Will saving for a rainy day come back in fashion?

For philosophical reflections on the COVID-19 pandemic. How can philosophy help us to understand it, to combat it and to survive it?

Moderators: AMod, iMod

User avatar
Arising_uk
Posts: 12314
Joined: Wed Oct 17, 2007 2:31 am

Will saving for a rainy day come back in fashion?

Post by Arising_uk »

A saying I used to hear from my grannies all the time but one that has gone very out of fashion.

Will this experience cause a rethink on the spend and debt model we have been under for a long-time now, will people try to clear their debts and to build savings pots or war-chests for the next rainy-day?

If we do what will happen to the zero-interest rate model?

Will it hinder an economic recovery apparently predicated on consumer-spending resuming? As to save you have to stop spending a portion of your income.
User avatar
vegetariantaxidermy
Posts: 13983
Joined: Thu Aug 09, 2012 6:45 am
Location: Narniabiznus

Re: Will saving for a rainy day come back in fashion?

Post by vegetariantaxidermy »

Arising_uk wrote: Mon May 04, 2020 1:22 am A saying I used to hear from my grannies all the time but one that has gone very out of fashion.

Will this experience cause a rethink on the spend and debt model we have been under for a long-time now, will people try to clear their debts and to build savings pots or war-chests for the next rainy-day?

If we do what will happen to the zero-interest rate model?

Will it hinder an economic recovery apparently predicated on consumer-spending resuming? As to save you have to stop spending a portion of your income.
Interesting. I've been thinking about that saying a lot recently. Surely if businesses are so poor that they can't cope with being closed for a few weeks then what does that say about the business? Perhaps the owners should have taken fewer overseas holidays? Kept a bit in the bank for a rainy day? Now we are all expected to bail them out?
What we have is natural selection of businesses.
commonsense
Posts: 5114
Joined: Sun Mar 26, 2017 6:38 pm

Re: Will saving for a rainy day come back in fashion?

Post by commonsense »

Arising_uk wrote: Mon May 04, 2020 1:22 am A saying I used to hear from my grannies all the time but one that has gone very out of fashion.

Will this experience cause a rethink on the spend and debt model we have been under for a long-time now, will people try to clear their debts and to build savings pots or war-chests for the next rainy-day?

If we do what will happen to the zero-interest rate model?

Will it hinder an economic recovery apparently predicated on consumer-spending resuming? As to save you have to stop spending a portion of your income.
Please provide a little clarification for me. What exactly is the zero interest rate model? I mean I understand what a zero interest rate is, but is there a particular scenario that makes a model out of it? What is it that you see happening with a zero interest rate situation?
User avatar
Arising_uk
Posts: 12314
Joined: Wed Oct 17, 2007 2:31 am

Re: Will saving for a rainy day come back in fashion?

Post by Arising_uk »

commonsense wrote:Please provide a little clarification for me. What exactly is the zero interest rate model? I mean I understand what a zero interest rate is, but is there a particular scenario that makes a model out of it? ...
Apologies, I mean the model that the market-makers have that assumed that zero-rate interest will be with us for a while yet.
What is it that you see happening with a zero interest rate situation?
I don't know that is why I was asking a question but my thought is that if we start to become savers again then we'll start to notice that saving actually loses money so will start to look around for higher interest rates and if enough start to do this then I assume banks, et al will start to compete for their money and offer increasingly higher interest rates but maybe not.
Impenitent
Posts: 4329
Joined: Wed Feb 10, 2010 2:04 pm

Re: Will saving for a rainy day come back in fashion?

Post by Impenitent »

pinstripe umbrellas never went out of fashion...

-Imp
User avatar
FlashDangerpants
Posts: 6264
Joined: Mon Jan 04, 2016 11:54 pm

Re: Will saving for a rainy day come back in fashion?

Post by FlashDangerpants »

Arising_uk wrote: Mon May 04, 2020 1:22 am A saying I used to hear from my grannies all the time but one that has gone very out of fashion.

