[sdhgaiojfsa]

Well, at a very high level, banks can use saved money to lend to businesses or individuals at a given multiplier. If a bank has insufficient deposits, it can't lend any more money. This is called fractional-reserve banking. https://en.wikipedia.org/wiki/Fractional-reserve_banking So when you make a deposit, you are effectively causing a fraction of that deposit to be available for lending. This is what you're getting paid for when you get interest.

On the other hand, when you invest in a stock, you're providing liquidity to whoever held it last. That doesn't directly provide money to a company. But it has an important function: people only buy stocks when they are confident they can later sell it. If there were no buyers for stocks in the secondary market, nobody would participate in IPOs.

As far as which is better for the economy, this is beyond my knowledge. However, any normal person with any financial savvy knows that market returns are much better than deposit returns, so most of the time when such people say "save" they mean "invest in the market."

[spiralx]

> If a bank has insufficient deposits, it can't lend any more money.

That's not actually true, banks effectively create money when making a loan, and the only constraints on this are the interest rate set by the central bank, which affects both demand for credit and the cost of providing it, and liquidity requirements set by legislation.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

[sdhgaiojfsa]

The "liquidity requirements" you refer to are the fraction in "fractional-reserve." If I deposit $1, and then the bank's capital requirements are 75%, and they lend out $0.75, the total amount of money is now $1.75. This is what people are referring to when they say banks create money.

[spiralx]

Banks "create" money by making loans, but those loans aren't made from other deposits. A bank with a 10% requirement that has $100,000 in reserves can loan $1,000,000 to somebody even though they don't have that much deposited there.

[pjmorris]

> any normal person with any financial savvy knows that market returns are much better than deposit returns

And, if I understand the arguments, that's confirmed by Piketty's r (return on capital) > g (economic growth rate). My concern is that more money is getting tied up in chasing financial assets than in the real economy (houses, hamburgers, cows, etc.) If you have financial assets, that's good. If you don't, that's bad. Most people don't have financial assets. Sooner or later something's going to correct that trend. It'd be better to find a non-violent solution.

[perl4ever]

"Money" isn't resources. It's just numbers in databases. The whole point of financial assets is so that real resources don't get tied up, so I think your outlook is totally backwards. If people don't understand this and get violent, it will just be another civilization destroying seizure, signifying nothing.

[sdhgaiojfsa]

You do not understand correctly. r vs. g has little to do with the return of debt vs. the return of certain classes of securities (since neither is pegged to economic growth). Rather, the return on deposits and the return on stocks are both part of a composite (r) that is meant to be greater than g.