<p>While people are spending less, <strong>they are also earning less</strong>, especially the many millions who have lost their jobs. It is very possible that the earnings lost are much greater then the money saved on reduced spending, and so net savings will decrease. It will take time before we really know either way.</p>

<p><a href="https://www.conference-board.org/publications/publicationdetail.cfm?publicationid=1905" rel="nofollow noreferrer">Here is a study</a> which looks at the increase in savings at the start of the so-called Great Recession (2007-2008):</p>

<blockquote>
  <p>As the crisis began, households cut spending and the saving rate shot
  up to about six percent within a year. <strong>During recessions or other
  periods of economic weakness, when any engine of growth is needed, an
  increase in the household saving rate could slow the pace of recovery</strong>
  because, by definition, when a household saves more it consumes less.</p>
</blockquote>

<p>Increased savings could potentially be good for growth in the long run if it allows for greater investment in the near future, and of course saving is good from the perspective of individual households that are able to save. But for the overall good of the economy as a whole, we need spending right now much more than we need savings. </p>

CC BY-SA 4.0
2020-05-07T17:52:00.560Z
2020-05-07T17:52:00.560Z
Brian Z
<p>I like the last post it was good.  Here are my thoughts and what I found on the subject. </p>

<p>As individuals save more businesses will sell less which leads to decrease in aggregate demand thus leads to decrease in gross output. ( we are already saving a lot as seen here in a Fed graph)</p>

<p><a href="https://i.sstatic.net/6i4U9.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/6i4U9.png" alt="enter image description here"></a>  </p>

<p>This is also called the paradox of savings or paradox of thrift.   Which suggests that total savings will fall because people’s attempts to increase their savings will be harmful to an economy because others will earn less.    <a href="https://en.wikipedia.org/wiki/Paradox_of_thrift" rel="nofollow noreferrer">https://en.wikipedia.org/wiki/Paradox_of_thrift</a></p>

<p>Because aggregate income = total expenditures and since total saving(or I should say investment) = income – expenditures, saving/investment must equal zero. </p>

<p>Remember the fundamental macroeconomic accounting identity is that saving equals investment.   Investment refers to physical investment, not financial investment. </p>

<p><a href="https://i.sstatic.net/y80KA.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/y80KA.jpg" alt="enter image description here"></a></p>

<p>So to answer your question most people who had saved previously has the money and the banks they banked with.    I don't think it matters if someone goes to the restaurant or not would indicate if they have the money. Obviously if people are not spending their money at restaurants they would have more of it.   It would depend if they had saved previously. </p>

<p>Here is a good article on the subject back in 2016  <a href="https://evonomics.com/note-to-economists-saving-doesnt-create-savings/" rel="nofollow noreferrer">https://evonomics.com/note-to-economists-saving-doesnt-create-savings/</a>  </p>

CC BY-SA 4.0
2020-05-08T00:59:26.247Z
2020-05-08T01:28:49.520Z
2020-05-08T01:28:49.520Z
Mike J
<p>I want to know why we don't talk about the money that people have saved because they are not going to restaurants, barbershops, flying, traveling, etc.  I have heard the restaurant business is in the billions for revenue.  Wouldn't that mean that the ones that don't go the restaurant during the pandemic have that money?  So does that mean the banks have the money?  Just wondering.  Thank you. </p>

<finance>
Who has the unspent money?
James Warcken
# Who has the unspent money?

(Asked by: username_0 on 2020-05-07)

I want to know why we don't talk about the money that people have saved because they are not going to restaurants, barbershops, flying, traveling, etc. I have heard the restaurant business is in the billions for revenue. Wouldn't that mean that the ones that don't go the restaurant during the pandemic have that money? So does that mean the banks have the money? Just wondering. Thank you.

**Tags:** finance


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## 2 answers

### Answer by username_1 on 2020-05-07. Score: 2

While people are spending less, **they are also earning less**, especially the many millions who have lost their jobs. It is very possible that the earnings lost are much greater then the money saved on reduced spending, and so net savings will decrease. It will take time before we really know either way.

[Here is a study](https://www.conference-board.org/publications/publicationdetail.cfm?publicationid=1905) which looks at the increase in savings at the start of the so-called Great Recession (2007-2008):

> As the crisis began, households cut spending and the saving rate shot
> up to about six percent within a year. **During recessions or other
> periods of economic weakness, when any engine of growth is needed, an
> increase in the household saving rate could slow the pace of recovery**
> because, by definition, when a household saves more it consumes less.

Increased savings could potentially be good for growth in the long run if it allows for greater investment in the near future, and of course saving is good from the perspective of individual households that are able to save. But for the overall good of the economy as a whole, we need spending right now much more than we need savings.


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### Answer by username_2 on 2020-05-08. Score: 1

I like the last post it was good. Here are my thoughts and what I found on the subject.

As individuals save more businesses will sell less which leads to decrease in aggregate demand thus leads to decrease in gross output. ( we are already saving a lot as seen here in a Fed graph)

[![enter image description here](https://i.sstatic.net/6i4U9.png)](https://i.sstatic.net/6i4U9.png)

This is also called the paradox of savings or paradox of thrift. Which suggests that total savings will fall because people’s attempts to increase their savings will be harmful to an economy because others will earn less. <https://en.wikipedia.org/wiki/Paradox_of_thrift>

Because aggregate income = total expenditures and since total saving(or I should say investment) = income – expenditures, saving/investment must equal zero.

Remember the fundamental macroeconomic accounting identity is that saving equals investment. Investment refers to physical investment, not financial investment.

[![enter image description here](https://i.sstatic.net/y80KA.jpg)](https://i.sstatic.net/y80KA.jpg)

So to answer your question most people who had saved previously has the money and the banks they banked with. I don't think it matters if someone goes to the restaurant or not would indicate if they have the money. Obviously if people are not spending their money at restaurants they would have more of it. It would depend if they had saved previously.

Here is a good article on the subject back in 2016 <https://evonomics.com/note-to-economists-saving-doesnt-create-savings/>


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