Will this experience cause a rethink on the spend and debt model we have been under for a long-time now, will people try to clear their debts and to build savings pots or war-chests for the next rainy-day?

If we do what will happen to the zero-interest rate model?

Will it hinder an economic recovery apparently predicated on consumer-spending resuming? As to save you have to stop spending a portion of your income.
The zero interest rate model is there to maintain price stability. The relevant formula (for us non-pro economists anyway) is MV = PQ where m is the amount of money in the system, v is the rate at which it changes hands (velocity), and on the other side of the equation is prices and demand. What it adds up to is if the velocity of money changes (consumers, governments and businesses all saving up at the same time for instance) and if the amount of money in the system doesn't change via quantitative easing or similar, then prices fall. Wages are the prices that businesses pay to acquire our labour, so that's included. That's deflation and nobody wants that, it spirals and is difficult to get out of once you are in. So everyone saving money means that the central banks have to push savers to to do something speedier with the cash (spend it, blow it on the stockmarket, whatever) and they do this by lowering interest rates - into negative terrirtory if need be - in order to avoid a situation where prices (and therefore incomes) fall, but debts don't.

It would be nice though if all this sitting around not shopping would have some lasting effects. There is a myth that we need high levels of consumer debt to sustain our economy, we can choose if we want to value something other than infinite quantities of utter shit though.

One thing that we may well choose to value is time. To overconsume - which we quite obviously do - requires us to overproduce and ultimately to overwork. But with all this furlough stuff and the working from home, perhaps we will see a move to commute much less, and even to the long expected, never quite delivered, 4 day standard working week.

Who knows, maybe we will even see the improved air quality and unusual flourishing of wildlife, and value those as well.
User avatar
attofishpi
Posts: 9956
Joined: Tue Aug 16, 2011 8:10 am
Location: Orion Spur
Contact:

Re: Will saving for a rainy day come back in fashion?

Post by attofishpi »

..all good here - it never rains in HELL.
User avatar
Arising_uk
Posts: 12314
Joined: Wed Oct 17, 2007 2:31 am

Re: Will saving for a rainy day come back in fashion?

Post by Arising_uk »

FlashDangerpants wrote:The zero interest rate model is there to maintain price stability. The relevant formula (for us non-pro economists anyway) is MV = PQ where m is the amount of money in the system, v is the rate at which it changes hands (velocity), and on the other side of the equation is prices and demand. What it adds up to is if the velocity of money changes (consumers, governments and businesses all saving up at the same time for instance) and if the amount of money in the system doesn't change via quantitative easing or similar, then prices fall. Wages are the prices that businesses pay to acquire our labour, so that's included. That's deflation and nobody wants that, it spirals and is difficult to get out of once you are in. So everyone saving money means that the central banks have to push savers to to do something speedier with the cash (spend it, blow it on the stockmarket, whatever) and they do this by lowering interest rates - into negative terrirtory if need be - in order to avoid a situation where prices (and therefore incomes) fall, but debts don't. ...
Thanks FDP always informative.

Rather than penalizing the saver couldn't the banks lend it to businesses tho'?
It would be nice though if all this sitting around not shopping would have some lasting effects. There is a myth that we need high levels of consumer debt to sustain our economy, we can choose if we want to value something other than infinite quantities of utter shit though.

One thing that we may well choose to value is time. To overconsume - which we quite obviously do - requires us to overproduce and ultimately to overwork. But with all this furlough stuff and the working from home, perhaps we will see a move to commute much less, and even to the long expected, never quite delivered, 4 day standard working week.

Who knows, maybe we will even see the improved air quality and unusual flourishing of wildlife, and value those as well.
Let's hope.
User avatar
Arising_uk
Posts: 12314
Joined: Wed Oct 17, 2007 2:31 am

Re: Will saving for a rainy day come back in fashion?

