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Revisiting S = I + (S – I)

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Hi Cullen

I read your article and gave it some thought. I think there is an even more concise way to illustrate that the statement must is wrong or very vague.  "Usually the private sector desires to net save.."

Where is the mechanism for that desire to save if it exists, to materialise practically.  Savers can not create financial assets by there own desire and so it cannot be a desire to save it must be a lack of desire to go into debt. And so the statement can only mean there is usually not enough  private sector individuals willing to go into debt by an amount large enough to provide the economic activity and flow of money required for an economy deemed to by sufficiently vibrant. As you pointed out yourself in the article, it certainly is not an accounting tautology .

 

 

 

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Hi Dinero,

You said:

"Savers can not create financial assets by there own desire"

This isn't quite true. Savers (households and corporations) create financial assets all the time. So what if these assets and liabilities net to zero? If I go to the bank and take out a mortgage for $100 then I can then own a $100 house. I will also have a $100 liability (the mortgage) and the bank has a $100 asset. Someone else gets a $100 deposit which is an asset for them and a liability for the bank. These finacial assets all net to zero. But we aren't worse off. Literally no one is worse off here. We are all better off. I own the house I wanted. The bank has a new income earning asset. And someone was the recipient of my spending. Who cares if these assets net to zero? We didn't need the govt to come in and spend money to make this situation better. It's an absurd statement by the MMT people and they should know better than to constantly spread this misinformation.

"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche