[ExI] Savings and wealth

[Stathis Papaioannou]

2009/5/30 MB <mbb386 at main.nc.us>:
> Stathis and Dan -
>
> What do y'all mean by "saving"?  Do you mean buying a Treasury bond or putting it in
> a savings account, or are you meaning putting it in a hole in the garden?
>
> If you're buying a bond or a CD or using a savings account, doesn't (much of) the
> money go out and get used in loans to people?
>
> Just because someone is saving their money doesn't mean it's gone out of
> circulation, unless they're putting it under the mattress for safekeeping...
> *Somebody* is using it.
>
> Without somebody saving, where's an entrepreneur to get venture capital?

Saving is the difference between income and spending on consumption.
Usually it goes into interest-bearing deposits, which can then be lent
out for investment or consumption. If everyone saves then investment
can increase, but this would create problems if there are no consumers
to take up the newly created productive capacity. The Chinese are
savers and invest a lot of those savings in manufacturing, but they
are in trouble when their largest markets stop buying. That is why the
Chinese Government is trying to stimulate domestic consumption.


-- 
Stathis Papaioannou