Thanks for the responses guys. What you have said makes sense. Additions to cash balance do imply a more forward looking view to consumption, which implies a decreasing time preference. An actor who does such is implicitly saying that he prefers goods in the future to goods now. However, “(consumer)goods in the future” are not “future goods.” Capital goods, on the other hand are “future goods.” It is the increased investment in future goods which puts downward pressure on the natural interest rate.
I dug around in my copy of Huerta de Soto’s book, and found this on page 697 within a section aptly named “Confusion Between the Concept of Saving and That of Demand for Money”:
"…the supply of and demand for money determine its price or purchasing power, while the supply of and demand for “present goods” in exchange for “future goods” determine the interest rate or social rate of time preference and the overall volume of saving and investment.
“Saving always requires that an economic agent reduce his consumption (i.e., sacrifice), thus freeing real goods. Saving does not arise from a simple increase in monetary units. That is, the mere fact that the new money is not immediately spent on consumer goods does not mean it is saved.”
It seems I must retract my statement lumping Professor de Soto in with Professor Garrison. He makes clear that investment is savings and savings is investment but additions to cash balance are neither. This echos what I remember reading of Rothbard. Additions to cash balance are governed by the demand for money; savings by time preference.
Garrison, however, says time and again (referring to balance additions) that in the Austrian view, people save necessarily FOR SOMETHING in many of his papers (I don’t own his “Time and Money” yet). Although he uses this statement to conclude that balance additions which come from decreased consumption set in motion the same processes as savings, including the tendency for the interest rate to fall, again my question is how?
Could this be a possible explanation:
Additions to cash balance imply a smaller societal Hayekian triangle (aggregate production). But insofar as those additions to balance come from consumption (which is what my original post stipulated) a smaller but longer production process is the result. The smaller Hayekian Triangle is the result of fewer total funds in the investment-production-consumption process. Yet it is longer, because the smaller total funds is the result of decreased consumption with gross saving remaining constant. Also as a result, the interest rate will fall reflecting not increased total savings but an increased savings-consumption ratio, which reflects the fall in the “real” time preference values of those who decided to add to cash balance. My departure here from Professor de Soto is that adding to cash balance does imply a rejection of goods in the present in favor of goods at a later time.
Professor de Soto is right to point out that an addition to cash balance is not necessarily savings, in terms of investment. The additions to balance could, at a later time be applied to consumption again, which would change the triangle back towards its initial shape and size. In defense of Garrison however, I would reply that reducing consumption in the present could imply a more forward looking orientation so when actors decide to lower their cash balance they could be more apt to invest, rather than spend the excess balance on consumers goods, although this is only a possibility.
Thoughts?