“Saving Glut and Low Real Interest Rate” : How this may impact your investment.
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Keynes further said that such a mass increase in savings eventually hurts the economy as a whole. Thrift or saving might be good in individual level as prudent financial planning and for contingencies use, but when it moves towards the macro level, it might not be a good thing or counter-productive in term of economic growth. This is why he called the saving as a “private virtue but a public vice “.
|image credit to bankofengland.co.uk|
most of these forces look set to persist and some may even build further. This suggests that the global neutral rate may remain low and perhaps settle at (or slightly below) 1% in the medium to long run. If true, this will have widespread implications for policymakers– not least in how to manage the business cycle if monetary policy is frequently constrained by the zero lower bound.
Also, the low-interest-rate environment will be good for investment asset like REIT and Business Trust !! ( which is good for me as my portfolio is having about 70% of these 2 asset class )
As Christmas and Holiday season is just around the corner, a little bit increase in spending might be wise and good for the overall economy. :-)
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