by Peter Zeihan on May 31, 2022

Between the Ukraine war, supply chain shortages, energy shocks, and government policy that probably spent too much money for too long a period of time, Americans are feeling the pinch of ever-higher inflation on an ever-broadening array of goods. The question is whether Americans can’t afford it.

The chart below shows what percentage of their income Americans are socking away – that all-important “savings rate”. During COVID it hit record highs. But now? It has already plunged to pre-COVID lows.

Between the Trump and Biden Covid stimulus checks, Americans amassed an extra $13 trillion in savings.

So are Americans burning through their savings purchasing goods whose prices keep going up and up and up? Absolutely.

But $13 trillion is roughly how much all consumers in the United States spend in ten months. Even in an inflated environment, it will take most Americans two years to burn through the surplus.

It doesn’t quite make Americans price insensitive, but it certainly suggests that the current levels of consumption – and by extension current levels of demand-driven inflation – can be with us a lot longer than the headline “savings rate” would suggest.

How long? Well, that’s part of what we’ll be going through in our next seminar. We invite those of you who are interested to join us for our upcoming webinar, Inflation: Navigating the New Normal, on June 8th. More information at the sign up link below. Unable to attend the webinar live? No problem. All paid registrants and attendees will be able to access a recording of the presentation as well as a PDF of presentation materials.