# Think Tank > Austrian Economics / Economic Theory >  Sincere question about ABCT

## Dogstar

I'm starting to question whether savings is necessary for sustainable economic growth.  Do any of you disagree with any of the points below from an article I read (I'll post a link later for context)?  Thank you.

In the classical model, the demand for loanable funds comes from firms that want to use them for economic investments that will improve economic efficiency.  The supply of loanable funds comes from the savings of households. 


When they are taught this conceptualization of the money/capital market, economists are asked to embrace several key assumptions:


All saved money is borrowed by firms


All money borrowed by firms is used for economic investments 


All economic investments by firms are financed by borrowed money and therefore by savings


All money borrowed by firms comes from saved money


1) 85% of the money that corporations spent on investment came from RETAINED EARNINGS or other internally generated funds, not SAVINGS.  What is the ultimate source of the internally generated funds?  It would be the EXPENDITURES of consumers and firms and government, not SAVINGS.


2) The household sector accounted for 20-30% of total borrowing.  Much of the money that is saved is ultimately spent on CONSUMPTION, not INVESTMENT.


3) Savings are not the only source of loanable funds.  The Fed provides loanable funds (created out of thin air) to banks that were NOT SAVED by any saver. 


Instead of the equality, Investment = Savings, that is taught in most economics classrooms, a more accurate description of the loanable funds market would be: 


Investment = (some % of Savings not used for Consumption) + (the corporate earnings that finance 85% of Corporate Investment) + (newly created money by the Fed deposited in banks).


One thing we need to try to remember is that it is economic INVESTMENT SPENDING that is sacred in our economy, not the practice of SAVING money.

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## Dogstar

Here's a link to the article.

http://nontrivialpursuits.org/savings_investment.htm

My view on the necessity of savings was strongly influenced by Peter Schiff's book, _How An Economy Grows And Why It Crashes_, but there are some very basic questions that Austrians need to acknowledge and answer if they are swing the masses away from Keynesianism.

I thought the article did a good job of articulating the Keynesian claim that demand creates supply (consumption leads to cash inflows to finance CapEx spending).

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## loveshiscountry

I don't understand the first premise. That earned money is not saved money. Why does it matter where or how its generated?

Isn't it logical to assume a business that puts in 50 percent of the necessary capital and gets loans for the other 50 percent compared to a business that puts in 30 percent and gets loans for the other 70 percent is in a stronger position right off the bat? The less failures the better the economic growth. Stability matters.

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## loveshiscountry

> Here's a link to the article.
> 
> http://nontrivialpursuits.org/savings_investment.htm
> 
> My view on the necessity of savings was strongly influenced by Peter Schiff's book, _How An Economy Grows And Why It Crashes_, but there are some very basic questions that Austrians need to acknowledge and answer if they are swing the masses away from Keynesianism.
> 
> I thought the article did a good job of articulating the Keynesian claim that demand creates supply (consumption leads to cash inflows to finance CapEx spending).


What about pricing? If the price is "too high" demand will fall and you'll have an over abundance of supply. When the price is "too low" the supply gets scare.

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## Dogstar

> I don't understand the first premise. That earned money is not saved money. Why does it matter where or how its generated?


Earnings can be saved or spent. Savings is postponed consumption. 

If I hide my earnings under my mattress it counts as savings but it's not available for producers to borrow it and spend it on investment goods (capital goods) that improve productivity. 

If I deposit my savings in a bank, it counts as savings but my bank is more likely to lend my savings to a consumer buying consumption goods than a producer buying investment goods (capital goods).

If I use my earnings to buy stocks and bonds directly from a producer that counts as savings and it could be used to finance the purchase of investment goods (capital goods) but it also might be spent in ways that don't improve productivity (stock buybacks to inflate share prices and earnings per share).

If I use my earnings to buy stocks and bonds on the secondary market (more likely than buying them directly from producers), that counts as savings but my savings will not be available for producers to borrow and buy investment goods (capital goods).

Retained earnings by producers does not count as savings.

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## Dogstar

> What about pricing? If the price is "too high" demand will fall and you'll have an over abundance of supply. When the price is "too low" the supply gets scare.


The Fed can create money out of thin air in unlimited quantities and keep interest rates artificially low. The Fed has kept the Fed Funds rate at zero for 6 years. Japan's central bank has done it for 20+ years.

