Affluence and High Household Liquidity: Problems and Opportunities

Abstract

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.