Can forcing people to save cool inflation?

The Indicator from Planet Money

NPR

Business

4.7 • 9.2K Ratings

🗓️ 17 April 2023

⏱️ 10 minutes

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Summary

"Forced savings, you cowards!" Those aren't his exact words, but in 1940, macroeconomist John Maynard Keynes advocated for compulsory savings to help tame inflation during World War II. Could that work today?

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Transcript

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0:00.0	NPR.
0:07.0	Right now the Federal Reserve is pulling on its one big giant inflation-busting lever
0:17.5	interest rates.
0:18.9	The Fed is making borrowing harder, and it's trying to make saving money more appealing.
0:23.6	That's all in an effort to slow down spending and bring down inflation.
0:28.0	And we are starting to spend less.
0:30.8	The latest numbers show a 1% decline in retail spending in the month to March.
0:35.8	That's 1% lower in a single month.
0:38.6	But this approach has its problems.
0:40.8	Rising interest rates make getting a new mortgage really expensive, so it particularly
0:45.2	hurts groups like young people buying their first home.
0:48.6	Racing interest rates has all kinds of distributional effects that we don't even fully understand.
0:53.6	Plus, it seems kind of indirect.
0:56.2	It's a long chain of reasoning just to basically get people to spend less.
1:01.2	So what if we just went straight to the source?
1:03.7	What if to bring down inflation the government forced people to save more?
1:09.4	This is the indicator from planet money I'm Darian Woods.
1:12.5	And I'm Whelan Wawne.
1:13.5	To deal in the show, an unorthodox policy to fight inflation, compulsory savings.
1:19.6	We talk to a champion of the idea and a critic.
1:27.5	Support for NPR and the following message come from Indeed.
1:30.8	If you're a business owner, you'll love Indeed.
	...

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