The paradox of savings

The paradox of savings, we're really going in circles image of

The paradox of savings is a paradox of Economics proposed by John Maynard Keynes. The paradox is this: if everyone saves more money during periods of recession, so no one n´economisera more before.

Why a paradox?

Indeed, the increase in savings reduced consumer spending and, therefore, selling products (apart from exports, if we assume that the rest of the world does not spare more and is not in recession).

Faced with the decline in the level of sales, companies cut their production volume. This induced a reduction in the income of employees and so the national revenue and, often, the level of employment.

The savings of workers being related to income qu´ils perceive wages, she is also reduced because revenues from workers fall. Like they have so less of the wing, they can not set so much aside. So to the final person some more before!

So any attempt to collectively increase household savings ends in failure because they indirectly reduce their own income in fact lowering their ability to save.

In this form it is a real Machiavellian game, as in the "prisoner's dilemma", because even though saving is beneficial to each individual this should never be done by all, and at the same time.

In these difficult times, indeed consumers want to save more, which thereby tends to reduce the capacity overall savings from each. However, in our effort to become rich, then it is necessary to save more than average to not end up like the average.


That tells us the average in France

Of the latest data of the Bank of France (November 2013), the funds on current accounts, passbooks and savings accounts amounted to 1,588 billion euros for the metropolis, with an average of 24.957 euros per capita.

The french put money aside, an average of 1,688 euros annual (December 2014, study). More than 50 years, they devote squarely 4.736 euros per year. Except that these numbers hide disparities.

When taking three-quarters who are saving least (young people especially because of the economic situation, see my article, they place only 452 euros on average per year. (source)

If you save more than € 452 per years you save more than 3/4 of the french!

€ 452 per years is thus the sum needed to save more than 3/4 of the french. Yet it is only € 38 per month then it is very largely insufficient. Except to save widely before you turn 18 and place on high performance products and be lucky you will have trouble in your retirement with if can money.

"Insufficient to cover their future needs", notes Hugues Magron, Director Financial Institutions and Social Protection. The latter quite rightly because when just 50 years old you won't be that can capital, what is really going to cause you problems in the future.  You must as far as possible save more.

The rate of savings in France

At the end of the first quarter of 2014, the savings rate in France stood at 15.9% of gross disposable income, according to the Bank of France.

A rate to its highest since 2009 and still puts the French among early investors in Europe, just behind the Germans.

In fact, the average savings rate in the eurozone is only 13%, and it is even less than 6% in the United Kingdom. The gap is even greater with the United States, where the savings rate is of the order of only 4%.

However the French, famous for their pessimism, save first and foremost to protect their capital, not to make it grow, and it is a big mistake.

However, it is true that the taxation of savings in France is "backwards", according to Paris Europlace, the association responsible for promoting the city of Paris. In General, investments in the short term and without risk, as the Livret A, are indeed less taxed than investments at risk, such as actions and long term.

Why savings works in reverse with us?

Here in france we tax less A books as investments. Off a good economy, to grow businesses. Grow business to obviously invest in the latter.

But if we encourage people to not invest emphasizing A booklet that is not taxes and crippling investments in businesses people will be much less investing in companies. This is naturally quite understandable but anti-economic.

It is normal that if the State favours investment in businesses, savers will then naturally lend to businesses at a rate higher than savings without risk and available but with more beneficial prospects over the long term for france.

Indeed the livret A does not create many jobs and expensive cost to the State, it is d´´ why there down the rate of pay of the latter right now.

However if savers invest in businesses, is made of l´emplois which is very good for our economy. Indeed, the unemployment rate in France is catastrophic and many measures are to be taken to restart the France.

Review of the paradox of savings, feeding the debate history.

Non-keynesien economists criticize this theory for two reasons. First, if demand drops the prices fall, the resulting lower price will spur demand, which tends to limit the decline in demand. Indeed if the price drops naturally consume more.

Secondly, and perhaps more importantly, the "savings" represents the loanable funds; an increase in the supply of loanable funds tends to lower interest rates and stimulate borrowers by a lower rate.

That's some investments become profitable and thus a decline in the sector of the consumable goods which have a horizon short term is offset by an increase in production in the areas that need to have long-term (energy and heavy investments or research).

For example, PC demand may decrease, but the demand for real estate would be stimulated by favourable conditions in rates, going up market.


If everyone saves more money during periods of recession, so no one n´economisera more. In our effort to become rich, it is then necessary save more than the average to not end up like the average, but more easy said than done.



Macroeconomics, edition pearson ISBN 978-2-7440-7513 – 1 p148

Samuelson, Paul (1973). Economics – Ninth Edition, New York: McGraw-Hill. ISBN 0-07-054561-8



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