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> money "saved" is usually invested, and that too stimulates an economy -- and probably more meaningfully long-term. Money gets very tricky at scale. If "money" means "paper bills" and "saved" means "sitting in a warehouse", then no, saving enormous amounts of money will not make you richer or improve your future. You can't eat bills—or bitcoins. And indeed, if enough people decide to hold onto large amounts of cash, it makes it harder to trade. Can this really happen? Sure. When the market looked like it was about to crash in 2008, I moved my investments out of index funds and into cash equivalents. Now, this might have been a dumb move—but I'm not the only one who panicked and invested very conservatively. As a result of this, it became much harder for even solvent businesses to get short-term loans to pay for inventory, etc. Or we could use a really simple model to visualize this: Imagine that the entire economy consists of (vertically integrated) restaurants. When the economy goes to hell in a hand-basket, people will do two things: (1) eat out less, and (2) try to get more hours at work. Obviously if nobody eats out, the restaurant will not be offering anybody very many hours! What's happening here is that a sudden change in risk tolerance drops the total demand for goods and services below what the economy is capable of producing, while increasing the number of people who want jobs. When demand is lower than production capacity, we'll produce less than we can, and fewer jobs will be available. Apparently, you need a reasonable balance between the number of people who want to work, and the quantity of goods we want to consume. Now, is any of this true? Who knows. The Keynesians certainly think so, and their model does explain some things. (Krugman, who's a Keynesian when he's not a political commentator, gives his own personal favorite introduction here: http://www.pkarchive.org/theory/baby.html) Other economists disagree. And of course, it's also possible that the Keynesians were correct about the exceptional events of 1929 and 2008, but that their theory is irrelevant in ordinary economic times. But the key takeaway is that money is weird at scale—because it's basically an illusion, among other things—and that you shouldn't expect personal intuitions from your day-to-day life to always apply in obvious ways. |