Is it true Veeky Forums? Is saving worse for the economy than investing?

LuckyDusty
LuckyDusty

Is it true Veeky Forums? Is saving worse for the economy than investing?

Other urls found in this thread:

faculty.washington.edu/danby/bls324/macro/bop/1-3new.html
youtube.com/watch?v=tR-Tta3Pm28
econfaculty.gmu.edu/bcaplan/whyaust.htm
smilingdavesblog.blogspot.com/2012/08/bryan-caplan-all-in-one-place.html
youtube.com/watch?v=FzCb97RKkQQ

StrangeWizard
StrangeWizard

Generally yes. But it's good for the individual. When everyone is spending you should be saving and vice versa.

Flameblow
Flameblow

Do you guys even economics?
If you save money om the bank, that money will be invested in business through loans and whatnot.
ONLY if you hoard your money physically under your bed, at that moment you are hurting the economy.
And loans given to small business creates jobs. Fuck man, I honestly can't be bothered to type more.

WebTool
WebTool

Are you retarded? Keeping your money in a bank is a form of investing. OP is talking about hypotheticals.

JunkTop
JunkTop

savings=investments in macroeconomic sense

New_Cliche
New_Cliche

didn't know Veeky Forums was so retarded

do you really believe not spending "hurts" the economy?

I guess you all will have to learn the lesson the hard way.

Harmless_Venom
Harmless_Venom

Saving (including hoarding money) does not hurt the economy.

It signals to entrepreneurs that potential investors (savers) are not interested in the current array of investment opportunities. The investment and consumption options available are not desirable. That incentivizes entrepreneurs to try different enterprises that are either merely of a different quality (especially for consumption) OR more likely long-term projects that will have a higher pay-off.

An increase in the average level of savings (assuming a free market, ceteris paribus) will initiate the shift in the structure of production to more "roundabout" production processes and an increase in higher factors of production relative to lower factors of production. The "Hayekian Triangle" lengthens and labor shifts "deeper" into the capital structure away from labor markets closer to end consumption (such as retail).

In other words, saving signals to entrepreneurs that no one wants what they are peddling. They are then incentivized to create investment opportunities more in line with savers time-preferences and forecasts.

5mileys
5mileys

Sadly that is just not true.

The savings rate has to equal the investment rate, say many economists. But saving is just not the same thing as investing. In order to save capital, one decides to 'invest' their money in a bank. But it's only really invested in capital if they use it to purchase stock or bonds, not trade stocks or bonds. In addition, investing affects the marginal efficiency of capital, saving does not.

In addition, I'm certain you've all heard of fractional reserves. As opposed to actually using or transferring the money at all, some portion of that money HAS to either lie idle or be transferred to other institutions, or is being transferred to other institutions(which can be a lengthy process of lying idle as well), where it will sit idle as a portion of their reserves as well.

askme
askme

In a bizarre world where people went insane and started hoarding money indefinitely, then yes that would be bad for the economy. Maybe if they hallucinated and thought they could eat the money?

In the real world, people save rationally. They believe that the investing oppurtunities out there are too risky or don't have a good enough return. Entrepreneurs inevitably figure out how to create better opportunities to coax funds from savers.

Inmate
Inmate

It's not that simple or linear. It depends. Saving can trigger a decrease in the aggregate saving and aggregate consumption, and it can also work the other way.

Investing is really preferred. And we are talking about a macro sense here, because on a micro sense this shit doesn't even make sense.

Hold on did you say hoarding helps the economy? Investing can create jobs, depositing your money with a bank only really helps create jobs in the leisure classes with a slight correlation for the productive workforce, but hoarding creates no jobs at all.

idontknow
idontknow

In order to save capital, one decides to 'invest' their money in a bank
nah saving is money that is not consumed in the period not necessarily deposited at the bank
literally income=consumption +saving
so unless u are claiming people hide their money under the mattress in any significant margin saving=investment

kizzmybutt
kizzmybutt

It seems like you are quoting Keynes here with that whole income = consumption + saving

That's not what Keynes said. At. All. His opinion runs contrary to what you're saying here.

Sharpcharm
Sharpcharm

Jeez, do you have a blue-pill prescription dude?

Think about it, hoarding does not directly "help" the economy. It causes an EFFECT that helps the economy because it alters the investment oppurtunites, which will lead in the long term to a capital configuration that is more complementary to consumer demand. An increase in savings clears out investments that are sub-par and motivates people to create new projects that will interest savers.

