November 30, 2022

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How much of the excess savings will be spent?

1 min read

Experience from WWII might be instructive

A big part of the bull case for the economic reopening is that household balance sheets are in phenomenal shape.

High government transfers and a lack of ways to spend money led to a glut of savings in the last 16 months. If those savings are released, it will create a virtuous cycle of spending and growth, boosting everything.

If not, the recovery will fall short of expectations.

One argument against higher spending comes from Matthew Klein at The Overshoot. He points to the experience after WWII when there was a similar impulse in savings that was never paid down.
Experience from WWII might be instructive

Of course, after WWII consumers didn’t have to deal with the greatest weapon ever created: The modern American advertising machine.

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