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September 10, 2014

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Stevenclarkesblog.wordpress.com

You say consumers getting themselves into too much debt is in the interests of capitalism. Isn't a large part of the recent financial crisis due to bad lending?

In which case, don't capitalists need character planning? Don't over-extend credit for short term profits if it means the entire economy is gonna blow up in the medium term? (leaving aside that they may get bailed out when that happens!)

Luis Enrique

I expect I am going to get shit for suggesting there is any link between savings and investment, but nonetheless doesn't your simple maths of profits actually say that if increased saving is the counterpart of increased investment, profits are just fine?

chris

@ Steve - not really. Banks collapsed for several reasons, but a buildup of bad consumer debt wasn't one of them.
@ Luis - this is the old Keynesian point; the decision to save does not mean a decision to invest in the sense of buying new capital goods; the cash not spent might merely lie on deposit.

Stevenclarkesblog.wordpress.com

If savings did increase, and consumption declined, then given the investment dearth, wouldn't government deficits have to increase?

Maybe financial illiteracy is a cunning deficit reduction strategy.

Socialism In One Bedroom

Another interesting and informative perspective, if not a clearly Marxist one. But, hey, that isn't a crime!

But tell me there is more to financial literacy than spending within your means?

Luke

If I stick £x a month into an index fund, am I saving or investing? And, if it's a different question, is that money being saved or invested?

Andy

That's an interesting question from Luke.
I don't think the money is being invested as the companies within the index fund aren't really seeing any of that money.
I doubt that it is being saved either as market declines can decimate the value of your money.
I think the money is simply being gambled.
I only think money is invested if you lend or invest directly during the capital raising window of the firm or Government.
Happy to be corrected.

An Alien Visitor

It is an interesting question from Luke, surely is you save money and put it in the banks or in a fund then you are at least loaning money to companies or individuals, investing in shares etc. Isn't there a fund that is set up to help struggling businesses keep afloat?

Whether you call it investment, loaning or saving, money that is saved is used by business in one way or another. Unless it sits under the mattress.

Luke

Andy, AAV, thanks. I think speculated sounds better.

JohnM

¨If I stick £x a month into an index fund, am I saving or investing? And, if it's a different question, is that money being saved or invested¨

If the value neither increases not decreases, it´s being saved.
If the value increases and the money is put to good use, it is being invested.
If the value increases, but the money is used for speculation and not investment, then it is probably being wasted!

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