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## loveshiscountry

> The Fed can create money out of thin air in unlimited quantities and keep interest rates artificially low. The Fed has kept the Fed Funds rate at zero for 6 years. Japan's central bank has done it for 20+ years.


Okay but what does that have to do with supply, demand, and pricing?

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## Dogstar

> Okay but what does that have to do with supply, demand, and pricing?


If the Fed has the ability to increase the SUPPLY of money out of thin air in unlimited quantities, it can drive the PRICE of money (interest rate) to zero. As you can imagine the DEMAND for free money is insatiable.

None of this answers my question: Why is savings necessary for sustainable growth?

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## Vanguard101

Not sure what you are getting at here tbh

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## Henry Rogue

> When they are taught this conceptualization of the money/capital market, economists are asked to embrace several key assumptions:
> 
> 
> All saved money is borrowed by firms
> 
> 
> All money borrowed by firms is used for economic investments*
> 
> 
> ...


So says the Keynesian author.  Show me where Austrian Business Cycle Theory claims any of those to be absolutes. The Business Cycle occurs because interest rates are manipulated. I take that to mean borrowed money comes from fractional reserve banking, printing money and government subsidation, not savings. It is precisely because the relationship between savings and investment is nearly nonexistent that malinvestment occurs. Manipulated interest rates don't just affect business choices, they also affect consumer choices. (Keynesian, of course are all to aware of that.) I couldn't tell you if consumer choices are included in the theory, but I believe it most certainly is a factor in malinfestment and certainly is a factor in malconsumption. I believe government subsidation affects malinvestment as well, (thinking of Solyndra) but that doesn't disprove ABCT, since the interest rate of subsidized money isn't decided by the market.

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## Henry Rogue

> In light of these facts, it is quite irrational for economists to insist that interest rates are influenced in any significant way by savings levels given The Fed’s known capabilities and its proven ability to control the money supply (interest rates) no matter what the level of savings.


No Sh!t Sherlock, that's the point. The fed destroyed the natural relationship between saving and investment,  that is why the Business Cycle occurs. What an idiotic article.

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## Occam's Banana

> Why is savings necessary for sustainable growth?


Why is seed stock necessary for sustainable crops?




> So says the Keynesian author.  Show me where Austrian Business Cycle Theory claims any of those to be absolutes. The Business Cycle occurs because interest rates are manipulated. I take that to mean borrowed money comes from fractional reserve banking, printing money and government subsidation, not savings. It is precisely because the relationship between savings and investment is nearly nonexistent that malinvestment occurs. Manipulated interest rates don't just affect business choices, they also  affect consumer choices. (Keynesian, of course are all to aware of  that.)


Precisely so.




> I couldn't tell you if consumer choices are included in the theory, but I believe it most certainly is a factor in malinfestment and certainly is a factor in malconsumption. I believe government subsidation affects malinvestment as well, (thinking of Solyndra) but that doesn't disprove ABCT, since the interest rate of subsidized money isn't decided by the market.


Consumer  choices do indeed factor significantly into ABCT. According to Austrians,  one of the  critical functions of interest rates is to coordinate  between present & future  production (on the one hand) and present & future consumption (on the other hand).

A greater level of consumer savings would indicate an increased desire by consumers to defer consumption into the future. At the same time, this greater amount of savings would _ceteris paribus_ result in lower interest rates (since there would be more money available for producers to borrow, thus decreasing the price of borrowed money). Those lower interest rates, in turn, would encourage producers to borrow more for (and otherwise invest more resources in) longer-term projects - while simultaneously encouraging them to focus less on shorter-term or immediate production. This would work out quite nicely, since consumers would be spending less on present consumption and saving more for future consumption (just when the producers's longer-term projects would be coming to fruition).

A lesser level of consumer savings would indicate a decreased desire by consumers to defer consumption into the future. At the same time, this lesser amount of savings would _ceteris paribus_ result in higher interest rates (since there would be less money available for producers to borrow, thus increasing the price of borrowed money). Those higher interest rates, in turn, would encourage producers to borrow less for (and otherwise invest fewer resources in) longer-term projects - while simultaneously encouraging them to focus more on shorter-term or immediate production. This would work out quite nicely, since consumers would be saving less for future consumption and spending more on present consumption (just when the producers's shorter-term and immediate projects would be coming to fruition).

