I still don’t know what to exactly say as to whether saving is “deposit banking/loan banking” or “loan banking”.
Perhaps an easier way to go about this would be to post some quotes.
Here is a quote from Murray Rothbard’s America’s Great Depression (starting on page 38)
Savings and investment are indissolubly linked. It is impossible
to encourage one and discourage the other. Aside from bank
credit, investments can come from no other source than savings
(and we have seen what happens when investments are financed by
bank credit). Not only consumers save directly, but also consumers
in their capacity as independent businessmen or as owners of corporations.
But can’t savings be “hoarded”? This, however, is an
artificial and misleading way of putting the matter. Consider a
man’s possible allocation of his monetary assets:
He can (1) spend money on consumption; (2) spend on investment;
(3) add to cash balance or subtract from previous cash balance.
This is the sum of his alternatives. The Keynesians assume,
most contrivedly, that he first decides how much to consume or
not, calling this “not-consumption” saving, and then decides how
much to invest and how much to “leak” into hoards. (This, of
course, is neo-Keynesianism rather than pure Keynesian orthodoxy,
which banishes hoarding from the living room, while readmitting
it by the back door.) This is a highly artificial approach and
confirms Sir Dennis Robertson’s charge that the Keynesians are
incapable of “visualizing more than two margins at once.”2 Clearly,
our individual decides at one and the same stroke about allocating
his income in the three different channels. Furthermore, he allocates
between the various categories on the basis of two embracing
utilities: his time preferences decide his allocation between consumption
and investment (between spending on present vs. future
consumption); his utility of money decides how much he will keep in
his cash balance. In order to invest resources in the future, he
must restrict his consumption and save funds. This restricting is his savings, and so saving and investment are always equivalent. The two terms may be used almost interchangeably.
And here are two quotes from Murray Rothbard’s What Has Government Done to Our Money? and The Case for a 100 Percent Gold Dollar (Starting on Page 134-135 and then 162)
In one sense, 100 percent banking is now easier to establish than it was in 1962. In my original essay, I called upon the banks to start issuing debentures of varying maturities, which could be purchased by the public and serve as productive channels for genuine savings which would neither be fraudulent nor inflationary. Instead of depositors each believing that they have a total, say, of $1 billion of deposits, while they are all laying claim to only $100 million of reserves, money would be saved and loaned to a bank for a definite term, the bank then relending these savings at an interest differential, and repaying the loan when it becomes due.
(Page 162)
Another argument holds that the fact that notes and deposits are redeemable on demand is only a kind of accident; that these are merely credit transactions. The depositors or noteholders are simply lending money to the banks, which in turn act as their agents to channel the money to business firms. And why repress productive credit? Mises has shown, however, the crucial difference between a credit transaction and a claim transaction; credit always involves the purchase of a future good by the creditor in exchange for a present good (money). The creditor gives up a present good in exchange for an IOU for a good coming to him in the future. But a claim—and bank notes or deposits are claims to money—does not involve the creditor’s relinquishing any of the present good. On the contrary the noteholder or deposit-holder still retains his money (the present good) because he has a claim to it, a warehouse receipt, which he can redeem at any time he desires.[25] This is the nub of the problem, and this is why fractional-reserve banking creates new money while other credit agencies do not—for warehouse receipts or claims to money function on the market as equivalent to standard money itself.
To those who persist in believing that the bulk of bank deposits are really saved funds voluntarily left with the banks to invest for savers, and are not just kept as monetary cash balances, I would like to lay down this challenge: If what you say is true, why not agree to alter the banking structure to change these deposits to debentures of varying maturities? A shift from uncovered deposits to debentures will of course mean an enormous drop in the supply of money; but if these deposits are simply another form of credit, then the depositors should not object and we 100-percent theorists will be satisfied. The purchase of a debenture will, furthermore, be a genuine saving and investment of existing money, rather than an unsound increase in the money supply.
Now these seem to agree with Giles’ view on saving
Of course perplexingly enough when you look in the Index of the book you find that the word Savings is listed on Page 43. There is no word “savings” on page 43, but instead his talk about Hoarding. Cruel trick or typo? I don’t know.
But then…
In Henry Hazlitt’s Economics in One Lesson (Page 167) he says
The enemies of saving are not through. They begin by drawing a distinction, which is proper enough, between “savings” and “investment.” But then they start to talk as if the two were independent variables and as if it were merely an accident that they should ever equal each other. These writers paint a portentous picture. On the one side are savers automatically, pointlessly, stupidly continuing to save; on the other side are limited “investment opportunities” that cannot absorb this saving. The result, alas, is stagnation. The only solution, they declare, is for the government to expropriate these stupid and harmful savings and to invent its own projects, even if these are only useless ditches or pyramids, to use up the money and provide employment.
There is so much that is false in this picture and “solution” that we can here point only to some of the main fallacies. Savings can exceed investment only by the amounts that are actually hoarded in cash.’[*] Few people nowadays, in a modern industrial community, hoard coins and bills in stockings or under mattresses. To the small extent that this may occur, it has already been reflected in the production plans of business and in the price level. It is not ordinarily even cumulative: dishoarding, as eccentric recluses die and their hoards are discovered and dissipated, probably offsets new hoarding. In fact, the whole amount involved is probably insignificant in its effect on business activity.
* Many of the differences between economists in the diverse views now expressed on this subject are merely the result of differences in definition. Savings and investment may be so defined as to be identical, and therefore necessarily equal. Here I am choosing to define savings in terms of money and investment in terms of goods. This corresponds roughly with the common use of the words, which is, however, not consistent.
Of course the confusion continues… In Robert Murphy’s Human Action Study Guide (page 178) he says
Before lengthening the period of production, a person must first engage in saving, i.e; consuming less than what is possible. An obvious example is the stockpiling of consumer goods for the workers who will be devoted to a project (such as construction of a bridge) that will not yield direct benefits for several years
Now I’M REALLY confused lol.
Perhaps a Mises staff or Austrian Professor could sort this out.[:D]
(Sorry for the length)