How the wealthy hanging onto their money actually makes everyone else poorer, according to a new study

• A Chicago Booth Review report looks at the link between the wealthiest saving their money and inequality.
• Wealthy people's savings are used to finance household debt for everyday Americans.
• As debt grows for the lowest-earning Americans, the wealthy having more savings just fuels the cycle further.

The wealthy sitting on their savings may be helping finance the debts of poorer Americans and therefore play a role in rising inequality, according to the Chicago Booth Review.

Researchers Amir Sufi, Ludwig Straub, and Atif Mian looked at the growing savings of America's wealthiest residents, and found it isn't going into what they call "productive" investments, like building roads or new research. Instead, the stockpile is going toward financing debt from everyone not in the top 1%.

Prior to the financial crisis in 2008, such savings financed "almost a third of the rise in household debt owed by the bottom 90%." After the housing crash, they began to take on a greater role in subsidizing government debt (although the continued debt from lower-earning Americans is still financed from those savings).

How does that work, exactly? Rebecca Stropoli at Chicago Booth Review uses the hypothetical of a corporation issuing equity to a wealthy shareholder, but the proceeds don't go on research or equipment but into a deposit at a bank, which in turn uses it to fund a mortgage for a less-affluent household. The wealthy are financing bank lending to average Americans, in other words.

When the poorer take on more debt - especially when they're incentivized by low interest rates - that's less money they have to spend on other things.

During the pandemic, wealthy savings climbed, along with their fortunes

On the whole, the personal saving rate - the amount that Americans have left over from their income after paying off bills - has climbed during the pandemic, although it shot down in April 2021. But, as Time's Alex Gailey reports, an increased savings rate may not show the whole story. Poorer Americans, Time reports, continued to spend at levels just a little below pre-pandemic rates, while their wealthier counterparts held on to more money.

The wealthiest Americans saw their net worths grow during the pandemic as widespread economic devastation and unemployment ravaged the country. From March 18 to December 30, 2020, the world's billionaires added $3.9 trillion to their net worths; that's enough to pay for the world's vaccines and to keep everyone out of poverty.

In the US, billionaires got 44% richer throughout the pandemic, Insider's Lina Batarags reported. That stands in marked contrast to the millions of Americans facing down unemployment and poverty.

The researchers note that the pandemic has cleaved an even deeper divide between the top 1% and the bottom 99%. Low-wage workers and workers of color were disproportionately impacted by the pandemic's economic devastation, which took the shape of a K - high-earning workers saw jobs and incomes grow, while those at the bottom experienced the opposite.

"Mian, Straub, and Sufi see in the data a widening wealth gap and more saving by the rich, thus more money being turned into loans and lent out to consumers," Stropoli writes.

The methods by which the ultrawealthy hang onto that wealth have come into greater relief this week, too, as a bombshell ProPublica investigation revealed that the wealthiest Americans are paying an incredibly low rate of taxes proportional to their wealth. That's all legal, but it could finally kickstart reform targeted at America's highest earners.

In the meantime, the savings of the wealthy will sit in bank accounts, fueling more debt for the rest of the country.