I say "would" rather than "does" in all the above because the current Keynesian system utterly discombobulates the process. It completely trashes the balance and self-organizing coordination of "natural" market forces. The artificial and "unnatural" suppression of interest rates (by flooding the market with fiat "stimulus," among other things) systematically dis-coordinates and completely unhitches savings from "investment." By means of "stimulus," artificial credit expansion, fiat money creation, etc., producers are encouraged to indulge investments and projects utterly regardless of whether they correspond with consumers's present or future consumption desires. Indeed, consumers have been essentially forbidden and practically prevented from signalling their desires in this regard by the systematic and deliberate destruction of the utility of savings under a regime of artificially and aggressively suppressed interest rates (which, among other things, is needed to keep the whole rotten system propped up).

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## Henry Rogue

> Why is seed stock necessary for sustainable crops?
> 
> 
> 
> Precisely so.
> 
> 
> 
> Consumer  choices do indeed factor significantly into ABCT. According to Austrians,  one of the  critical functions of interest rates is to coordinate  between present & future  production (on the one hand) and present & future consumption (on the other hand).
> ...


Duh at me, what the heck was I thinking? I knew that, but for whatever reason it wasn't in my thought process when I typed that post.

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## Occam's Banana

This just came out from the Mises Institute. Perfect timing ...

*Jeff Deist Explains How the Fed Distorts Everything*
http://www.lewrockwell.com/lrc-blog/...ts-everything/
_Ryan McMaken (26 June 2014)_

Jeff Deist discusses how the Fed creates a perilous landscape in which  there is no honest pricingeverything has been distortedeven at the  consumer level.

https://www.youtube.com/watch?v=z45OvU08ts8

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## Dogstar

> Why is seed stock necessary for sustainable crops?


Just because you can't grow food out of thin air doesn't mean the Fed can't created loanable funds out of thin air that could be used to purchase capital goods (making labor more productive) and hire workers (who now have money to spend or save).

Even if the supply of real savings were to drop to zero, producers would not suffer from a lack of loanable funds since the Fed can create loanable funds out of thin air anytime it feels like it.

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## Occam's Banana

> Originally Posted by Occam's Banana
> 
> 
> 
> 
> 
> 
> 
>  Originally Posted by Dogstar
> ...


And NONE of those shenanigans are sustainable - as evidenced by the absence of any significant savings, the rampancy of Fed-fueled "stimulus" and (so-called) "investment," and the operation of the boom-bust cycle. They are not sustainable precisely because "seed stock" (savings) is being devoured by the artificial and aggressive suppression of interest rates. The critical role of savings in coordinating between (present & future) production & consumption has been destroyed in a Keynesian orgy of consumption stimulus - and there isn't anything the least bit "sustainable" about it.

Savings are necessary for sustainable economic growth for exactly the same reasons that seed stock is necessary for sustainable agriculture. No one denies that you can have a grand old time baking seed-cakes and gobbling up all your stock - but sooner or later, the party is going to end and the malnutrition and starvation is going to begin ...

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## Dogstar

> And NONE of those shenanigans are sustainable - as evidenced by the absence of any significant savings


Keynesians claim that savings are completely unnecessary for economic growth (production/ output) since the Fed can create all the loanable funds producers would ever need to fund their investment spending.

You claim that is unsustainable and offer up a lack of savings as proof of its unsustainability. How is that supposed to disprove their assertion that savings is unnecessary in the first place?

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## angelatc

> Okay but what does that have to do with supply, demand, and pricing?


It's the biggest weakness of a fiat currency. More money available to loan out means that interest rates are kept artificially low.

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## Occam's Banana

> Keynesians claim that savings are completely unnecessary for economic growth (production/ output) since the Fed can create all the loanable funds producers would ever need to fund their investment spending.


And Austrians claim that Keynesians are wrong - if ABCT is correct, then such a course is NOT sustainable and would result in the very malinvestment-driven booms and busts we've been seeeing under Keynesian policies.




> You claim that is unsustainable and offer up a lack of savings as proof of its unsustainability. How is that supposed to disprove their assertion that savings is unnecessary in the first place?


You claim to be "sincere" in your "question" about ABCT - yet you ignore (and snip out of your replies) the very explanations that you have been demanding.

