Edward Conard

Top Ten New York Times Bestselling Author

  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

AI Summary. Households across income groups accumulated large amounts of liquid wealth after the onset of the pandemic recession and subsequently spent it down, with credit card delinquency rates falling and then rising as that wealth rose and fell. Delinquency rates for middle and low-income households grew more rapidly and now sit about 3 percentage points above pre-pandemic levels.

Hamza Abdelrahman, Luiz Edgard Oliveira, and Adam Shapiro Federal Reserve Bank of San Francisco
Date Posted:

The bottom 80% of households by income exhausted their extra pandemic-era savings by late 2021, and their credit card delinquencies rates are now about 3 percentage points above late-2019 levels. @ah_shapiro

Has the drawdown of pandemic-era liquid wealth raised credit card delinquencies?

Core argument: Credit card delinquency rates for middle- and low-income households sit about 3 percentage points above late-2019 levels, having grown more substantially and more rapidly than those of high-income households.

We assess the evolution of pandemic-era liquid wealth across two income groups: high-income and middle to low-income. We find that households in both income groups accumulated and subsequently spent large amounts of liquid wealth following the onset of the pandemic recession. The rise and fall in household liquid wealth coincided with a fall and subsequent rise in credit card delinquency rates for both groups. Higher-income households held pandemic-era liquid wealth until mid-2022, and credit card delinquencies started to increase above pre-pandemic levels shortly thereafter. These households recently increased their liquid asset holdings by shifting funds into money market funds, likely fueled by higher interest rates. Middle and low-income households spent down their entire pandemic-era liquid wealth a bit earlier, by late 2021. Similar to high-income households, credit card delinquency rates for middle and low-income households surpassed pre-pandemic levels around the same time they completely drew down their pandemic-era liquid wealth. However, delinquency rates for this group grew more substantially and more rapidly than high-income households and now sit about 3 percentage points above late-2019 levels.

Takeaways by Macro Roundup® AI

  1. Credit card delinquency rates for middle- and low-income households sit about 3 percentage points above late-2019 levels, having grown more substantially and more rapidly than those of high-income households.
  2. Middle- and low-income households spent down their entire pandemic-era liquid wealth by late 2021, and their credit card delinquency rates surpassed pre-pandemic levels around the same time.
  3. Higher-income households held pandemic-era liquid wealth until mid-2022 and have since increased liquid asset holdings by shifting funds into money market funds, likely fueled by higher interest rates.

Related Articles:

  • Pandemic Savings Are Gone: What’s Next for U.S. Consumers? — Researchers estimate U.S. households' pandemic-era excess savings peaked at $2.1tn and were drawn down at an average pace of about $70bn per month before being depleted. The depletion is unlikely to cause households to sharply cut spending as long as they can support consumption through continued employment or wage gains, other wealth, and more debt.
  • The Rich Have all the “Excess” Cash Now — Excess cash balances outside the top 1% have mostly disappeared, but the author argues their liquidation did little to finance consumer spending, which has been driven mainly by wage income. Relatively low household debt leaves many Americans room to spend above their income, potentially aided by lower interest rates.
  • Accumulated Savings During the Pandemic: An International Comparison with Historical Perspective — The authors construct measures of excess household savings accumulated during the COVID-19 pandemic and find they have been unwound in the United States, declined in advanced foreign economies, and slowed in emerging market economies. Past recessions featured smaller increases in excess savings and greater persistence in the accumulated stock.
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