Comments on: Saving versus Savings

By: thai

thai — Fri, 15 Jun 2012 19:19:40 +0000

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By: Hema Senanayake

Hema Senanayake — Mon, 31 Aug 2009 13:56:47 +0000

My observation is that consumers as a collective group of people cannot have a net saving since the economic system can never pay consumers an income exceeding or equal to the value of consumption. Therefore if some consumers save part of their income others have to borrow more than what is saved. This means the economic system needs to have a system of banking that could create more credits than incoming deposists. So capitalism evolved a system of banking just to do it and is called “Fractional Reserve Banking”. Most economists ignore this fundamental truth and enter into a useless argument about saving and savings.

By: Sergei

Sergei — Fri, 17 Jul 2009 18:26:17 +0000

But at the level of the entire economy, the US must be saving, as the current account deficit is falling, so the country is requiring less financing from abroad, no?

By: anon

anon — Tue, 14 Jul 2009 00:24:36 +0000

When national economies are open, as they are, the global economy is the only economic level at which it is true that saving equals investment.

At any sub-global sector level, this equivalence need not hold. Sector or micro saving can finance dissaving in the form of consumption.

E.g. the US government provides stimulus in the form of spending and sells bonds to non-government savers. No investment need be referenced in this equation.

E.g. the US in its relationship with the rest of the world dissaves via its current account deficit and the rest of the world saves. No investment need be referenced. (Investment can be referenced by noting that current account deficits equate to investment deficits and vice versa. But this is just the flip side of the saving imbalance.)

Another way of looking at this is to recognize that saving can be negative at the sector level but investment can’t.

The ex post / ex ante distinction is fully reconcilable. It occurs by inventory adjustment and/or in the case of pure services by sector saving and dissaving. If I stop purchasing service X, I save from income at the margin and the vendor of the service dissaves (holding other things equal, including the vendor’s expenditure).

Finally, a lot can be understood about saving by understanding that it does not include capital gains.