In any event, people were building up bank accounts and bond holdings; while actually living worse than before, they were feeling wealthier.
I mentioned my theory that an increase in savings during the war could explain much of the post-war economic success before, but I remember being told that much of these savings (including savings held by U.S. personnel overseas) were held in the form of treasury bonds, and so the value of these savings is questionable. Surely, it is true that many of the saved capital goods were squandered in the war (that is, they were consumed in the process of fighting the Axis powers).
But the industrial recuperation that took place in the years after the war required a stock of capital goods, and I think it's plausible to believe that a good volume of these capital goods were made available by abstention from consumption during the war.
Any thoughts?
I have actually used the same theory myself when trying to explain the post WWII boom and discredit the idea that the government's massive spending got us out of the war. From what I have seen, the boom didn't start till after spending was cut dramatically. I haven't researched data on the idea, but the theory seems perfectly plausible, especially considering that wage and price controls were in place limiting consumption during the war.
ReplyDelete"I mentioned my theory that an increase in savings during the war could explain much of the post-war economic success before, but I remember being told that much of these savings (including savings held by U.S. personnel overseas) were held in the form of treasury bonds, and so the value of these savings is questionable."
ReplyDeleteIronically, this sort of sounds like the MMT position that "net savings" (gov treasuries or deficits if you like) was responsible for the recovery.