The Neglected Mass Saving

The current low level of interest rates is mainly due to the fact that the savings plans in Europe and Southeast Asia exceed the investment plans; the expansive monetary policy only strengthened this trend slightly. The savings surpluses are primarily the result of mass saving, which tends to curb consumption and force it into intermediation through the credit apparatus; this inevitably leads to problems of maturity and risk transformation as well as debt.

They contribute to the instability of the system. Savings surpluses due to mass saving already occurred in the last quarter of the 19th century but were eliminated by wars and inflation before they could pose more serious problems. Since 2000 at the latest, however, savings surpluses have been dampening consumption and growth; the economy's willingness to borrow is limited in view of the low growth rates, and national debt tends to be contained. This is unlikely to change much in the foreseeable future. The guest commentary is based on an article that shows the problems on the basis of the Austrian development over the last 180 years and discusses possible solutions.

The complete commentary (in German) can be found here.

The commentary was published as part of the "economic view", a cooperation between Austria's "National Economic Society" and the daily newspaper "Die Presse".