I did not merely say:



> And NONE of those shenanigans are sustainable - as evidenced by the absence of any significant savings


I said (most emphasis added)



> And NONE of those shenanigans are sustainable  - as evidenced by the absence of any significant savings, the rampancy  of Fed-fueled "stimulus" and (so-called) "investment," and the operation  of the boom-bust cycle. *They are not sustainable precisely because  "seed stock" (savings) is being devoured by the artificial and  aggressive suppression of interest rates. The critical role of savings  in coordinating between (present & future) production &  consumption has been destroyed* in a Keynesian orgy of consumption  stimulus - and there isn't anything the least bit "sustainable" about  it.
> 
> * Savings are necessary for sustainable economic growth for exactly the same reasons that seed stock is necessary for sustainable  agriculture.* No one denies that you can have a grand old time baking  seed-cakes and gobbling up all your stock - but sooner or later, the  party is going to end and the malnutrition and starvation is going to  begin ...


There is also nearly the entirety of my post #12 explaining the critical role played by savings in coordinating between (present & future) production & consumption.

Now, you may not like these explanations. You may not agree with them (for whatever reasons). But it is dishonest and extremely disingenuous of you to pretend that you have not been offered an explanation - especially when the only thing YOU have offered is a repititious chant of the Keynesian mantra of the alleged wonders of Fed-fueled loan bonanzas ...

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## Dogstar

> And Austrians claim that Keynesians are wrong - if ABCT is correct, then such a course is NOT sustainable and would result in the very malinvestment-driven booms and busts we've been seeeing under Keynesian policies.


Merely claiming something is wrong is not the equivalent of disproving it.  

Keynes published his General Theory in 1936 yet all the following booms and busts occurred prior to 1936 so I eagerly await your explanation of how Keynesian policies caused them.  Incidentally, the Fed wasn't created until 1913 either.

Panic of 1797
Depression of 1807
Panic of 1837
1815-1821 Depression
Panic Of 1857
Panic of 1873
Panic of 1893

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## Dogstar

> And NONE of those shenanigans are sustainable - as evidenced by the absence of any significant savings, the rampancy of Fed-fueled "stimulus" and (so-called) "investment," and the operation of the boom-bust cycle. *They are not sustainable precisely because "seed stock" (savings) is being devoured* by the artificial and aggressive suppression of interest rates. The critical role of savings in coordinating between (present & future) production & consumption has been destroyed in a Keynesian orgy of consumption stimulus - and there isn't anything the least bit "sustainable" about it.
> 
> Savings are necessary for sustainable economic growth for exactly the same reasons that *seed stock is necessary for sustainable agriculture.* No one denies that you can have a grand old time baking seed-cakes and gobbling up all your stock - but *sooner or later, the party is going to end and the malnutrition and starvation is going to begin ...*


You keep repeating, ad nauseum, your irrational fear of running out of something (savings/ seed stock) that is UNNECESSARY in the first place.  

Why are savings necessary for economic growth?  To provide loanable funds (seed stock) that producers need for investment spending.

Yet you refuse to acknowledge that it is IMPOSSIBLE to EVER RUN OUT OF LOANABLE FUNDS (seed stock) since the Fed can create loanable funds out of thin air even if savings were to become completely depleted.  You CANNOT run out of loanable funds!

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## Occam's Banana

> Merely claiming something is wrong is not the equivalent of disproving it.


I have not tried to "prove" or "disprove" anything. I merely attempted to explain to you the bare, nutshell basics of why Austrians think savings are essential for sustainable economic growth (and why they think Keynesianism is not sustainable) - a thing for which you claimed to be "sincerely" asking. I could not really care less whether you like or agree with that explanation - and given your demonstrated (and quite possibly deliberate) obtuseness in understanding what you have been told about it, I have zero desire or inclination to try "proving" or "disproving" anything to your satisfaction.




> Keynes published his General Theory in 1936 yet all the following booms and busts occurred prior to 1936 so I eagerly await your explanation of how Keynesian policies caused them.  Incidentally, the Fed wasn't created until 1913 either.
> 
> Panic of 1797
> Depression of 1807
> Panic of 1837
> 1815-1821 Depression
> Panic Of 1857
> Panic of 1873
> Panic of 1893


Your obtuseness is showing again. Is it intentional - or are people like you genuinely incapable of grasping the difference between abstract theories (such as the ABCT) and the application of those abstractions in examining contingent particulars and concrete instances (such as Keynesianism or the Federal Reserve system)? Neither I nor anyone else has claimed that "Keynesianism" _per se_  caused pre-1936 booms and busts (nor that the Federal Reserve somehow magically  participated in them as a causative agent prior to 1913). But the same elements identified by ABCT (such as central banking, artificial expansions of credit, artificial suppressions of interest rates, inflationary fiat money creation, malinvestments induced by all those things, etc., _ad nauseum_) that were responsible for boom-busts after 1936 (or 1913, or whenever else) have been responsible for boom-busts before that time as well. If you were actually "sincere," you would be capable of grasping this instead of idiotically trying to pretend that ABCT is somehow contingent upon the existence of particulars such as John Maynard Keynes himself or the Federal Reserve Bank itself.

