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The economy of savings set aside the decision by the consumer money rather than goods and services consumed. The propensity to save depends on many factors, such as interest rates, consumer confidence and expectations for the future. The level of savings can be a big impact on the performance of the economy. Low savings rates can cause more economic growth in the short term, but will lead to low levels of investment in the future of economic growth more difficult. These are the main factors determining the savings in an economy.
credit. If bank loans, mortgages and credit easily and cheaply available, it will encourage consumers to borrow. For example, in the period 2002-2007, there was a period of easy credit, banks were happy to lend at low prices. However, the 2007-08 credit crisis, banks reluctant to lend, this is especially true in sub-prime lending. As banks withdraw the availability of credit, savings rate will increase
interest rates. The rate increase will make saving more attractive because the interest earned on the savings. The base rate is the main determinant of saving interest rates indirectly affect trade in the savings rate. At the same time, commercial banks added incentive to offer attractive savings deposit accounts. Also important is the level of real interest rates. This level of interest rates minus inflation. If interest rates are lower than inflation, it is little incentive for people to save.
confidence in future economic prospects. If people have confidence in the future, you will be willing to borrow money. However, if you are afraid that unemployment will start saving and cut back on borrowing. Thus ensuring rates are often cyclical. Falling in times of economic growth and rising during the recession.
save attitudes . Savings rate may vary from one country to another is very important. This reflects a cultural change in saving. For example, China is relatively high savings rate in the US is a relatively low savings rate. This reflects the difference between the attitudes of consumption and saving.
House prices . When consumers see an increase in housing prices rising housing equity. This causes that people are more optimistic and willing to lend money. Falling house prices, negative equity makes it much harder for people credit.
The short term, the savings rate can vary because of changes in interest rates and economic confidence. In the longer run, the savings rate in the access and availability of credit and savings accounts. The social and cultural attitudes to debt and savings is important.
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Source by Richard Pettinger