Savers are slowly choking off the life of the world economy

These days our accumulated wealth is our savings – and far from being a way to protect us from financial shocks, they are toxic and slowly killing the world’s economies.

Firstly there is the sheer scale of savings held by individuals, companies and governments. Earlier this year the International Monetary Fund felt the need to add it all up and declared it a savings glut.

It says institutional investors such as pension funds, insurance companies and mutual funds, along with the sovereign wealth funds of oil-rich nations and central banks, hold around $100 trillion in assets under management.

.. The unprecedented size of these savings might not matter if investors only wanted a modest return. Unfortunately investors are greedy and there are simply not enough things to invest in that can offer the high returns they demand.

.. Then there is the way most people, businesses and governments have accumulated their savings. Just a quick look at the $100tn total and we can see that most of it is the result of tax avoidance.

The Japanese are famous for their savings and investments. But middle-income families can only save because they don’t pay enough tax for officials in Tokyo to provide basic services. Every year the Japanese government runs a 10% budget deficit, such that its accumulated debt is worth almost 250% of GDP.

.. The next thing that makes savings toxic is the way investors have bullied governments into making them safe.

.. The protection offered to the stock market is illustrated by Janet Yellen, the boss of the US Federal Reserve, who said last year that the threat of a stock market slump was a key factor in the central bank keeping interest rates at historical lows.

.. But when investment banks demand between 10% and 15% returns and pension funds think we should be grateful they only want 6% to 9%, the IMF is supporting a rip-off perpetrated by today’s savers on tomorrow’s taxpayers. Instead it should use its intellectual muscle to shift the debate and support higher taxes on wealth.