The problem is, the poor have almost no access and no knowledge of the savings instruments other than cash, so that means that in some way inflation forcibly drains their money to risk investment.
Corn is a productive asset that generates more corn. Money is not, in and of itself, a productive asset. One of the essential insights of Keynes was that it was possible for real productive capacity (machinery and labour etc) to be idle simply due to lack of liquid money to flow through the system. This was why consumer credit was so crucial to kickstarting modern consumerist economies: like Ford paying workers so they could afford the products, injecting credit allowed consumers to buy items creating jobs to make products, which jobs then allowed consumers to pay off the loans.
"Shortage of specie" has been a real economic problem at times; e.g. https://www.cambridge.org/core/journals/journal-of-economic-...
So let's just say if there is a small economy where there are only two investors you and Elon Musk, and you decide to skip investing in any business and hide money under the mattress, then this is equivalent of you giving the money to Elon Musk to invest in his business. How? Because now you're not competing him for raw materials, labor and capital.
Then when he built self-driving cars and economic growth happens because of this productive activity, when you take your money out of your mattress it is now worth more , and I'm presuming no new dollars were produced and this time.
You can see the effect if a major stockholder of a company decides to not participate in the functioning of the company, this in effect is equivalent of him lending his stocks to the other stockholders. This does not mean that somehow the company is working at a reduced power.
Your investment into the general market is really only the amount of interest earned on deflation of that amount.
Compare this with investing the whole amount into a local bakery. The utility difference is dramatic.
Your investment is the whole amount which would have purchased the 3 components of production (land/labor/capital), because the price of all these goods have fallen, which have allowed other entrepreneurs to buy them for their own investment.
What you're saying is like telling people who invest in index funds only that their investment is only the interest on the yearly return they get from the fund.
I do not agree that the utility difference is dramatic. The utility difference is closely proportional to the difference on expected returns.
His point was that when money is hidden under the mattress it is not serving an important function which would be if it wasn't under the mattress. I disagreed with that and explained how it worked.
The fundamental idea is that if you store your money under the mattress then this is equivalent of investing in the most diversified index fund out there, you invest in EVERY business and CEO out there who operates in the USD economy.
This generally is a bad idea because the Federal Reserve produces more money which results in reduced returns, BUT, this effect is really visible in fixed money supply economies such as Bitcoin. By hodling bitcoin you invest in every bitcoin business out there (including the scams) because by not competing with other investors for the same resources, you allow them to operate at a bigger scale.
The global capital market is a continuous auction process to allocate the world’s collective productive output at any given time.
Inflationary money: people have to place meaningless low-information randomized “bids” (buying spoos) to protect their assets from inflation. This crowds out high-information directed bids.
Deflationary money: people without an edge simply refrain from placing “bids” (by saving cash) and each unit of money that does get spent on bids has more power to influence the allocation of capital.
In the end, I expect it to come out in the wash. You might actually see more capital invested in stuff like R&D because you have less money blindly pumping up entrenched large-cap valuations through spoos. That depends on how good of a job fundamental analysis funds are doing in today’s world.