How our ageing population influences the economy
BY SHANNON ROBERTS
Our time of life affects they way we use our money - whether we are looking to borrow or whether we are looking to save, whether we want a safe investment with a guaranteed return, or whether we want to take a risk. As we all know, there are currently a lot more elderly people in the world than ever before.
When elderly people save more money without investing it in businesses or infrastructure it affects our economy. Spending falls and interest rates also fall because banks don’t need high interest rates to attract savers, but do want to encourage lending. When more people save, more money is available to lend, so the ‘price’ of money drops.
The 'global savings glut theory’ works like this:
- Ageing savers become more conservative as they get closer to retirement. That means they're more likely to put their savings into a bank than into a risky start-up company or new venture.
- When more income goes to the very wealthy they struggle to spend it all and they put it into banks and other low-risk assets, such as property and bonds (this happens when there is a bigger gap between rich and poor).
- Third, the world's biggest corporates are sitting on enormous cash piles because they don't have to invest much to grow their businesses due to the low price of technology.
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Read more:www.mercatornet.com
Our time of life affects they way we use our money - whether we are looking to borrow or whether we are looking to save, whether we want a safe investment with a guaranteed return, or whether we want to take a risk. As we all know, there are currently a lot more elderly people in the world than ever before.
When elderly people save more money without investing it in businesses or infrastructure it affects our economy. Spending falls and interest rates also fall because banks don’t need high interest rates to attract savers, but do want to encourage lending. When more people save, more money is available to lend, so the ‘price’ of money drops.
The 'global savings glut theory’ works like this:
- Ageing savers become more conservative as they get closer to retirement. That means they're more likely to put their savings into a bank than into a risky start-up company or new venture.
- When more income goes to the very wealthy they struggle to spend it all and they put it into banks and other low-risk assets, such as property and bonds (this happens when there is a bigger gap between rich and poor).
- Third, the world's biggest corporates are sitting on enormous cash piles because they don't have to invest much to grow their businesses due to the low price of technology.
.......................
Read more:www.mercatornet.com
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