According to an article in the Economist, in Germany 80% of household wealth is in the form of bank deposits, as opposed to only 20% in the United States. The article notes: “If German … savers are vulnerable to low rates, it is partly due to their own investment habits.”
a. Would German savers be more vulnerable to low interest rates than U.S. savers? Briefly explain.
b. The article notes that “low rates … are intended to encourage spending, not saving.” Why would central bank policymakers focus more on encouraging spending than on encouraging saving?