When you tax or penalize saving, you are basically making the economy stupider because now savers are incentivized to put their money in investments that they would not have otherwise thought worthwhile which perpetuates a less than optimal configuration of capital.

RavySnake
RavySnake

faculty.washington.edu/danby/bls324/macro/bop/1-3new.html
. yes it doesnt hold 100% true, but its close enough to reality that its used in macro

CouchChiller
CouchChiller

I'm not saying that saving is positive, I'm not saying it's negative either. It can balance out some negative effects, and if it is decreasing faster than the marginal efficiency of capital, it can even be a spur to investment in a way.

BinaryMan
BinaryMan

Investment includes inventory? Inventory isn't part of the goods that are purchased from other firms in their operations as part of the function of demand for employment? What the fuck man. Seems dumb.

Anyway, I'm running based off of Keynesianism right now. Not that there is a 'correct' way to view economics.

StrangeWizard
StrangeWizard

ceteris paribus
My econ major lizard brain orgasmed

Ignoramus
Ignoramus

You may find this video interesting. yes, you will probably dismiss it from the get-go (it is long and frankly, it is charmingly dull) but I will link it in case you want to understand an austrian perspective on macro:

youtube.com/watch?v=tR-Tta3Pm28

Illusionz
Illusionz

inventory change is a sort of shock absorber that makes demand equal to output.
even explains it,changes inventory is there to make one side of the equation equal to other, its kind of like how we have changes in inventories in our expenditure side GDP calculation

Fried_Sushi
Fried_Sushi

topkek, whenever i listen to an econ podcast i always imagine peopel tipping fedora when they say ceteris paribus

Lunatick
Lunatick

lol, I didn't know it was a thing. I do throw it around a lot, just because in econ it's very easy for people to forget that in the real world, there can be various distortions of markets by states or whatever that change the otherwise logical outcome.

Didn't know it was a meme.

Crazy_Nice
Crazy_Nice

On a very, very basic level, saving is investment.

That said, fractional reserve jewry and other distortions created by certain biased policies make this irrelevant. It may be the case right now, for instance, that there's simply nothing worthwhile to invest in and that's why companies are sitting on huge cash piles, meaning savings is truly in excess of investment. Now, you could consider that to be 'investing' in cash as an asset, but I wouldn't consider fiat money to be a normal asset rather than just the best worst option.

Sir_Gallonhead
Sir_Gallonhead

Quick! try to find a few positive review of ABCT in recent years not done by an Austrian econ-based journal, but from leading 5 econ journals!

MPmaster
MPmaster

Just because savings isn't the same thing, doesn't mean that savings rate =/= investment rate.

For instance, Keynes understood savings and investments as two very different things, and the rates though, he held with Irving Fisher, were supposed to be equal at all times.

farquit
farquit

What was wrong with my arguments above, and what is wrong with Garrison's arguments in the video?

SomethingNew
SomethingNew

It's from the Mises institute.

likme
likme

Alright, I mean... I am not expecting a high level of discourse in this thread, but I did completely blow you the fuck out with my argument above, which revealed that in treating investment as homogeneous you were led to a rather fundamental error regarding the role of saving in the economy, so it would be nice if you gave me something besides a no effort logical fallacy.

Evilember
Evilember

As homogenous? What do you mean by that?

Saving is not investment, to me it seems like you are lumping them together, which is funny because I was thinking about this issue earlier. It's exactly what difference of opinion economists like Keynes had with economists like Ludwig Von Mises at the beginning of the 20th century. And here you are one century later, posting videos of the Mises institute in my Keynes thread. What did you think was going to happen?

DeathDog
DeathDog

The economy does not benefit from "more" investment.

The economy benefits from the right investments.

An increase in the general level of savings signals to entrepreneurs that the kinds of investment opportunities that they are offering are not paying off for investors (people with savings).

That incentivizes entrepreneurs to CHANGE their projects to be more in line with the time-preferences and forecasts of savers.

Doing so benefits the economy because now the configuration of capital will be more closely aligned to consumer demand.

Penalizing savers through monetary policy or otherwise, creates malinvestment which may at times lead to systematic-wide misconfigurations of capital and therefore busts.