Post by Arising_uk »

Impenitent wrote: Tue May 05, 2020 1:29 am pinstripe umbrellas never went out of fashion...
-Imp
Not quite sure what you mean but...

https://www.forbes.com/sites/maggiemcgr ... bc011f4e0d

https://www.theguardian.com/money/2018/ ... insecurity

Lot of moth holes in that pinstripe it seems.
User avatar
FlashDangerpants
Posts: 6264
Joined: Mon Jan 04, 2016 11:54 pm

Re: Will saving for a rainy day come back in fashion?

Post by FlashDangerpants »

Arising_uk wrote: Tue May 05, 2020 11:34 pm
FlashDangerpants wrote:The zero interest rate model is there to maintain price stability. The relevant formula (for us non-pro economists anyway) is MV = PQ where m is the amount of money in the system, v is the rate at which it changes hands (velocity), and on the other side of the equation is prices and demand. What it adds up to is if the velocity of money changes (consumers, governments and businesses all saving up at the same time for instance) and if the amount of money in the system doesn't change via quantitative easing or similar, then prices fall. Wages are the prices that businesses pay to acquire our labour, so that's included. That's deflation and nobody wants that, it spirals and is difficult to get out of once you are in. So everyone saving money means that the central banks have to push savers to to do something speedier with the cash (spend it, blow it on the stockmarket, whatever) and they do this by lowering interest rates - into negative terrirtory if need be - in order to avoid a situation where prices (and therefore incomes) fall, but debts don't. ...
Thanks FDP always informative.

Rather than penalizing the saver couldn't the banks lend it to businesses tho'?
Typically, yes. As a rule everything is in balance when at least one out State, Households or Businesses is borrowing to invest. Low interest rates promote that just as they disuade savings. Things get messy when lowering interest rate doesn't bring this into balance.

What we would like is for interest rates in the 3 to 5% range, in an ideal world that would be cheap enough for businesses and householders to feel secure in borrowing to pay for upgrades to their stuff, and provide enough incentive for savers to save up, AND leave us with an option to drop interest rates next time there is a problem that needs a monetary solution. But for various reasons we didn't get back into that zone this time, which could prove costly for us all over the next couple of years. It means that when managing this recession (which was on the way anyhow but surely will be worsened) we may have to go direct to the drastic shit with the risk of unwanted outcomes they all carry.
User avatar
FlashDangerpants
Posts: 6264
Joined: Mon Jan 04, 2016 11:54 pm

Re: Will saving for a rainy day come back in fashion?

Post by FlashDangerpants »

And there you have it. Saving up is about to become a punishable crime, with fines levied by negative interest rate.

Canada is posting a negative rate of inflation (-0.2 so let's not get carried away)
https://www.cbc.ca/news/business/inflat ... -1.5576581

The UK has just issued its first ever bond with a negative coupon (-0.003%) but still...
And is openly discussing negative interest rates to go with.
https://www.theguardian.com/business/20 ... oronavirus

There has been a 2 trillion dollar spike in M0 money circulating in the USA (careful, the graph here starts at 3trn)
https://tradingeconomics.com/united-sta ... -supply-m0

Having extended vast amounts of credit for geopolitical purposes in fiscally unwise projects, China is now facing the predictable repayment crisis, but about a decade ahead of schedule...
https://www.nytimes.com/2020/05/18/busi ... -road.html

Everyone seems to be expecting Helicopter Money as the go-to solution for this current thing (predictable as there is little scope for QE politically)
https://www.positivemoney.eu/2020/03/he ... 19-report/
But UBI and the 4 day working week are also being floated with some possiblity, albeit slight, of actually being deployed as policy.
https://www.theguardian.com/world/2020/ ... r-covid-19
If we didn't have VT as proof that New Zealand is just as full of arseholes as everywhere else, those guys would be my heroes right now.

