That $20 trillion number comes from $9 trillion in bank deposits (see the FRED data) + $10 trillion in negative yielding bonds as per Bloomberg + the relatively puny $1.4 trillion in cash at big companies. Cash in a bank yields almost nothing and could suffer in a run on the bank (yes, you are lending money to the bank). It is news when the 10 year Bund (German Sovereign Debt) goes from negative to positive.; it is “news” when you stop paying the person you are lending to? Warren Buffet has publicly mused about the craziness of paying a bank to hold Berkshire Hathaway cash. (For more on cash in the global economy, please go to this Bain report entitled A World Awash in Money from 2012; it is awash in great data and highly recommended to other data junkies).
Thesis: Cash needs to get to work and the usual safe places to store cash are looking like a lousy bet after years of ZIRP. Lending to consumers has default risk (actually so does lending to banks and governments but that risk is obviously lower) but the key is net return after default, not absolute risk. Those investors who understand how to lend to consumers (including many retail investors, the original P2P lenders) have averaged good net returns (after defaults). Lend Academy has the data. The net return after defaults is better than bank deposits or sovereign bonds. Even if you pay a Fund to do this for you, the net return after defaults and fees still looks attractive. Some of that $20 trillion is double counted (bank deposits include corporate bank deposits for example). Even if it is “only” $10 trillion, the number is still officially “humungous”.
The conduits for this $20 trillion in cash (aka funds of various types) should do well. So should ventures making analysis tools, the marketplaces and all other players in the MarketPlace Lending ecosystem.
The questions are:
which cash sources are likely to move first - bank deposits, sovereign bonds, corporate cash?
which intermediaries are best positioned to be the conduit for this flow of money?
what new models will emerge to act as conduits for this flow of money?