Banks and consumers have saved more money than at any point in the last five years, so why haven’t we seen a strong rise in gross domestic product statistics or even a significant boost in inflation?  Consumers are “hording” money, says a new study by the St. Louis Federal Reserve.

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Fed blames consumers for the low level of money movement

The white paper, first reported by CNBC Finance Editor Jeff Cox, blames the low level of money movement partially on consumers “willingness to hoard money instead of spending it.”  Note this moment in history when those saving money have been officially called “hoarders” by the U.S. Federal Reserve.

Why do consumers “suddenly decide to hoard money instead of spend it?” the Fed white paper asks.  There are two reasons: A gloomy economy following what has been described as a worse financial crisis than the great depression by former Fed chief Ben Bernanke. The second reason involves the Fed’s own policies, as it acknowledges.  “The dramatic decrease in interest rates that has forced investors to readjust their portfolios toward liquid money and away from interest-bearing assets such as government bonds.”

The report highlighted that while banks have saved over $2.8 trillion in reserves, households have nearly $2.15 trillion they have saved, a 50 percent increase over the past five years.

Fed says inflation is running well below the 2% level

Another issue could be real inflation. While the Fed report says inflation is running well below the 2 percent level, the CNBC report notes that consumers might dispute the idea inflation has been low.

In fact, separate analysis shows food inflation is up much more significantly. Judging by the CRB index, a measure of commodity prices, food inflation is up 19 percent in 2014 and prices people pay in the super market are much higher than official measures of inflation indicate, according to a Wall Street Journal report.

Perhaps most interesting in the report is the Fed’s own analysis, if not critique, of its interest rate policy as materialized through quantitative easing.  “The unconventional monetary policy has reinforced the recession by stimulating the private sector’s money demand through pursuing an excessively low interest rate policy (i.e., the zero-interest rate policy),” the report highlighted.

Fed on the impact of ZIRP

The Fed white paper also makes an interesting observation regarding the impact of zero interest rates and the turnover, or velocity, of money.  Money turnover in the economy has declined by 5.85 percent, 69 times what financial modes would suggest they should.

“This happened because the nominal interest rate on short-term bonds has declined essentially to zero, and, in this case, the best form of risk-free liquid asset is no longer the short-term government bonds, but money,” the Fed report acknowledged.