But most worrying of all ... it is actually possible that the Germans will finally see sense and allow the ECB to issue jointly backed bonds instead of each country issuing bonds of their own against a shared currency ... I mean they should have got that message and gone much further still in the 90s, but damn. The Eurozone could one day actually become an optimal currency area by the end of the century if they make one sensible change per economic catastrophe between now and then.
https://blogs.lse.ac.uk/businessreview/ ... countries/


What all of the above means though, is that we are definitely about to annoy savers. Possibly to the point where your local authority won't offer a discount if you pay your annual property taxes up front, because that would mean they have all their cash in a bank account with negative interest so it costs them to sit on money they aren't spending yet.

On top of that, the spike in m0 in the US, the helicopter money elsewhere if it happens - these are all direct currency debasement, and unlike QE, much of it looks not designed to be destroyed, nor is it spent on profitable assets to be held by the state. So if you skip those negative interest rates by hiding your cash under the mattress, you still get hit. and if you put your cash into nice safe bonds to lend to the government ... bad luck, unlike QE, this is a strategy to inflate those debts away, so you still get hit.
Skepdick
Posts: 14362
Joined: Fri Jun 14, 2019 11:16 am

Re: Will saving for a rainy day come back in fashion?

Post by Skepdick »

Wow! There's billions to be made here.

South Africa's interest rate is at 7.25%

All you people with surplus cash suffering negative interest rates, come buy all of our debt and undercut our reserve bank.
User avatar
vegetariantaxidermy
Posts: 13983
Joined: Thu Aug 09, 2012 6:45 am
Location: Narniabiznus

Re: Will saving for a rainy day come back in fashion?

Post by vegetariantaxidermy »

FlashDangerpants wrote: Wed May 20, 2020 10:10 pm
I see the brilliant amod removed my response to your mealy-mouthed and predictably PCturdish insult, along with my explanation of the Govt. here, which you seem to be entirely ignorant of. Oh well. You might have learnt something from it, instead of resorting to silly 'hero-worship'.
User avatar
FlashDangerpants
Posts: 6264
Joined: Mon Jan 04, 2016 11:54 pm

Re: Will saving for a rainy day come back in fashion?

Post by FlashDangerpants »

vegetariantaxidermy wrote: Thu May 21, 2020 6:23 pm
FlashDangerpants wrote: Wed May 20, 2020 10:10 pm
I see the brilliant amod removed my response to your mealy-mouthed and predictably PCturdish insult, along with my explanation of the Govt. here, which you seem to be entirely ignorant of. Oh well. You might have learnt something from it, instead of resorting to silly 'hero-worship'.
I saw it, I don't know why it was removed, it seemed no worse than the usual shit to me. Nobody cares all that much about the internal affairs of New Zealand, let alone who your deputy prime minister is or what dumb stuff he gets up to. Obviously the heroes line was a throwaway.
User avatar
vegetariantaxidermy
Posts: 13983
Joined: Thu Aug 09, 2012 6:45 am
Location: Narniabiznus

Re: Will saving for a rainy day come back in fashion?

Post by vegetariantaxidermy »

FlashDangerpants wrote: Thu May 21, 2020 6:43 pm
vegetariantaxidermy wrote: Thu May 21, 2020 6:23 pm
FlashDangerpants wrote: Wed May 20, 2020 10:10 pm
I see the brilliant amod removed my response to your mealy-mouthed and predictably PCturdish insult, along with my explanation of the Govt. here, which you seem to be entirely ignorant of. Oh well. You might have learnt something from it, instead of resorting to silly 'hero-worship'.
I saw it, I don't know why it was removed, it seemed no worse than the usual shit to me. Nobody cares all that much about the internal affairs of New Zealand, let alone who your deputy prime minister is or what dumb stuff he gets up to. Obviously the heroes line was a throwaway.
Glad you saw it. You wrote an awful lot about something that apparently 'no one cares about'. I wouldn't have bothered to even mention it if you hadn't first. Keep 'hero-worshipping' then. :lol: :lol: :lol: :lol: :lol: :lol: :lol: :lol:
Post Reply