The three possible uses of excess money

We look at the situations of the United States, the euro zone and France. The COVID crisis has led to: On the one hand, a rise in the savings rate of households (which have not been able or willing to consume) and a fall in corporate investment; On the other hand, a massive fiscal deficit, which has offset the income loss for households and companies and has been monetised; Altogether, combining these two developments, excess private savings over investment (no income loss, increase in savings, fall in investment), held in the form of money. The key question for what happens next is what households and companies will do with this excess money. Keep it in monetary form and do nothing with it? Spend it (invest, consume)? Use it to buy other assets (equities, real estate)? In the first case, nothing w ould happen; in the second, there would be a strong recovery in demand; in the third, there would be a sharp rise in asset prices.