Not trying to spam. I did not notice this forum section before, and thought it would be a good idea to post here since I am new and seems like a good basic question
Upon reading 100% Reserve Demand Banking vs Fractional Reserve Banking and inflation the main thread about fractional reserve banking and inflation, I stumbled upon a question relating to 100 reserves and saving, or saving in general. Saving is described as being the same thing as investment since you are freeing up resources to give to someone else in the economy. Increases in cash balances are different because you are holding the money in anticipation or something, waiting to get enough money to invest, and/or are just uncertain like all human beings.(I am right on saving and cash balances being two different things, and “saving”, in the Austrian sense exactly or “equaling” investment right?Meaning in 100% reserves, loan banking is “saving”, while deposit banking “increases in cash balances?”) -see below.
In 100% banking, can “hoarding” and/or “Increases/decreases in cash balances” manifest itself in deposit banking? They seem to be three terms that mean the same thing. Me keeping a big bag of gold under my bed is the same thing as me putting it in a deposit warehouse correct? I guess another way to say it is deposit banking is “hoarding” or “increases cash balances?” But that doesn’t equal “saving/investing” right, because I am not freeing up resources correct?
Thank you to anyone who clearly explains this to me as I am confused and see many people saying different things.
I guess another way to ask this (and somewhat of another question is) are savings? “Differed consumption?” I see this alot where I look, but then also see Austrian economists say that it isn’t.
For example,
http://www.safehaven.com/article-7785.htm
genuine savings take place when resources are directed from current consumption (present goods) and invested in capital goods (future goods). It can be easily deduced that this process is one of capital accumulation that will eventually bring about a greater flow of consumer goods. This brings us to another fallacy: one that defines savings as deferred consumption. This is truly sloppy thinking. It amounts to saying that because men are human being it must follow that all human beings are men. The error here is the inexcusable one – at least for economists – of confusing the demand to hold money (an increase in cash balances) with the demand for savings. (This guy is an Austrian economist)
So are savings differed consumption, or are they his definition?
Thanks
In a system of 100 percent reserve, demand deposits are not available for making loans, so any ‘savings’ in demand deposits are not deferred consumption in a strict economic sense. Just like the money in your wallet is not deferred consumption, it is simply consumption you haven’t quite gotten around to making yet.
On the macro economic scale, M2, the quantity of money people carry in their pockets and the quantity of money people carry in demand deposits tends to remain relatively stable (unless a central bank messes with it). People as a rule would not keep more money in demand deposits than they need to because they would not generate revenue.