Some of the north and western European countries have a long tradition of savings nurtured by public opinion and the government. In France the government attracts countless savers among the young and lower-income group with Livret A account available in savings and postal banks.
It is tax free, requires negligible balance and the rate is interest is more than that of the market. In Germany at every corner of cities are savings banks named Sparkassen that are immensely popular; the commitment is to build up a “savings mentality”.
The banks allow accounts without charging fees for the youth and help schools financially. Thus in general the European countries have placed checks on over-indebtedness. Loans on home equity are uncommon in Germany while the people of Belgium, Italy and Germany are hardly offered the American type of credit card that permits the user to carry forward even if there is no balance.
In America during the past two hundred years the federal government has hardly encouraged savings. It was left to the pulls of the market and the state. During the 19th century banks, building and loan groups did operate in the North East and Mid West and here the working class saved in good numbers.
But the bulk of Americans in the West and South of the country lacked any access to small savings till 1910. The Americans turned to regular savings only when the Federal Government in 1934 set up the Federal Deposit Insurance Corporation and there was mass marketing of savings bond during World War II.
America emerged from the war prosperous and thriving without any parallel. Savings campaigns were no longer necessary. Instead all – politicians, business and labour heads jumped into propagating consumerism holding it up to be the engine for economic growth. A plethora of housing as well as tax policies made its debut to enable people to borrow to purchase residences and goods. This has never been seen in any other country.
From the 80’s regulators took a back seat and new taxes kicked off growth of house equity loans, credit cards and sub-prime mortgages linked with predatory lending.
Home prices began to soar and this encouraged the financial segment to grant loans knowing full well that the borrowers were in no position to repay. Without going into the inside game, most Americans reasoned that why should they save when they can borrow so easily? It was only after the housing collapse of 2008 that the country realized that paper wealth is not equivalent to dollars in the bank.
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