Note 127

One might say that excess of saving over investment and falling interest rates tend to indicate demand constraints and excessive inequality, while excess of consumption over investment along with rising interest rates indicate savings supply constraints and insufficient inequality.

Rising rates are due to high costs of risk or overheating and inflation. One might say that these may be caused by inadequate savings, which may be partially attributed to overconsumption. Multiplier effects of consumption increase the asset base of banks and hence credit provision, which may help address the problem.