People weren’t supposed to be saving this much money — and now it’s a problem – Myles Udland 10/5/15


So, let’s start with the basic premise: Consumers are not economists.

This means that normal people who have a job and then decide what to do with their hard-earned money often make decisions that economists don’t expect.

The latest example is when, how much, and why people save money. In short, too much saving means not enough spending means a lack of aggregate demand in the economy, the thinking goes. “Secular stagnation” is another term that might apply.

In a note to clients last week, Deutsche Bank’s Binky Chadha looked at the relationship between interest rates and savings rates, finding that — of course — consumers aren’t exactly acting the way the economists at the Federal Reserve might expect.

Namely, people are saving money despite low interest rates when many economists expected or hoped these folks would spend that money to buy stuff or put it in assets that actually earn some return.

Article continues:

http://www.businessinsider.com/savings-rate-increases-as-interest-rates-fall-2015-10

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