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Is Covid amplifying the Saving Glut of the Rich and its associated issues for the overall economy? Some thoughts on recent empirical economics research on Covid. 1/N
A result that is emerging from empirical Covid economics research is a rise in savings by highest income individuals. Their income has not suffered much, but their spending has declined substantially. Here is the UK version of this from Andy Haldane's speech last week: 2/N
A similar result shows up in fantastic work by @pascaljnoel, @p_ganong and co-authors; and in amazing work by Raj Chetty and co-authors. Here is a picture from the former: 3/N
And from the latter: "high-income individuals reduced spending sharply in mid-March 2020 ... This reduction in spending greatly reduced the
revenues of businesses that cater to high-income households in person." 4/N
The research we have been working on (@ludwigstraub @AtifRMian) is focused on this saving glut of the rich, which rose by a great deal from 1983 to 2016 (the last year of our sample). 5/N
We document this saving glut, and talk about its potential implications for the economy. I am still thinking through the Covid evidence, but the point is that Covid seems to be amplifying the saving glut of the rich substantially. 6/N
Here is the saving glut of the rich from our research, and here are the links to the two papers: 7/N

scholar.harvard.edu/files/straub/f…
scholar.harvard.edu/files/straub/f…
I also discussed related issues on the @HiddenBrain Podcast (which was a lot of fun). If you are interested in this saving glut of the rich, check it out: N/N
npr.org/2020/06/15/877…
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Amir Sufi
@profsufi
I finished the excellent "Trade Wars are Class Wars" by @M_C_Klein and @michaelxpettis a couple of weeks ago. It is a fantastic book, a must-read especially for my academic economist colleagues
The "global saving glut" of @benbernanke made the idea of "financial excesses" broadly known among academics, but the issue is far broader. Trade Wars are Class Wars provides the historical context, and makes clear connections between trade wars, inequality, and saving gluts.
For example, inequality is closely linked to financial excesses: the countries generating excesses (China and Germany) do so by suppressing demand, especially by those lower in the income distribution. The stuff on Germany in particular was completely new to me.
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Amir Sufi
@profsufi
Some thoughts from interview with @M_C_Klein, related to research with @AtifRMian and @ludwigstraub:

central point: Covid recession will further damage already weak economy unless we significantly change course.
The indebted demand framework makes the case that rising inequality fuels a saving glut of the rich, putting downward pressure on interest rates and ultimately economic output.
Covid is likely to exacerbate this trend: the rich will spend less for the foreseeable future, and the non-rich are experiencing the largest income losses (so further rise inequality)
Read 5 tweets
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Amir Sufi
@profsufi
The world economy entered the COVID-19 crisis with very low interest rates and very high debt levels, which will complicate policy efforts to boost the economy. We released two @nberpubs papers that address how this happened and what it means for policy (@AtifRMian @ludwigstraub)
Both studies point to the rise in income inequality as a central culprit. The rich save more than the non-rich, and therefore a rise in income inequality creates a "saving glut of the rich" which has fueled the rise in household and gov debt since the 1980s.
When non-rich households and governments borrow from the rich, it creates a transfer of future resources from those who spend to those who save. This puts downward pressure on aggregate demand, and interest rates must fall in an effort to keep demand high.
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