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> but there is no point to producing more than you consume -- not for long anyways. Of course there is. This is the definition of savings and capital creation.

• cryptonector 8y ago
  You can only accumulate and save so much non-productive stuff. You can have a granary with several years' worth of seed. You can have an oil reserve. But you don't want to have a factory sitting unused (it rots, it depreciates). You don't want cash burning a hole in your pocket -- you want to reinvest this (yes, into raising production, but you'll need demand to increase to, otherwise... see below). And you're not going to build an ever-larger {grain, oil, cash, whatever} reserve. Capital creation isn't like having a grain reserve in case of drought. In a steady state you don't want to be producing much more than is consumed, not for long -- you should be producing just enough more than consumption, on average, to allow for some waste. Of course, the context is global. You can produce much more than you consume locally, if you export, but globally, producing more than is consumed for long is just another way of wasting resources. You can always try to stoke demand if you built too much production capacity, or if you want to build more production capacity, naturally, and you can produce more than is consumed while you're doing this. But in the long run you shouldn't produce much more than is demanded.