4 ms·

Because saving money is not consuming which is bad for the economy.

by quixoticelixer- 4y ago

emmelaich 4y ago
More pertinently, it's not producing.
eru 4y ago
Saving money is equivalent to investing. Investing is pretty good for the economy.
- imtringued 4y ago
  There is no such relation. You can save cash which does not result in additional investment. When banks refuse to lend money, saving does not result in additional investment, in fact that is the cause of QE. The government feeling compelled to invest because people in the private economy refused to invest.
  - eru 4y ago
    Cash behaves like an interest free loan to the central bank. Stuffing cash under your mattress takes it out of circulation. An inflation targeting central bank will 'print' more money to make up for the missing cash. That new cash will be spend. (Or, if people keep stuffing it under mattresses, the central bank can just keep 'printing' money.) In a few years, when you take the money from under your mattress and buy yourself a nice ice cream, the central bank will notice that total spending has gone up, and decrease the amount of money in the economy to keep inflation on target. It's exactly as if you had lend out the money from under your mattress to the central bank. (And by 'print money', I mean that they will buy assets with newly created money. Typically they buy government debt, but they can also buy stocks or gold or foreign exchange or rare Lego sets.) In any case, it looks like we don't actually disagree on what's happening, only on how to interpret it. I hold that stuffing money under your mattress isn't the problem here. Central bank monopoly on printing money is. If you stuff privately issued money under your mattress, it's the private issuer that can increase its balance sheet. No government-run central bank required for this.
- nly 4y ago
  Most "investing" isn't investing either. When you buy Facebook shares on the NYSE not a penny is going to Facebook, you're just transferring shares from one person to another at a new price
  - quixoticelixer- 4y ago
    At the end of the day who actually ends up with the money is irrelevant. It still has the same net effect
- quixoticelixer- 4y ago
  Yes and no, you don't want too much of either but they are different. You want people to save more when there is high inflation and consume more when there is less

Because saving money is not consuming which is bad for the economy.

emmelaich 4y ago

More pertinently, it's not producing.

eru 4y ago

Saving money is equivalent to investing. Investing is pretty good for the economy.

imtringued 4y ago
There is no such relation. You can save cash which does not result in additional investment. When banks refuse to lend money, saving does not result in additional investment, in fact that is the cause of QE. The government feeling compelled to invest because people in the private economy refused to invest.
- eru 4y ago
  Cash behaves like an interest free loan to the central bank. Stuffing cash under your mattress takes it out of circulation. An inflation targeting central bank will 'print' more money to make up for the missing cash. That new cash will be spend. (Or, if people keep stuffing it under mattresses, the central bank can just keep 'printing' money.) In a few years, when you take the money from under your mattress and buy yourself a nice ice cream, the central bank will notice that total spending has gone up, and decrease the amount of money in the economy to keep inflation on target. It's exactly as if you had lend out the money from under your mattress to the central bank. (And by 'print money', I mean that they will buy assets with newly created money. Typically they buy government debt, but they can also buy stocks or gold or foreign exchange or rare Lego sets.) In any case, it looks like we don't actually disagree on what's happening, only on how to interpret it. I hold that stuffing money under your mattress isn't the problem here. Central bank monopoly on printing money is. If you stuff privately issued money under your mattress, it's the private issuer that can increase its balance sheet. No government-run central bank required for this.
nly 4y ago
Most "investing" isn't investing either. When you buy Facebook shares on the NYSE not a penny is going to Facebook, you're just transferring shares from one person to another at a new price
- quixoticelixer- 4y ago
  At the end of the day who actually ends up with the money is irrelevant. It still has the same net effect
quixoticelixer- 4y ago
Yes and no, you don't want too much of either but they are different. You want people to save more when there is high inflation and consume more when there is less