Not really Hawk: <Likewise, money hoarded in a low-yielding bank CD, or a PM that pays no interest, is not conducive to economic growth. > Money doesn't cause economic growth and "hoarding" it doesn't stop economic growth.
If I have my money just sitting in a 0% yielding bank, it is just as conducive to economic growth as if I go and buy something like a dozen bottles of whisky or a new car. If I have it in the bank, the bank lends it to somebody else and the only reason for somebody to borrow money is to buy something. Since they obviously value the money more highly than me, since they are willing to pay 5% to borrow it from the bank whereas I am willing to get 0% for it, they are obviously going to do something more useful with it than I would do.
If they use it to buy a new server for their data centre, which will enable them to provide valuable Cyberspace services, that's a lot more useful and productive on an ongoing basis than me buying a case of whisky and drinking it, or buying a car to zoom up and down a motorway burning petrol just for the fun of it.
If I just poke the money under a mattress, which I could do at 0% interest, then the data centre operator would need to raise their bid from 5% to 8% or something to get hold of the money they need. That would mean less valuable activities would not be done. But with that extra 3% on offer, the money under the mattress would be brought back out and loaned to the people offering 6%.
Think of money as a measuring stick, rather than a productive asset. All money does is measure who is owed something valuable, such as an object or service.
If all the money in the world suddenly turned from 0s and 1s to just 0s, nothing would happen to the things which exist. All the houses would still be there and the roads, computers, airliners, fuel tanks, factories and Cyberspace data [other than money]. It would just mean that people who thought they could go shopping tomorrow would have to get a job. People who thought they had to go to work to repay their loans could stay in bed. There would be a swap of who gets to lie in bed the next day. The problem would be clearing the market because a Trustafarian accustomed to hanging around on a beach doing nothing would not be able to take over from a brain surgeon the next day. So I'm not pretending such a dramatic event would not have real consequences of catastrophic proportions. I'm just pointing out that money sitting there instead of "moving" does not actually have any effect.
That's why 'stimulus' spending by governments on useless things such as "green jobs" is no better than all those people just staying at the beach. To the extent that the 'stimulus' diverts actually useful people from useful activities, the 'stimulus' is actually economically destructive. Also, diluting the savings of productive people and giving it to useless layabouts will make the productive give up and stop producing.
If economic activity is wanted, cancel minimum pay rates and dole and watch people get busy doing useful things of economic value so they can eat.
Mqurice |
