Lazy Savings
Ursula von der Leyen is the President of the European Union. She was in the news the other day for saying that savings were “lazy.” That may have been an unfortunate translation, since I think it would be more accurate to have reported that she said savings were “idle.”
Here is an accurate translation of her comments in context. “In Europe there are savings. Unfortunately, these savings are idle. Ten trillion Euros of household savings at present remain on bank deposits. And a significant part of European savings is invested outside our continent. Europe must now make these savings work for the good of its business.” She then proposed that the EU’s Savings and Investment Union would channel those savings into what the EU decided were productive investments.
Critics expressed their concern that the money that Europeans worked hard to save would be confiscated by the European Union because Europe is short on cash. The Commission pushed back saying that there was no mechanism for mandatory redirection of private deposits. This would merely be a voluntary action.
However, it is easy to understand the concern. In the past, I have talked about how struggling banks in other countries have used a “bail in” to deal with its debt by using the funds of depositors. The EU does not presently have such authority, but you can understand the concern.
Those of us who know our history remember Executive Order 6102 that made it illegal for Americans to own gold and were required to surrender their gold to the Federal Reserve. Failing to comply brought a fine of $10,000 (worth hundreds of thousands in today’s dollars) and 10 years in prison.
When banks or governments need cash, sometimes voluntary programs become mandatory programs. That is why her speech caused a stir.
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