I am not lumping saving and investment together, not sure what gave you that idea.

whereismyname
whereismyname

econfaculty.gmu.edu/bcaplan/whyaust.htm

austrian economics is wrong because it uses 1920 reasoning and theory without evenb trying to adapt to modern theories and new discoveries. Its like seeing a building from medival times, sure its pretty but its falling apart

Need_TLC
Need_TLC

The economy does not benefit from "more" investment.
Employment always rises after investments. If this doesn't help the economy I would like to know what does.
The economy benefits from the right investments.
This I agree with. If you invest money into the right industries/sectors you will experience higher job growth than elsewhere.
An increase in the general level of savings signals to entrepreneurs that the kinds of investment opportunities that they are offering are not paying off for investors (people with savings).
And here we go. Your mindset is determining that a shorter production cycle results from these larger amounts of savings due to the lowering interest rate from increased supply of a given monetary unit. I say that the lower the interest rate goes, the closer the marginal efficiency of capital is to zero, which results in a longer production cycle, as a recovery or stability is looked for in the interest rate. It doesn't change the investment rate at all sometimes, just the length of the production cycle to a limit, which is defined under Von Mises terminology as the National Subsistence Fund. This is getting confusing, so just take my word for it, they have an ALMOST technical inverse idea of what happens when the interest rate shrinks.

John Maynard Keynes believes that as the interest rate decreases, the production cycle grows longer, up to a certain limit.
Ludwig Von Mises believes that as the state sets the interest rate lower, the production cycle suffers in length and the amount received.
Keynes says nothing about the amount received, quite feasibly because it does decrease with the decreased interest rate, just not pari passu. Especially since there is a LIMITATION for current consumption(that needs to exist for society to function. An intelligent limitation indeed.)
I am not lumping saving and investment together, not sure what gave you that idea.
Sorry that was the other guy. He didn't capitalize his sentences.

Crazy_Nice
Crazy_Nice

The Caplan article has been demolished:

smilingdavesblog.blogspot.com/2012/08/bryan-caplan-all-in-one-place.html

Inmate
Inmate

utterly demolished
only talks about 3 points and doesnt adress ABC
blog with 7 followers
there is a reason milton friedman said 'there are many good economists, but not very many austrian economists are good economists'.
when was the last time austrian economist contributed to any economic theory and got any recognition for it?

Burnblaze
Burnblaze

Employment always rises after investments. If this doesn't help the economy I would like to know what does.

Why would people being employed at the wrong place, at the wrong time, at the wrong jobs be beneficial for the economy?

And here we go...

Your wording confused me a bit, although I get the gist of what you're saying.

Your mindset is determining that a shorter production cycle results from these larger amounts of savings due to the lowering interest rate from increased supply of a given monetary unit.

Like I said, bit confused due to your wording here. I would say that an increase in the general level of savings would cause a lengthening of the structure of production.

Savers signal to investors that their projects suck and aren't going to be worth investing in. Saving is more profitable than investing in shitty projects that aren't satisfying demand and therefore aren't very profitable.

Entrepreneurs go back to the drawing board and initiate more long-term projects that will produce higher order goods (goods that will expand the PPF, not merely new varieties of consumer goods - lower order goods). Entrepreneurs say "Look savers, our projects are now more aligned with predicted demand! You will get a greater ROI so please give us your savings for investment." The savers may in fact do this.

The point is that by penalizing savers and thus subsidizing investments, you are not subsidizing "good" investments you are inhibiting the endogenous process by which the market avoids systemic malinvestment.

TurtleCat
TurtleCat

Why would people being employed at the wrong place, at the wrong time, at the wrong jobs be beneficial for the economy?
Exactly why it is only the productive sectors or industries that should be invested in. But that's almost micro level man, on a macro level what is needed in any area is an investment to spur employment. And it is more effective in the areas whose income is predominantly consumption, not saving.

And the rest of the post is what I thought it would be. This isn't a debate, I just told you what you would say in the last post. Keynesianism and Austrian are just two schools of economic thought that don't mix. Like oil and water.

When I bring up Neoclassicism or Chicago schools go ahead and chime in.

RumChicken
RumChicken

So he demolishes 3/4 of Caplan's points...

but doesn't address ABC...

even though he talks about ABC elsewhere on his blog constantly.

Consider removing Caplan's article from your bookmarks.

AwesomeTucker
AwesomeTucker

Why do you think interest rates are so low?

it's to encourage people to spend

PurpleCharger
PurpleCharger

Hey man I never said saving was bad for the economy. Just worse than investing.

Your English sucks.

GoogleCat
GoogleCat

Saving (including hoarding money)
No.

Ludwig Von Mises did not believe this.

Inmate
Inmate

Savers are losers, OP.

youtube.com/watch?v=FzCb97RKkQQ

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