The article “U.S. Banks are ‘Swimming in money’ as Deposits Increase by $2 Trillion amid the Coronavirus" by Hugh Son explores the impact of coronavirus on paltry interest rates in the US. According to Son (2020), as banks recorded a record two trillion increase in cash deposits since COVID-9 started in January. By April, about $865 billion had already been deposited in banks, a record figure higher than 2019. The huge deposits were a response to the COVID-19 since the government had earlier released billions of dollars to support the small businesses through stimulus checks and unemployment benefits. Deposits gains concentrated on the topic industry player, whereby organizations like JPMorgan Chase experienced rapid growth in the first quarter compared to smaller firms. The impacts of these huge deposits will probably be a reduction in the paltry interest rates.
This article shows the impacts of huge savings and less cash flow have on banks. For years, banks have relied on plentiful deposits to make huge profits by providing loans. Huge savings provide the banks with plenty of cash to offer as loans, whereby they reap huge profits even when offering the loans at lower interest rates. However, during this COVID-19 pandemic, there are plenty of deposits, which the banks do not understand what to with it. This deposit boom is a technique that many individuals took to counter the financial harm resulting from the COVID-19 pandemic. According to Son (2020), the consequences of the government's historical spending remains to be seen. Some of the consequences include a collapse in the dollar and inflation. Additionally, the huge deposits will have adverse impacts on savers, who will receive lower paltry interests, since the banks do not need their money. This is enough evidence that huge amounts of savings have adverse impacts on the paltry rates and may result in inflation.
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Conclusively, Son uses the article to explain the impacts of huge deposits experienced since January on paltry interests. Additionally, the author predicts the impacts of huge government spending on the economy. The huge deposits in banks will result in lower paltry rates since the banks have more than cash than they want. Regarding the economy, effects, such as inflation and collapse of the dollar, may be experienced. The economy dynamics show that huge government spending may result in a decline in paltry rates and inflation.
References
Son, H. (2020, June 21). US banks are 'swimming in money' as deposits increase by $2 trillion amid the coronavirus. CNBC . Retrieved from https://www.cnbc.com/2020/06/21/banks-have-grown-by-2-trillion-in-deposits-since-coronavirus-first-hit.html
