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> Another economical fallacy. When you put money in the bank, it's not standing there doing nothing. Savings are invested, loaned, used to create additional val
by ddebernardy 13y ago
> Another economical fallacy. When you put money in the bank, it's not standing there doing nothing. Savings are invested, loaned, used to create additional value. That's why banks want your money. (...)
Actually, it's the other way around. Banks loan money first. Only then do they worry about the amount of cash they have in their vault. The parent post is actually correct for the most part: excessive amounts of wealth tend to end up blowing asset bubbles rather than be put to good use in the economy.
You might find this talk by Steve Keen (of Debunking Economics fame) interesting if you've an hour or so:
http://www.youtube.com/watch?v=BPRdyVabiQk http://www.youtube.com/watch?v=BPRdyVabiQk
- head_stomp 13y agoThis is such an asinine argument against loanable funds theory and is equivalent to saying, "Actually, it's the other way around. People drive their cars first. Only then do they worry about the amount of gas they have in their tank." You see the same kind of nonsense from MMTers who use their confused understandings of accounting identities to justify their policies. In addition, the notion that entities that have excessive amounts of wealth, ie they have accumulated capital through successful investments, would be less likely to put their money to good use is silly. It's not capital accumulation that leads to bubbles. Historically, it's been caused by an influx of money not supported by production due to currency debasement, precious metals stolen from the new world flooding into the Holland, various precious metal rushes, excessive printing of paper currency or bank money, or suppression of interest rates.