I've seen several news that were concerned about effect of the unspend savings that just sits on a bank account to the global economy.

Given that bank uses to money invest in things, or simply lend them to other people, isn't that money still on the market and contribution to the whole economy?

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The Saving Glut of the Rich (68 page working paper)


A prominent idea in the history of economics is that an excess of savings relative to investment opportunities can present challenges for an economy (e.g., Hobson (1902), Keynes (1936), Eccles(1951)). A recent manifestation of this idea is the “global saving glut,” or the argument that a rise in savings by certain countries is a primary culprit for the decline in interest rates to low levels around the world (e.g., Bernanke (2005), Summers (2014), Rachel and Smith (2017)).

This study shows an equally important saving glut of the rich. In the United States, the rise in savings by the top 1% of the income or wealth distribution since the 1980s has been substantial, it has not boosted investment, and it has been associated with dissaving by the government and the rest of the household sector. The saving glut of the rich has important implications for the concept of national savings, the evolution of the financial sector, and the demand for U.S. produced safe assets. It also warrants consideration in explanations of extremely low interest rates and high debt levels around the world.

The rise in savings by the top 1% has not been accompanied by a rise in net domestic investment. Instead the additional savings have been absorbed in a less conventional manner through dissavings by the government and the rest of the U.S. household sector. In particular, savings by the bottom 90% have fallen significantly since the early 1980s and the government has run larger deficits, especially after the Great Recession.

It may be surprising that Americans in the top 1% of the wealth distribution hold so much U.S. government and household debt in their portfolios, but the unveiling process clarifies how this is in fact the case. For example, holdings of business equity by rich Americans represent a substantial claim on such debt. The reason is that non-financial businesses have increased their holdings of money market funds and time deposits substantially since the mid 1990s, and these time deposits and money market funds are claims on debt through the financial system. More generally, government and household debt have been financed by rich Americans through direct bond holdings, bond mutual fund holdings, business equity, time deposits, money market funds, and defined contribution pensions.

If it is "good" when savings correspond to investment in the non-financial sector, and it is relatively "bad" when savings do not correspond to investments in the non-financial sector, then the accumulation of financial assets by the top 1% households would seem to "crowd out" investment by saturating the working class with debt and depressing the increase of wages or discharge of debt that would be necessary to stimulate more aggregate demand.


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