| The idea of "conflating all saving" is itself wrong. Saving is a matter of time preference, specifically, preferring to consume in the future. That implies carrying forward surplus value from today to be spent tomorrow. Let's say you have a choice of how to go about it: G, or W. Strategy G is to stash gold in a mattress. Strategy W is to buy stock of Webvan/Amazon. Let X = present value to save
T = timestamp at present
d = value delta
t = time delta Now at time T+t you want to have X+d value where d=0 is okay, but (d < 0) is unacceptable. Now the choice between G and W is as follows: W has to offer you a higher rate of return than merely holding the gold in strategy G. Gold will increase in value (price) if more produce is offered in exchange at time T+t, assuming stock of gold is constant (which it is, to an approximation). So what Webvan/Amazon must offer a rational investor is a better return than the rest of the aggregate efforts of human-kind. They must have high productivity. This is precisely what makes capitalism and free-floating interest rates so efficient, capital is allocated to the most productive enterprises. The ratio between spending preferences now and in the future determines the interest rate. A high interest rate implies that only higher-credit (in the sense of faith in their success) companies will get money. The highly risky investments will simply not happen. There won't be any bubble mania. In your conception, the idea that stashing gold is not productive is merely another way of saying "gold stashers don't fund Webvan" when looked at through this lens. But it is good they don't! Everybody should have the right to sit on the side-lines and watch. When the word "unproductive saving" and "hoarding" are used, they usually refer to this leave-me-alone strategy. In periods of hard-money we saw great advancements in the standard of living of peoples around the world [ref Thiel?]. The free market always beats a planned economy. It doesn't matter if the planning is overt like the Soviet model or merely a plan to distort time preferences. |
If a venture produces a lower return than the rest of human kind, 'd' will be negative. Knowing whether d will be positive or negative let alone by how much is difficult.
> The highly risky investments will simply not happen. There won't be any bubble mania.
The high risk investments will absolutely happen but only if the rewards are commensurate. The issue with monetary policy is the skewing of risk/reward.