https://www.youtube.com/watch?v=TxcjT8T3EGU






> You keep repeating, ad nauseum, your irrational  fear of running out of something (savings/ seed stock) that is  UNNECESSARY in the first place.
> 
> Why are savings necessary for economic growth?  To provide loanable  funds (seed stock) that producers need for investment spending.
> 
> Yet you refuse to acknowledge that it is IMPOSSIBLE to EVER RUN OUT OF  LOANABLE FUNDS (seed stock) since the Fed can create loanable funds out  of thin air even if savings were to become completely depleted.  You  CANNOT run out of loanable funds!


And yet again you demonstrate that you have utterly failed to comprehend what has been said to you (or that you are just selectively and deliberately ignoring it). Saving are not necessary merely to provide loanable funds. This will be at least the THIRD time (and will definitely be the LAST time) I have pointed this out: the level of savings provides absolutely critical information to the market that makes it possible for the market to coordinate between (present & future) consumption and (present & future) production. The magic "bottomless well" of infinite "loanable funds" you keep yapping & yammering about destroys that coordination - and without it, economic sustainability is impossible (and recession, depression and "boom-bust" are inevitable).

It is a  common characteristic of trolls that they ask "sincere" questions and "eagerly await" repsonses to  themselves while refusing to acknowledge or address anything that has been said to them. Since  you have repeatedly ignored (and/or failed to understand) pretty much everything that has been  said to you while stomping your foot, petulantly demanding "proof," and chanting "never-ending loanable funds, bitchez!", you can just go pound sand at this point. Maybe someone else will bite your troll-hook - I'm not going to waste any more time on you.

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## Dogstar

> I have not tried to "prove" or "disprove" anything. 
> 
> The level of savings provides absolutely critical information to the market that makes it possible for the market to coordinate between (present & future) consumption and (present & future) production.


I would certainly agree with that first statement as you have demonstrated that you are not equipped to prove anything, since you never demanded proof yourself before joining your tribe.  You watched a YouTube video and accept what it told you uncritically as an article of faith.  That is why there will never be a unified theory of economics.  There are too many people in this world like you and Paul Krugman that "get their pee pee hurt" and behave like adolescents when anyone questions the most basic tenets of their faith-based economic religion.  Don't think, obey.

If the LEVEL of savings provides such "absolutely critical" information to the market, I assume you (and all market participants) have that information at your fingertips at all times.  Please tell me the level of savings.

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## angelatc

> Don't think, obey.
> 
> If the LEVEL of savings provides such "absolutely critical" information to the market, I assume you (and all market participants) have that information at your fingertips at all times.  Please tell me the level of savings.


http://www.bing.com/search?setmkt=en...ing+in+economy

You are trolling.  Strawmen, screeching "you!", demanding simple explanations to incredibly complex theories .... go back under your bridge.

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## Dogstar

> http://www.bing.com/search?setmkt=en...ing+in+economy
> 
> You are trolling.  Strawmen, screeching "you!", demanding simple explanations to incredibly complex theories .... go back under your bridge.


Your posts have provided a textbook example of ad hominem logical fallacy.  If you someone asks a question you cannot answer, change the subject, substitute personal attacks for logical arguments and hope that no one notices.  Make the person the subject so that you can avoid the real subject.

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## Dogstar

> http://www.bing.com/search?setmkt=en...ing+in+economy
> 
> You are trolling.  Strawmen, screeching "you!", demanding simple explanations to incredibly complex theories .... go back under your bridge.


By definition, an indeterminate number (the level of savings) cannot possibly be providing "absolutely critical information" by virtue of it being unknown by all market participants.

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## Dogstar

> Saving are not necessary merely to provide loanable funds. The level of savings provides absolutely critical information to the market that makes it possible for the market to coordinate between (present & future) consumption and (present & future) production. The magic "bottomless well" of infinite "loanable funds destroys that coordination - and without it, economic sustainability is impossible (and recession, depression and "boom-bust" are inevitable).


