Saving money, saving real things…not the same
Lifted from comments from Edward Lambert’s International flows Part 4 comes a reminder from Angry Bear Steve Roth:
This is all part of the universal “saving/saving” confusion. See Nick’s post “Why ‘Saving’ Should be Abolished”
http://worthwhile.typepad.com/worthwhile_canadian_initi/2012/01/why-saving-should-be-banned.html
Key point, I think, been meaning to write a (another) post on this:
“The economy” cannot “save” money. For a closed economy or the world, all financial claims net to zero.
“The economy” can accumulate real resources. Which is “saving” in the sense of not eating all your corn this year.
But saving resources and saving money are decidedly different things. The are constantly confuted and confused in these discussions.
My modest proposal for better words and understanding:
http://angrybearblog.strategydemo.com/2013/04/identity-games-saving-≠-saving-whodathunkit.html
“The economy” cannot “save” money. For a closed economy or the world, all financial claims net to zero.”
If you assume money is a liability of issuer then the above statement is correct. Money can be recorded as equity on the central bank balance sheet though. New net financial assets are therefore created when the CB expands.