By Jeph Ajobaju, Chief Copy Editor
Americans have hoarded at least $12.5 trillion in cash in fear of chaos in the presidential vote on November 3, as Republican Donald Trump threatens not to hand over power if he loses, and Democratic Joe Biden builds a war chest for court battle.
Research showed that citizens stockpiled $12.5 trillion between April and July. The figure may notch $21.86 trillion at the end of October.
Trump has a history of lawsuits, having sued and been sued – personally or involving his business – more than 4,000 times in his life. So, he may go to court if he loses the election through what he terms “unfair” result.
Biden may also file a lawsuit against the result, as Democratic Al Gore did in 2000 over the count in Florida, which led to a recount in selected Florida counties.
The recount was stopped later by the Supreme Court, which ruled 7-2 that it was unconstitutional and that no constitutionally valid recount could be completed by the December 12 deadline.
Wikipedia records that the ruling effectively gave Republican George W. Bush a 537 vote victory in Florida as well as Florida’s 25 electoral votes and the presidency.
Gore won the popular vote by about 500,000 votes but received 266 electoral votes to Bush’s 271 (one District of Columbia elector abstained).
Gore eventually conceded the election on December 13, 2000 but said he strongly disagreed with the decision of the Supreme Court.
Uncertainties of coronavirus
Also fuelling the cash hoarding are the uncertainties of coronavirus in which the United States has recorded 210,814 deaths and 7,407,201 infections, topping the global chart in both categories.
New research by Morgan Stanley economist, Ellen Zentner, showed that U.S. consumers built up an astounding $12.5 trillion in excess of savings from April through July.
This equates to 13.5 months of the $600 a week supplemental unemployment insurance benefit that lapsed on July 31, Zentner estimates.
It also amounts to $3.12 trillion in excess savings per month. If the trend holds, it means an additional $6.24 trillion was added to the stockpile between August and September, making a total $18.74 trillion.
If another $3.12 trillion is added in October, a total $21.86 trillion would have been hoarded before Election Day.
Hoarding across the board
Cash hoards have been built across the income spectrum, says Zentner.
According to Yahoo Finance, that ultimately runs counter to cash being saved by wealthier households during tough economic times while lower income households are forced to spend more aggressively due to job loss, et cetera.
The trillion dollar question on the minds of consumer companies is if – and when – households will start to spend this money.
Absent a new round of fiscal stimulus, most indications suggest consumers are tightening back up on their spending ahead of the holidays after splurging to stock cupboards and buy work-from-home gear at the height of COVID-19 in March.
The U.S. Commerce Department reported earlier in September that August retail sales rose 0.6 per cent, slightly missing forecasts for 0.7 per cent growth.
At 0.6 per cent, the growth rate in retail sales in August cooled from a downwardly revised pace of 0.9 per cent in July (1.2 per cent increase for July previously reported).
Retailers from Target to Walmart to Macy’s have warned of sales slowdowns into September as households spent cautiously around back-to-school products.
Some economic experts are already sounding the alarm bell on consumer spending moving forward.
“Our worst-case scenario is we have a couple land mines in the economy such as the lost of the $600 unemployment insurance supplement and the lack of aid to state and local governments,” warned Deloitte Insights senior economic forecaster Dr. Daniel Bachman on Yahoo Finance’s The First Trade.
“So we do have a negative fourth quarter for GDP. Worst-case scenario is that hits along with clearly no [COVID-19] vaccine and consumer spending just really starts to decline as people begin to be concerned about the longer term.”