Is it Stimulus or is it Relief?

What are you doing with your stimulus check? Is it stimulus or does it feel more like a sigh of relief?

Economically, there is a big difference in stimulus vs. relief. The first one acts like jet fuel to an economy and the second one allows people to survive. Put another way: relief is that morning cup of coffee that’s needed to form coherent thoughts. Stimulus is the triple-shot of espresso that gets you to do 👏🏻 all 👏🏻 the 👏🏻 things and hear colors.

In order to be either stimulus or relief, though, the money needs to be injected into the economy. AKA: it needs to be spent. And as of right now, that isn’t really happening. A New York Fed survey published in April found that only 13% of funds received from the most recent American Rescue Plan Act are earmarked for household necessities (meaning the money is relief). Just 8% of the cash is being spent on nonessential items (making it stimulus). So that’s… 25%. Just twenty-five percent of the money meant to spur the economy is actually working.

Where’s the other 75%? It’s in the bank, baby.

42% went to savings and 33% of the last round paid down debt. It has been a pretty significant jump in the percentage of savings from the first round to this third round. TBD if (or – more likely – when) that money will be spent. Maybe it will become stimulus after all.

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