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> Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the growth rate of wealth itself. You need the wealth rate to be l

> Basically he compares two kinds of growth rates : the growth rate of the 'real' economy and the growth rate of wealth itself. You need the wealth rate to be low enough that rich people want to invest some of it in the real world, not leave it in the bank. I think your second sentence, and thus your explanation of Piketty's thesis, is wrong. Piketty's point was that if wealth grows faster than the economy, the total share of all assets held by the wealthy will grow and grow. I don't think he was concerned about the choice to invest 'in the real world'. In any case it's not clear what 'not investing in the real world' means or if it's meaningful. Any return on capital either comes from direct investment or from lending to someone else who will invest directly. There is a fundamental accounting equation which proves that all net saving is net investment.

AlexandrB 2y ago
> Any return on capital either comes from direct investment or from lending to someone else who will invest directly. Is this true? I'm not saying it's a huge portion of all saving, but holding wealth in things like precious metals or greater fool investments like Bitcoin doesn't seem like "investing" in anything productive.
- eftychis 2y ago
  If you bury gold bars that you mined yourself in your backyard, or you bury your salary in cash there straight from your paycheck, then you remove money from the system and thus not invest it. And effectively damage the economy, mainly via lack of liquidity. It's hard making your capital inaccessible to the economy, but it's easy to not get the benefits of that working capital. For instance, any time you park your money in a regular bank account or lend it at a suboptimal rate, you don't get some of the benefits.
  - TheSpiceIsLife 2y ago
    This comment was down voted, but is a reasonable response. Further to the parent comment, if you park your money in gold or crypto, you’ve given that money to someone else, and so on and so forth. But there’s a balance to be bad, if no one actually spends anything other than acquiring investments, they starve, and the economy suffers.
- hgomersall 2y ago
  No it isn't true. Holding money as money in a bank account is also not investing unless you think that providing liquidity to a bank is a useful investment (liquidity they can trivially access from the central bank, albeit at a slightly less desirable rate). A bank deposit is a liability to the bank, not something that can be invested.
  - nr378 2y ago
    A bank deposit is both an asset and a liability to the bank - a customer depositing money in a bank expands both sides of the bank's balance sheet. Banks can and do then lend out deposited money to other customers, who can then spend it in the economy as they see fit.
    - hgomersall 2y ago
      No, the deposit is a liability with a matching asset that comes with it. The asset is needed to balance the asset. They certainly don't lend it out to other customers, which always happens through new money creation. They do buy short duration government bonds with it because they're not stupid and can get a better return than on reserves, and bonds are acceptably liquid. Nothing they do can be construed as investment. Savings really are savings and are effectively removed from the economy.
      - dreghgh 2y ago
        You seem very confused about several different points here. 1. Deposits often fund loans. If deposits were never used to fund loans as you describe, most banks would have at least as many cash or HQLAs as they do deposit liabilities. Check any deposit-taking bank's balance sheet to see that this is not the case. 2. If banks do buy government bonds with deposits, that still does not negate the funds being invested. The government now has the money and will spend it. Again, you can quickly check the governments do not hold piles of cash and the vast majority of the money that they borrow is spent on their activities. 3. It is axiomatically untrue that 'savings are removed from the economy'. Savings means that someone consumes less than they produce. That production must either be consumed by someone else, or add to the stock of capital. It cannot disappear.

AlexandrB 2y ago

> Any return on capital either comes from direct investment or from lending to someone else who will invest directly. Is this true? I'm not saying it's a huge portion of all saving, but holding wealth in things like precious metals or greater fool investments like Bitcoin doesn't seem like "investing" in anything productive.

eftychis 2y ago
If you bury gold bars that you mined yourself in your backyard, or you bury your salary in cash there straight from your paycheck, then you remove money from the system and thus not invest it. And effectively damage the economy, mainly via lack of liquidity. It's hard making your capital inaccessible to the economy, but it's easy to not get the benefits of that working capital. For instance, any time you park your money in a regular bank account or lend it at a suboptimal rate, you don't get some of the benefits.
- TheSpiceIsLife 2y ago
  This comment was down voted, but is a reasonable response. Further to the parent comment, if you park your money in gold or crypto, you’ve given that money to someone else, and so on and so forth. But there’s a balance to be bad, if no one actually spends anything other than acquiring investments, they starve, and the economy suffers.
hgomersall 2y ago
No it isn't true. Holding money as money in a bank account is also not investing unless you think that providing liquidity to a bank is a useful investment (liquidity they can trivially access from the central bank, albeit at a slightly less desirable rate). A bank deposit is a liability to the bank, not something that can be invested.
- nr378 2y ago
  A bank deposit is both an asset and a liability to the bank - a customer depositing money in a bank expands both sides of the bank's balance sheet. Banks can and do then lend out deposited money to other customers, who can then spend it in the economy as they see fit.
  - hgomersall 2y ago
    No, the deposit is a liability with a matching asset that comes with it. The asset is needed to balance the asset. They certainly don't lend it out to other customers, which always happens through new money creation. They do buy short duration government bonds with it because they're not stupid and can get a better return than on reserves, and bonds are acceptably liquid. Nothing they do can be construed as investment. Savings really are savings and are effectively removed from the economy.
    - dreghgh 2y ago
      You seem very confused about several different points here. 1. Deposits often fund loans. If deposits were never used to fund loans as you describe, most banks would have at least as many cash or HQLAs as they do deposit liabilities. Check any deposit-taking bank's balance sheet to see that this is not the case. 2. If banks do buy government bonds with deposits, that still does not negate the funds being invested. The government now has the money and will spend it. Again, you can quickly check the governments do not hold piles of cash and the vast majority of the money that they borrow is spent on their activities. 3. It is axiomatically untrue that 'savings are removed from the economy'. Savings means that someone consumes less than they produce. That production must either be consumed by someone else, or add to the stock of capital. It cannot disappear.