Wednesday, August 20, 2008

Did $100Billion of Stimulus Checks Help?

Somebody at worked asked me if I thought the stimulus checks sent out in May and June of this year have helped prop up the economy. The short answer is that it's too early to tell. But, doing some preliminary math will add at least some transparency. The federal reserve shows that the household savings rate spiked in May and June to 4.9% and 2.5% respectively (compared to .61% over the last three years). In order for those numbers to hold true, then Americans recieving rebate checks would have had to save 80% of May rebates and 60% of June rebates. This isn't exactly what the Fed was hoping for. The goal was to either boost spending or extinguish debt, and, so far, none of that seems to be happening. Although the rebates do seem to be supporting consumer durables (necessities) the general impact on spending does not seem to be proportionate to the size of the rebates. But, most experts agree that we need to see data from the third and fourth quarters to be more definite. And then you have to ask yourself, "was this even the best way to spend $100 Billion dollars?"

1 comment:

Nate said...

We need another post to help us make sense of all this financial craziness. Please, Toad, pontificate!