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Politics : Just the Facts, Ma'am: A Compendium of Liberal Fiction -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (53550)	11/15/2006 11:09:16 PM
From: Peter Dierks	Read Replies (2) \| Respond to of 90947

"If you put it in a savings account, or if your buying bonds than the money gets put back in to the economy." That is a common misconception. If you save, it provides capital, which can be used to invest. Investing is good, but it is not driven by the cost of capital. (Increase available capital > reduce relative capital cost) Capital investments are mostly made (by rational businesspersons) after a demand has been demonstrated. the higher the rate of spending the more demand for services, and the surge cascades through the system. This increases economic activity at every level of the economy, causing growth and possible inflation. Aside: Inflation discourages saving. Does saving reduce inflation?