This sounds remarkably like a self-solving problem

It’s possible that this is all true and yet even if it is it doesn’t sound like a problem:

The results are pretty bleak. You’ll have heard a lot about the extra saving going on during lockdown. People not being able to spend on holidays or restaurants has led to a staggering £125bn in extra savings. But this report crucially notes that not everyone is racking up the cash. Pre-Covid, 10.7 million of us were over-indebted or had low savings. That has now risen to 14.2 million.

The generational aspect of this is huge. Overall, the number of financially vulnerable adults rose by 3.7 million (or 15%) to 27.7 million. For those aged 18-34, the rise is 40% while it has actually decreased among retirees. There’s some rubbish written about income inequality having soared during the pandemic (it hasn’t, although the savings increase has been top heavy since it’s the rich who splurge on holidays). However, I’m increasingly worried by the prospect of an unequal recovery in the coming months with the rich and old out consuming while unemployment rises and the young (particularly, poorer parents) are left to struggle with higher debt. That’s not a society building back better, it’s one growing apart.

Nice to see that confirmation that income inequality hasn’t increased - it doesn’t in recessions. The richer among us gain more of their income from profits than the poorer do. As profits are what crash in recessions inequality of income falls during them.

But that inequality of recovery. It’s worth going back to a cod-Keynesian model. During a recession savings rise, cutting into demand and thus compounding the fall in the economy. The solution is for savings to be spent, increasing demand and thus ending the recession. The argument about government deficits and pump priming and all that is simply to accelerate this process.

OK. We also know that the people worst hit in recent times are those in consumer facing services. These being the very things we expect to boom as the lockdowns end and those savings are unleashed into the economy. It’s the very unleashing which increases demand and thus employment and the incomes of those who provide the things being spent upon.

That is, even if this is all an actual problem it seems to be one of those self-solving ones. Assume that we have a recovery and the worry goes away, doesn’t it? Because this is the very worry that a recovery will deal with.