Hacker News Reader

Comment by kriro | Hacker News Reader

How is this a problem? You don't save to hoard, you save to use that money later. Delaying the urge to consume in favor of investment is very much correlated to the growth of an economy (afaik, not an economist but a somewhat interested layperson).

View on HN

You say it yourself: Saving to use that money later. Which is an issue as economic measurements are based on what the economy is like at the present moment. If a large amount of people's capital is sitting dormant in bank accounts it can't flow through the economy. This used not to be such a huge problem because banks were allowed to re-invest savings (fractional reserve lending), but this changed after 2008. The problem with Austerity is that it doesn't encourage people to spend. It damages consumer sentiment, which makes people more inclined to save for a rainy day, which has a knock on effect in the shops and restaurants, and ultimately the tax take that these businesses bring in. Of course, if all people were rational, and self-interested this may not be a problem, but this is counterbalanced by Keyne's "Animal Spirits" or the irrational behaviour of people en mass. I'm not saying that either style of economics is 100% right or wrong, but that it is a delicate balancing act between the two.

No, these savings are just offsetting shrinking retirement and welfare provisions from the State. They do very little for investment (pension funds are naturally conservative) and nothing for immediate consumption, grinding the overall system slowly to a halt. Japan historically has a similar problem due to cultural elements, Europe is getting there because of prolonged austerity "reforms".

Where do you imagine the saved money goes?

In a modern economy "savings" equals investment. Even using a bank deposit account transforms one persons savings into another's business loan or mortgage.

This seems to be a widely held misconception - that savings are economically inert - a bit like a squirrel's nut hoard.

Nah, between "firewalls" and rock-bottom central bank rates, money invested (or rather multiplied, through fractional etc etc) by banks today is not coming from savings. Which is why returns on savings are basically non-existent; but it's the only wealth accumulation available to everyone, and in times of "austere" frugality with uncertain job prospects, people keep accumulating them anyway.

The massive accumulation of capital to the top 1% means competition for investment opportunities... aka capital is really cheap as investors hook up the money funnel to anything that smells like yield. That encourages malinvestment.

Businesses don't need loans when they don't have customers with money to spend.

> In a modern economy "savings" equals investment

This, is a widely held misconception. A bank is no longer allowed to re-invest more than a small proportion of it's customers' savings.

https://en.wikipedia.org/wiki/Fractional-reserve_banking#Res...

Reply on news.ycombinator.com