There Is Not Too Much Saving, Only Bad Economic Policies

This article reminds why saving now seems particularly abundant, but criticized the notion of « excess saving ». It argues that in the medium term, substantial saving can be absorbed into productive investment and as such promotes productivity and growth. The low European economic growth in recent years was not a fatality linked to a saving glut, but the result of inaccurate economic policies that have left productive investment collapse without reacting. On a structural level, however it is true that the abundance of saving penalizes investors who receive a poor, or even negative, real return on their investments. In this context, economic theory speaks of « over-accumulation » when long-term real interest rates are lower than the potential growth rate of the economy. In these situations, public debt weighs on no generation and the balanced budget target loses its legitimacy. Moreover, in this overview of « bad economic policies » related to savings, this article is concerned about the ability of financial institutions to continue lending during the next recession, in a context where they are now threatened by use of arbitrary resolution powers.