Munich Personal RePEc Archive

Tessa: A new economic tool; A Temporary Equity Spend and Save Again system

De Koning, Kees (2020): Tessa: A new economic tool; A Temporary Equity Spend and Save Again system.


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The corona virus pandemic has caused and will cause severe hardship for nearly all countries in the world. Government expenditures have gone up dramatically in many countries and tax revenues will drop substantially. Unemployment levels will reach historical highs according to the International Labour Office. Worldwide some 1.6 billion workers will be severely affected . Governments have helped companies to furlough staff and pay such staff from government budgets. Central banks have expanded Quantitative Easing activities and lowered interest rates to practically zero or in case of the ECB to below zero. On April 29th this year, the Fed left its target range for its federal funds rate unchanged at 0-0.25 percent and reiterated it is committed to using its full range of tools to support the economy hit by the coronavirus crisis. U.S. policymakers said that the on-going public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.

Savings incorporated as equity in homes constitute a very substantial source of wealth in many countries. To give a few examples: in the U.S. the net worth embedded in homes was approximately U.S. $23 trillion as per February of 2020. The U.S. GDP for 2019 was $21.2 trillion. In 2018 in the U.K. the total household sector had a net worth in non-financial assets of £4.74 trillion. U.K.’s GDP was £2.11 trillion in the same year. In another example: in 2018, Italy had a home equity level of approximately €3.28 trillion with a GDP level of €1.757 trillion. Spain has a home ownership level of 76.2% far above Germany with 51.5% of households.

In many countries, the collective levels of home equity wealth -or in other words the savings locked into homes- are often a multiple of annual GDP levels. Why is it that these savings are not used at all to stimulate economies?

There are two reasons for it: The first one is linked to the banking sector. The latter can only turn an asset into a liability. The second reason is that part sales of a home are an untested territory in economic terms.

This paper will explain the economic option of a Temporary Equity Spend and Save Again (Tessa) system.

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