Let's assume you meant to say the price of savings (which is knowable) instead of the level of savings (which is unknowable).  A market economy is a price-coordinated economy.

Prices are what keep supply and demand in balance and the market-clearing price of credit (interest rate) is determined by lenders and borrowers, not necessarily savers and borrowers. 

Sometimes savers and lenders are one in the same and sometimes they’re not:
     -If I postpone consumption and hide my savings under my mattress, I'm a saver but I’m not a lender.  
     -If a bank lends money into existence, the bank is a lender but not a saver.
     -If I postpone consumption & use my savings to subscribe to a corporate bond issue, I'm a saver & a lender.

In regard to credit that is derived from real savings, lenders and borrowers determine the market-clearing price of credit (interest rate).  If a corporation issues a bond paying 2%, savers have to decide whether that rate makes it worth their while to put their savings at risk and lend it to the corporation (ie. become lenders).

In regard to credit that is not derived from real savings there is this thing called fractional reserve banking which allows banks to lend new money into existence (banks would still be able to do this even if Ron Paul successfully ended the Fed).  If a bank lends new money into existence at a rate of 4%, borrowers have to decide whether that rate is acceptable to them.  

Lenders and borrowers are in control either way.  They determine the market-clearing price of credit (interest rates that are acceptable to both parties) whether you are dealing with credit derived from real savings or credit that was not derived from real savings.

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## loveshiscountry

> Earnings can be saved or spent. Savings is postponed consumption. 
> 
> If I hide my earnings under my mattress it counts as savings but it's not available for producers to borrow it and spend it on investment goods (capital goods) that improve productivity. 
> 
> If I deposit my savings in a bank, it counts as savings but my bank is more likely to lend my savings to a consumer buying consumption goods than a producer buying investment goods (capital goods).
> 
> If I use my earnings to buy stocks and bonds directly from a producer that counts as savings and it could be used to finance the purchase of investment goods (capital goods) but it also might be spent in ways that don't improve productivity (stock buybacks to inflate share prices and earnings per share).
> 
> If I use my earnings to buy stocks and bonds on the secondary market (more likely than buying them directly from producers), that counts as savings but my savings will not be available for producers to borrow and buy investment goods (capital goods).
> ...


You didn't answer this part of my question

Isn't it logical to assume a business that puts in 50 percent of the necessary capital and gets loans for the other 50 percent compared to a business that puts in 30 percent and gets loans for the other 70 percent is in a stronger position right off the bat? The less failures the better the economic growth. Stability matters.

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## loveshiscountry

> Merely claiming something is wrong is not the equivalent of disproving it.  
> 
> Keynes published his General Theory in 1936 yet all the following booms and busts occurred prior to 1936 so I eagerly await your explanation of how Keynesian policies caused them.  Incidentally, the Fed wasn't created until 1913 either.


The Central Bank was there, its the same thing. 




> Panic of 1797
> Depression of 1807
> Panic of 1837
> 1815-1821 Depression
> Panic Of 1857
> Panic of 1873
> Panic of 1893


 Aren't the majority of those panics related to the increase in the money supply or the free money concept.

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## helmuth_hubener

> You keep repeating, ad nauseum, your irrational fear of running out of something (savings/ seed stock) that is UNNECESSARY in the first place.  
> 
> Why are savings necessary for economic growth?  To provide loanable funds (seed stock) that producers need for investment spending.
> 
> Yet you refuse to acknowledge that it is IMPOSSIBLE to EVER RUN OUT OF LOANABLE FUNDS (seed stock) since the Fed can create loanable funds out of thin air even if savings were to become completely depleted.  You CANNOT run out of loanable funds!


 Money is an abstract concept.  Too abstract: it's confusing you.

Forget money then.  Money's just accounting.  "Loanable funds" don't matter.  What matters?  Loanable _resources_.  Actual _stuff_.

*Bottom line: If every day you eat everything you make, you can't get ahead.*

Robinson Crusoe must save up an extra day's worth of coconuts to eat if he wants to spend all day making a net to catch more fish.  Get it?  Without saving, he's hand-to-mouth and never gets ahead.

Building a skyscraper produces no food.  Unless society has a whole lot of food saved up, all the workers starve a few days into the project.  Bigger scale, same principle.

There's only so much stuff -- real resources.  If everyone consumes it all, there's none left over to loan.  It doesn't matter how much money the Fed or anyone else conjures.

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