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Affluence and High Household Liquidity: Problems and Opportunities
Published online by Cambridge University Press: 19 October 2009
Extract
Households and firms are now holding unprecedented amounts of highly shiftable, “liquid,” assets. Even the holding of currency has risen to a level requiring a formal Federal Reserve explanation. In the aggregate, such holdings have a potential to disturb consumer and inventory markets if economic units attempt substantial shifts between assets of one degree of liquidity to another, or a shift from liquid assets, money or near-money, to goods in the stores and materials in the warehouses.
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- Research Article
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- Copyright © School of Business Administration, University of Washington 1966
References
1 Minsky, Hyman P., “Financial Crisis, Financial Systems, and the Performance of the Economy,” Research Study Two in Private Capital Markets, a Commission on Money and Credit monograph, Prentice-Hall, Englewood Cliffs, N. J., 1964 Section IVGoogle Scholar.
2 Thompson, L. and Martin, S. measured liquidity in a whole metropolitan area in “The Savings Accounts of Individuals,” one of the Harvard Capital Markets Studies, MIT-Harvard Press, Cambridge, to be publishedGoogle Scholar.
3 The two-mile radius was suggested by the Balderston memorandum.
Fred E. Balderston, “Summary Report: Revision of the Standards of Application for New Charters and New Branches in the Savings and Loan Industry in California, 1963, Sacramento, Division of Savings and Loan.
4 Duplications could not be tabulated, but a rather unsystematic sampling of the sample indicated that duplicates probably ran between 13 percent and 20 percent. A factor of 20 percent was therefore used. Also, there was no way to estimate the number of accounts held at addresses within the radius by workers and firms whose households were located elsewhere.
5 As measured by per household savings dollars, numbers of accounts, and “sa.vings penetration,” the proportion of households holding one or more savings accounts, which ranged from 38.9 percent to 58.3 percent. See Table 3.
6 Savings penetration in these tracts ranged from 19.3 percent to 24.6 percent.
7 Tract #7 may be part of the inner ring although it has only 13.4 percent of its households with savings accounts. The low rate of holding may be attributable to the 33.7 percent minority population there. These households typically have a low savings rate. See Glazer, Nathan, and Moynihan, Daniel “Beyond the Melting Pot,” Joint Center for Urban Studies, MIT Press, Cambridge, 1964, p. 33Google Scholar.
8 The reader will recall that the holdings of business firms are included in these dollar volumes.
9 Two prior studies of larger geographical scope done by. Cohen, B. C. and Kaufman, G. G., “Deposit Growth by State: An Empirical Analysis,” The Journal of Finance, XX, No. 1 (March 1965), p. 59Google Scholar; and Friend, I. and Natrella, V., “Individual's Saving - Volume and Composition” (New York: John Wiley & Sons, 1954)Google Scholar.
10 Los Angeles and Orange Counties. Since October 1963, the two counties have been designated as separate metropolitan areas by the Bureau of the Census.
11 Stanford Research Institute, Public Need and Support for a Proposed Office in the Wilshlre-Crenshaw Area, Report #IS 4191, South Pasadena, California, 1962.
12 The methodology is contained in, “A Guide to Selecting Bank Location,” The American Bankers Association, New York, 1965, pp. 27–30 and 61–69Google Scholar. Note particularly the statement on page 30 that, “Source for both tables: Survey of Consumer Finances, Survey Research Center, University of Michigan; data as of early 1963.”
13 Ibid., p. 31.