SHI 10.14.20: How to Spend $2.2 Trillion

SHI 10.7.2020: Who’s Buying the Toilet Paper?
October 7, 2020
SHI 10.21.2020: Coming Soon!
October 21, 2020

The CARES Act was approved on March 27, 2020.  Most of the $2.2 trillion it authorized has been spent.   Not all but most.  How was it spent?  Here are the “large” allocations … take a look:



Of the $2.2 trillion total, about $550 billion was given directly to American citizens in both individual checks and supplemental unemployment payments.  How those funds were spent is even more interesting. 



Where did all that money go?”


That’s the question, right?  And the good news is the NY FED can tell us!  Read on. 


Welcome to this week’s Steak House Index update.


If you are new to my blog, or you need a refresher on the SHI10, or its objective and methodology, I suggest you open and read the original BLOG:

Why You Should Care:   The US economy and US dollar are the bedrock of the world’s economy.  

But is the US economy expanding or contracting?

Before COVID-19, the world’s annual GDP was about $85 trillion.  No longer.  It shrank.   Until recently, annual US GDP exceeded $21.7 trillion.  Again, no longer.  According the the Q2 final numbers, annual US GDP is down to $19.5 trillion.  We can thank the Great Lockdown for this one.  But what has not changed is the fact that together, the U.S., the EU and China still generate about 70% of the global economic output.


The objective of this blog is singular.


It attempts to predict the direction of our GDP ahead of official economic releases. Historically, ‘personal consumption expenditures,’ or PCE, has been the largest component of US GDP growth — typically about 2/3 of all GDP growth.  In fact, the majority of all GDP increases (or declines) usually results from (increases or decreases in) consumer spending.  Consumer spending is clearly a critical financial metric.  In all likelihood, the most important financial metric. The Steak House Index focuses right here … on the “consumer spending” metric.  I intend the SHI10 is to be predictive, anticipating where the economy is going – not where it’s been.

Taking action:  Keep up with this weekly BLOG update.  Not only will we cover the SHI and SHI10, but we’ll explore related items of economic importance.

If the SHI10 index moves appreciably -– either showing massive improvement or significant declines –- indicating growing economic strength or a potential recession, we’ll discuss possible actions at that time.

The Blog:

Since 2013, the NY FED has conducted a survey they call the Survey of Consumer Expectations, or SCE for short.   The survey collects information from the “head of household,” focusing on his or her economic expectations and behavior.  The survey is internet-based, using a rotating panel of approximately 1,300 household heads.  They ask the each person to “stay on the panel” for a year.   Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, the NY FED believe this panel enables them to observe the changes in expectations and behavior of the same individuals over time.

When asked in the latest survey, 89% of respondents reported that their household had received an “economic impact payment,” with the median payment being $2,400.  Said another way, almost 9 out of 10 of the respondents received a stimulus check.   The survey then asked each respondent asked how the household spent the money.  Or did they save it, invest it, or pay down debts?  Their answers might surprise you: 

  • <>  18.2% was spent on “essentials.”
  • <>  34.5% was used to pay down debt.
  • <>  36.4% was saved.


I was shocked by how little was spent on essentials — things like food and shelter.   And I was even more surprised by the fact that almost 70% of the stimulus payment was either saved or used to pay down debt — which is another form of savings. 

You’ll recall past blogs discussed the unprecedented “personal savings” numbers we’ve been seeing since after the CARES Act was passed.  Here’s an updated 5-year chart:



Remember, the typical personal savings rate is around 7%.   In August, it was double that number!   And in April, the savings rate was more than 33%!  Staggering.

If you added up the numbers above, you’ll notice a bit more than 11% of the checks to households are unaccounted for.  Let’s correct that:  Another  7.7% was spent on “non-essentials” — perhaps a night out with a loved-one, or a new bow tie.  And 3.2% was donated to charity.  This put a smile on my face.  There’s some hope for humanity!  Remember, these recipients are not rich ….   The checks began to shrink in size above income levels of $75,000 ($150,000 for joint filers), so these households can certainly use every penny they received.   Yet they gave some away.  Very kind. 

From the median $2,400 check, the average respondent gave an average of $76.80 to charity and saved approximately $874 for the future.   I found both these facts to be quite impressive.

Leaders of the FED and the International Monetary Fund both feel additional stimulus is needed to fuel both the US and the global recovery.  In fact, the IMF believes a $2 trillion US stimulus program will add and additional 2% to global GDP in 2021.   But while many Americans will face a greater challenges if another stimulus bill is not passed, does the nascent recovery need more stimulus to remain self-sustaining?  

Probably not.  I believe the economy will continue to expand without further stimulus, but its growth rate would be very, very slow. 

Bottom Line:   More stimulus would be a good idea — for both needy Americans and the economy.   But that said: 

  • > The accumulated personal savings will be spent, helping support the consumer economy. 
  • >  I feel the FED is overly pessimistic about the sustainability of the recovery.   I believe it will continue either way, but without stimulus it will have little vigor.
  • >  The unemployment rate will remain high without additional fiscal support, continuing to impact lower-wage jobs the most.
  • Even if the economic recovery accelerates, I still believe the FED is unlikely to raise interest rates for years. 


My 2 cents.  🙂

  • Terry Liebman

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