voting on the National Defense Authorization Act.

1 hour ago - World

U.S. fears Iran won’t scale back to 2015 nuclear deal

Officials gather in Vienna on Sept. 29 for the first day of renewed nuclear talks with Iran. Photo: EU Vienna Delegation/Handout/Anadolu Agency via Getty Images

U.S. officials have extremely low expectations as world powers resume negotiations with Iran to curb its nuclear program, believing the Iranians aren't yet ready to negotiate seriously, Axios is told.

Driving the news: Senior officials in the U.S. intelligence community have assessed the new Iranian president, Ebrahim Raisi, thinks of his predecessor, Hassan Rouhani, as a weak accommodationist who negotiated a bad deal with the U.S. and other world powers in 2015.

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