Should the Livret A really protect you from inflation? – MoneyVox

Preserving the purchasing power of savers: this is one of the missions assigned to Livret A. However, this is far from always being the case, during its 200 years of history. At a time when high inflation is again placing its yield in negative territory, should the rules be changed? The good news should not be long in coming: in all likelihood, the Livret A rate will double on August 1st, to reach 2%. However, despite this remarkable increase, the favorite banking product of the French – 56 million open accounts – will fail to fulfill one of the missions assigned to it from the outset: to preserve the purchasing power of French savers. consumption, in fact, should reach nearly 6% year on year in July, according to the latest figures published by INSEE (1). 2 minus 6, the calculation is quickly made: the real rate of the Livret A, corrected for inflation, is -4%. Clearly, the value of the money you invest in it is gradually eroding. Preserving the purchasing power of savers, an objective from the start In this context, voices – from consumer associations in particular – are concerned and denounce this which is seen as a risk for the woolen stockings of the French. In the national imagination, the Livret A is indeed conceived as a bulwark that protects the money of ordinary people against the upheavals of the economy. According to our exclusive survey (2), carried out in partnership with YouGov, 80% of French people want the Livret A rate to follow the evolution of inflation, and 58% would even like its ceiling to be raised. Even if, in practice, the Livret A savings account mainly benefits the minority of savers, around 7%, who can afford to invest in it, net of tax, up to 22,950 euros, and even 34,950 if we add in the equation its satellite, the Sustainable and Solidarity Development Booklet (LDDS). With the Livret A, you benefit from a large tax shelter (and it costs more than one billion) This concept goes back a long way. At the origins, even, of the savings product, which celebrated its 200th anniversary in 2018. In a long and fascinating article (3) published on this occasion, the economist Philippe Crevel recalls that even before the Revolution of 1789, the State was looking for a way to encourage the French to put money aside, in anticipation of bad days. Then Napoleon, with the creation of the Banque de France, also thought of setting up a system for building up and protecting popular savings. Finally, the project came to fruition in 1818, with the invention of the Caisses d’Epargne, whose raison d’être was to capture money from the middle classes for the benefit of the Caisse des Dpts et Consignations, the financial arm of the newly created State. It was to gain their confidence that the State laid down, in a law of 1881, the main principles of regulated savings, which are still valid today: a State guarantee on the capital, tax exemption on interest and a rate fixed in advance, taking into account the cost of living. More than 200 years later, the regulations still include this objective of preserving purchasing power. This is, in fact, one of the reasons which authorizes the Banque de France to give, with the agreement of the government, a boost to the remuneration of the Livret A. The end of the inflation floor How, then, did we arrive at the situation present, with this negative relative rate of 4%? This is the consequence of a reform that took place in 2018 and has been applied since 2020, which removed what was called, for simplicity, the inflation floor. A rule which stipulated that the rate of the Livret A, at the time of its revision, could not be lower than the annual inflation of the previous month. This deletion was a shock: The Livret A massacred by the new calculation formula, wrote, in a press release published in early 2019, the consumer association CLCV, which calls for a reinstatement of the old calculation formula. , the Livret A can now distance itself from inflation. It is always one of the variables considered to revise its rate. But equal shares with another index, the ster, rate used by banks to lend money to each other. However, this has been at a historically low level for years: -0.57%. Account for children/teenagers: our comparison of risk-free offers price: the People’s Savings Account (LEP), the rate of which cannot be set below the average inflation rate for the previous half-year. However, it is reserved for households with little or no tax.LEP: do you have the right to this super savings account without knowing it? not so exceptional. We have gone back in time and looked at what has been going on since 1818 to see that on the scale of the bicentenary history of the Livret A, the inflation floor has not always been the rule, far from it. And for good reason: it was not introduced into the regulations until August 2004. of 1984, by a separate administrative authority, the Committee for Banking and Financial Regulation (CLRBF), with approval by ministerial order. Clearly, the public authorities have for a long time fixed the rate as they please, and according to above all political considerations. Result: in the absence of direct indexation on inflation, the real return on the Livret A has often sixty years in all, out of a little over 200 years. And sometimes very widely, especially in times of trouble. In the post-war Second World War, for example, it went down … -56%, due to hyper-inflation: 58.7%, while the Livret A rate was 2.50% ! Finally, it was only between 1985 and 2017 that the Livret A uninterruptedly fulfilled its promise of protecting purchasing power. Reintroducing the inflation floor? One question remains. While the rise in prices is returning to peaks in Europe, with the succession of a global health crisis and the outbreak of a war between European States, and bringing the real yield of the Livret to levels not seen since the beginning of the 1980s, should the inflation floor be reintroduced? Should I invest my money
on my booklet A? By placing on my booklet A Over a year… Your savings…

makes you lose brings you back

– Inflation…

makes you lose makes you win

– Your purchasing power…

decreases by increases by

– Calculations made from the discounted rate of the Livret A and the current rate of inflation excluding tobacco. This does not seem to be on the agenda for the Borne government, which could nevertheless benefit from it, as the Livret A has become a totem with strong political connotations. From an economic point of view, on the other hand, such a measure, in the current context, could turn out to be counter-productive. We sometimes need to have negative real rates, says the macroeconomist and co-founder of Cahiers de l’Epargne, Cyril Blesson. The actor whose role is to protect the value of the currency by contenting inflation over the long term is the European Central Bank (ECB). However, the Livret A, by its omnipresence in the heritage of the French, is in fact the key rate of savings in France, the one on which everyone must stall. In doing so, it curbs the monetary policy impulses of the ECB. While the Eurosystem is preparing to drive a change in its monetary policy to try to curb inflation, now is probably not the time.(1) National Institute of Statistics and Economic Studies. (2) The survey was carried out on 1,003 people representative of the French national population aged 18 and over. The survey was carried out online, on the YouGov France proprietary panel, from June 17 to 20, 2022. (3) Philippe Crevel, Le Livret A, 200 ans d’histoire well filled, Le Cercle de l’Epargne, March 2018.