Revisiting S = I + (S-I)
Hi Cullen. This is an “old” topic and you have covered it well. It’s the S = I + (S-I) discussion. While I think I understand it, there still seems to be much confusion on the subject and I want to make sure I am not one of the confused. When I discuss it with others and try to keep it simple, I worry that I am making it too simple and thus overlooking something. I say (S-I) is financial savings which equals the government deficit. I is real (often physical) savings created by investment. The latter usually dwarfs the former and, more importantly, it is the primary source of innovation, productivity and our standard of living. That is, since there is both a buyer and a seller in an “investment” transaction, such a transaction is financially neutral. But this saving is real and tangible. In the end, we live in the “real” world, so to speak. Is this depiction of I (Investment) reasonable? Thanks much for any help.
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