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Well it doesn't only counter the bad kinds of economic activity, it also counters the good kinds. If a mom-and-pop store with low margins can make more profit b
by School-Cotton 2y ago
Well it doesn't only counter the bad kinds of economic activity, it also counters the good kinds. If a mom-and-pop store with low margins can make more profit by hoarding cash than by expanding their business and employing more people, it can't be good.
- netbioserror 2y agoIf everybody is hoarding cash, then, if we assume markets control interest rates and not a central bank, would banks not lower their interest rates as the supply of deposits increases? Loaning money would become cheaper, and at the same time withdrawing to invest in other things would become incentivized. In sum, high savings would signal that it's safe to start lending and investing.