As it happened, several rounds of stimmies and lockdowns caused household cash balances to soar by nearly $5.0 trillion from the prepandemic level (Q4 2019) to $18.28 trillion by Q2 2022, or 71.5% of GDP. At that point, the implied excess compared to the normal 60% cash balance to GDP ratio was $2.93 trillion.

In the most recent quarters, however, household cash balances have slowly declined and have slipped to $18.03 trillion in Q4 2023, while nominal GDP has continued to expand. Consequently, the cash balance ratio has fallen to 64.5%. Still, the normal 60% ratio would have generated only $16.77 trillion of cash balances (currency, bank deposits, and money market funds) in Q4 2023, meaning that the excess cash was still $1.26 trillion above normal at the most recent reporting date.

That in itself is the true tale. To wit, fully $1.68 trillion or 56% of the Q2 2022 excess cash balance has already flowed into the spending stream. Stated differently, during the six quarters between Q2 2022 and Q4 2023, the excess cash balance runoff amounted to $280 billion per quarter, while nominal GDP rose by $2.4 trillion or $400 billion per quarter. Accordingly, the excess cash runoff accounted for nearly 70% of the average GDP gain during the post-Lockdown and stimmy-driven recovery.