Savings: one moment the media were celebrating news that interest rates were set to fall. The next moment they were lamenting the lousy returns savers can expect.

Then there’s pensions. We are not putting enough away into our pensions. According to research out this morning, the amount of money being pumped into pension schemes for staff at small companies should double.

But there is a snag with all this. As Keynes showed, in a recession the last thing the economy needs is for people to save more.

And that really does take us to the core of the crisis and opportunity for 2009.

As you know, in some parts of the world the population is getting older. In Europe, the baby boomer population will be retiring soon – in fact 20011 is the date often cited for when the first of the baby boomers reach 65. By the middle of this decade there will be more people retiring than indigenous workers entering the workforce. So we need to save more. A lot more.

According to the Association of Consulting Actuaries, the average combined employer and staff contribution being made into defined contribution pensions offered by firms employing up to 50 people was just 8 per cent of members’ pay. The problem is, in 1996 savings levels were much the same level as today, but investment returns these days are much, much worse, and we can all expect to live longer.

The bottom line, pension contributions need to double.

But then Keynes had a thing or two to say about the effect of saving in a recession. He called it the paradox of thrift. It might make sense for individuals to save more, but if all we save more, aggregate demand will fall, and this will lead to job cuts. Those who are in work will fear that they may lose their jobs, so they may start prudently saving more, and this will lead to an even bigger fall in aggregate demand.

And that is one of the big challenges for the years ahead. How do we deal with the demographic time bomb when the obvious solution is an increase in savings, yet a rise in savings can lead to recession?

Maybe this is in part the problem with Japan. The ageing of the Japanese population is more advanced than in Europe. This surely explains why savings rates are so high in the economy of the rising sun, and this may, at least in part, explain why the Japanese economy has performed so badly for so long.

In some way, the real crisis began with the dotcom crash. From the moment stocks peaked, saving became a much less profitable thing to do. Maybe some people at least turned their attention to property for that reason. In an environment where stock market investing represented such poor returns, it is perhaps no surprise that the view that “your home is your pension” became more popular. This in turn helped drive up property prices.

But of course the property boom was no more sustainable than the dotcom boom – in fact in some ways it was less sustainable.

So what next? We need to save more to meet our needs when we retire. If we save more, the recession will become much deeper.

But, actually, the whole debate misses the point.

The key to providing for a prosperous retirement does not lie in saving more. What counts is how the money saved is used.

If we all diligently save more, but then, when the baby boomers retire the UK’s productive potential has not risen, then all that saving will be irrelevant. Money is just a means for managing the transfer of goods and services. If there are insufficient means of producing goods and services, then savings will count for nothing.

If savings find their way to business, and are used to boost innovation and improve infrastructure, so that when we retire the UK’s output is greater for a set amount of inputs, then we can look forward to a prosperous retirement.