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Imagine a country of a hundred 18 year olds. They all get jobs on the same day, and start putting savings into the bank. The bank takes those deposits and loans
by sbierwagen 4y ago
Imagine a country of a hundred 18 year olds. They all get jobs on the same day, and start putting savings into the bank. The bank takes those deposits and loans them out to various productive (profit producing) enterprises.
Time passes. The hundred all turn 65 on the same day, and retire. The savings rate whipsaws, since nobody is depositing money anymore, and is instead withdrawing it. The bank can no longer make loans. Credit crunch.
- whatshisface 4y agoThen the central bank sees that inflation is lower than they want and then lowers interest rates, solving that part of the problem.
- MacsHeadroom 4y agoUS lending banks have had a reserve requirement of 0% since 2020. We are already in the days of cashless credit creation. No drop in savings will effect lending so long as this policy is in place.