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When private individuals have their money in savings accounts, aren't the banks investing that money anyway ?
by 4gotunameagain 9mo ago
When private individuals have their money in savings accounts, aren't the banks investing that money anyway ?
- clickety_clack 9mo agoPractically, yes. But in economics they often classify “savings” only as being in a bank account. So if you “save” money in a 401k, where it’s invested in stocks, bonds or ETFs or whatever, then it’s not recorded as savings because they consider that “investment”. So when someone says EU saving is 18.79% vs US saving of 3.50%, most of the wealth saved by Americans isn’t showing up in that comparison because it’s not in a bank account.
- 4gotunameagain 9mo agoIf it is just a matter of classification, then why would part of the problem lie on lack of private investment, when private savings are invested by the banks themselves ? I think a big a part is that a lot of EU money is invested in the US instead, and I am looking forward for that to stop..
- clickety_clack 9mo agoThere’s a whole lot of regulation around the types of investment a bank can make with the money. Most of it has to be low risk mortgages, loans and high quality bonds.
- 4gotunameagain 9mo agoMakes sense, thanks !