SAVINGS - Savers

1. Food Production

2. Agriculture

Only through accumulation of goods and commodities, at a very low level.

3. Simple Technology Rulers may build up substantial stores

4. City State

Advent of money enabled smaller man to accumulate savings - to do something he could not otherwise do, e.g. start a commercial activity or dwelling. Generally skilled craftsmen.

5. Empire (Roman)

Banks enabled larger sums to be kept more safely for wealthy. Savings Banks for others known. Concept of interest - a return to the saver

6. Medieval (Europe)

Bulk of people had barely enough for subsistence. Little money in general use until later in the period, when conditions as 4.

Investment in corporations (shares) by wealthy for a return

7. Industrial Revolution

Banks developed - used by well-off to store cash

8. Consumer Society

Self help institutions developed - especially to help people acquire homes - first used by moderately wealthy professionals. These developed into general savings media

State starts Savings Bank for very small savers. Other Savings Banks develop for small saver

9. Mass Production Society

Savings concept spreads as more people have spare resources above immediate needs. Saving occurs at lower economic level in society

Insurance spreads into savings, and likewise pensions which grows considerably under government encouragement

Other deposit-taking institutions - finance houses, Unit Trusts

By end of period about half of the people have significant savings activity for future needs. These savings however lose purchasing power (or value) under high inflation and taxation.

SAVINGS - Savers - CONSTANT TRENDS

Savings occur when people have some surplus above immediate needs, and wish to accumulate wealth to do something they could not normally do. Examples are constructing a dwelling or starting a commercial activity. Before money, people had to accumulate actual goods, which was cumbersome. With money, people with a small surplus could accumulate it, until they could deploy it on their objective. Broadly, people with higher incomes will save more of it.

The Constant Trend is that as the economic level rises, so the number of people coming into the savings net increases, while the proportion of their income saved increases. Thus the volume of savings is magnified considerably as the economic level rises.

The reasons for saving varies with economic level:

  1. At the lower levels, people are concerned to have something to fall back on if things go wrong.

  2. After this, people are concerned to better themselves, such as provision of a dwelling or commercial activity.

  3. At higher levels, people are concerned to put something by for their old age (at lower levels children provide this).

  4. A moderately affluent person will have short term savings needs to meet large intermittent outgoings such as holidays (though these are increasingly met by the converse of credit - credit).

  5. A wealthy person will be looking for a "store" for his wealth, and will also be tempted by prospect of "gains". Wealth may be accumulated for its own sake, for prestige and power. The proportion held in goods increases.

All of these may feature in a person's savings motivations. But generally those features with higher numbers in the above list will become more important as society's economic level rises.

There is no clear dividing line between saving in monetary form, and saving by other means. But as (5) above becomes more important, so the flows into monetary savings will proportionally reduce. Other impacts will operate towards this end: from Inflation, from changing status of the professional person, from the underground economy, and increasing taxation (on the wealthy in particular).

SAVINGS - Savers - IMPACTED SCENARIO

The Constant Trend of a growing volume of Savings with economic level will continue for a while in the advanced and Post Industrial Societies. As the last of the population (land and unskilled workers) begin to join the significant surplus category they will join the savers.

These may number over half the population at present in the early Post Industrials, where this growth will continue for another couple of decades. By the end of this time the standard of living will have nearly doubled. This means that the average income (which is coming into the savings category at this time) will be well within the significant savings group.

Bringing most people within the savings net will remove one source of growth. Other losses of growth can be expected:

  1. The falling position of the educated middle class (from Leisure & Surplus Wealth), who will still attempt to buy their homes and will automatically be put into a pension scheme. They are likely to have little left over for other forms of savings. This class has traditionally been high volume savers. (Already started)

  2. Growth of underground economy. People here tend to "save" via building up their own business. They are discouraged from using savings media where the taxman can identify it. They will save in goods or in other underground businesses (already occurring, Financing & Development of Enterprises).

  3. Effects of Inflation, which is likely to return (from Banking Stability). People at high economic level will increasingly realise that their savings are simply losing value. They may reduce their savings or switch to other forms - such as invest directly in enterprises or save in goods.

The expected outcome is that traditional savings will continue to grow in the early Post Industrials over the next decade, though a plateau may begin to be apparent in that time.

Time series data shows Savings growing strongly in a growing economy, being 10 - 15% of GNP in early Post Industrials. Though it has fallen below this in the US during early 2000s. During periods of high inflation this proportion actually rises - thought to be people struggling to maintain the value of their savings. This is contrary to (3) above. However, it can be seen also that there is a flight out of paper money during times of high inflation especially into Gold - stored bars and coins rise considerably. The wealthy are reacting according to (3) above - and as there becomes more of them they are likely to impact on the previous inflation behaviour. (Unfortunately, Western investors in Gold under inflation have faired badly. They mainly get into Gold when it is quite high already. In the long period of low inflation since the Banking Crisis they have almost all got out of Gold at a considerable loss. Souk buyers of Gold seem to understand its value much better, behave in the opposite direction to Western investors, and have acquired much of the Gold the Western investors laid down).

Middle Ranking & Other Countries

Outside the Post Industrials, the Savings pattern will follow the economic level reached in the Historical Analysis. As societies approach the Level 9 Mass Production phase so the volume of Savings grows significantly. This applies to MRCs and some LDCs (see Abbreviations).

There are however differences. When the Post Industrials went through Levels 7 & 8 money was still mainly valuable metal coins - inflation (except perhaps during wars) was very low by modern standards and often negative. The modern Level 7 - 9 Societies are using paper money, with its inflationary consequences - many MRCs & LDCs have inflation beyond the experience of the Post Industrials. From the discussion on Gold above it is apparent that the inhabitants of modern Level 7 - 9 Societies may be much more experienced of inflationary environments, and much more street wise in their attitude to paper money than their supposedly more advance Post Industrial counterparts. Many of these Level 7 - 9 Societies do not trust paper money, and their Savings may continue at present - a Gold and jewellery activity successfully traded in the Souks. Here a Western style Savings media may not arise. In other countries with a better inflation record such a Savings media may arise, but be stunted by competition with Gold and the Souks. Countries with a low inflation record may follow the Western Savings pattern.

Perhaps eventually the Post Industrial savers will catch up with the Souks.

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