What is forced savings?

Forced savings occur when consumers cannot buy and are forced to maintain their capital. This may happen because there is a lack of offer that makes it impossible to find goods or as a result of the high prices that make the permission of the goods more difficult. It is a phenomenon that can have serious economic impacts, including contributing to the creation of a cycle of boom and bust. This differs from voluntary savings when people decide to put their own money aside. He pointed out that this could have a pure effect on increasing inflation over time, which could contribute to the creation of an economic bubble. As the bubble stabilizes, it can occur and create problems as a sudden radical decline in the value of assets, including cash that can be held in savings. This bust of the economic cycle aspect can be particularly heavy for people with limited resources.

Interest rates of tens fall during a period of forced savings. Banks have enough money to borrow, thanks to deposit and lack of customers,who apply for loans. This market can be favorable to people who buy loans or try to consolidate, because financial institutions cannot afford to be about customers. In addition to low interest, people can qualify for other favorable conditions that benefit them, such as dropped fees for the origin to reduce the price of loans.

A period of forced savings should be repaired over time. Either the price of the goods will fall to make them more accessible so that companies can sell them, or the offers adapt to demand and make more public products available. Consumer expenditures may be an important part of the economy and manufacturers are interested in limiting the period of forced savings as they can lead to profit paddling. Some companies may not be able to weigh a period of reduced consumer expenditure and could fail.

Governments can also intervene, depending on their economic policy. InterventionThey may include measures to support consumer expenses and inflation controls, such as limiting the total money supply. These activities are not always successful and sometimes criticized by economists in the free market who claim that self -regulation is crucial for balance. They believe that market problems will be remedied, given the opportunity to do so, and that government measures to protect publicly can cause more damage than good in the long run.