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A dollar saved, a dollar spent

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05-13-2015 , 01:04 PM

Al Mirpuri

Pooh-Bah

Join Date: Feb 2003 Posts: 5,485

I have recently started to engage with economics as a subject. It is complicated. The consequences of any economic action can be multifold and obscure. Hence, the question:

What is more useful for the US economy?

Is it better for me (as a US citizen for the sake of the example) to

a) save a $1 in a US bank account

or

b) spend a $1 on a US good or service?

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05-13-2015 , 01:09 PM

Kingsup23

banned

Join Date: Sep 2008 Posts: 64

Quote:

Originally Posted by Al Mirpuri

More useful for the US economy? Spending money obvi, right?

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05-14-2015 , 08:06 PM

kazana

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Join Date: May 2006 Posts: 5,658

Pretty much impossible to answer without time frames. And even with a time frame, future circumstances will dictate the outcome

In brief, if your personal utility of the saved dollar at any point in the future exceeds the utility of spending it immediately, then saving is the superior choice.

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05-15-2015 , 12:25 AM

steelhouse

banned

Join Date: Feb 2007 Posts: 6,109

Quote:

Originally Posted by Al Mirpuri

Probably to save, as that money will be spent on cars, railroads, airplanes, factories, or large ticket items. Spending it will buy you an in-n-out burger and maybe some Nikes. It is probably better to spend on a foreign good. But in the end liberals will not let you save, as any money they see they will use government taxation and printing to take it. Then claim they are good. While claiming those they take the money from (the Koch brothers) as evil.

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05-15-2015 , 12:38 AM

apocalypse_fives

grinder

Join Date: Mar 2009 Posts: 567

If by useful OP means expand the US economy, then isn't this just a money-multiplier question. So it would be better to spend $1 vs save that $1?

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05-15-2015 , 08:07 AM

TiggerToo

centurion

Join Date: Jul 2013 Posts: 196

Quote:

Originally Posted by apocalypse_fives

If by useful OP means expand the US economy, then isn't this just a money-multiplier question. So it would be better to spend $1 vs save that $1?

If expansion is the goal, saving is the answer. A dollar saved can be leveraged by a bank into 5 or more dollars in loans that are then spent.

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05-15-2015 , 07:51 PM

samsonh

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Join Date: Dec 2005 Posts: 3,535

Quote:

Originally Posted by TiggerToo

If expansion is the goal, saving is the answer. A dollar saved can be leveraged by a bank into 5 or more dollars in loans that are then spent.

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Here's a secret: banks don't even really need deposits to make loans.

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05-15-2015 , 08:14 PM

TiggerToo

centurion

Join Date: Jul 2013 Posts: 196

Quote:

Originally Posted by samsonh

Here's a secret: banks don't even really need deposits to make loans.

LOL. They need reserves, set at a percentage of loans (and other financial instruments), so they want deposits. At least, retail banks that want to make loans do. Investment banks do not.

It's a lot more complex than that, of course, but I'm not trying to teach a course in banking here.

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05-15-2015 , 08:19 PM

AngerPush

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Join Date: Oct 2009 Posts: 32,050

turn off your signature tigger

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05-16-2015 , 12:35 AM

#10

samsonh

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Join Date: Dec 2005 Posts: 3,535

Quote:

Originally Posted by TiggerToo

You shouldn't teach a course in banking. Because you do not understand the money creation system in America. I am more qualified to discuss this issue than you.

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05-16-2015 , 08:30 AM

#11

TiggerToo

centurion

Join Date: Jul 2013 Posts: 196

Quote:

Originally Posted by samsonh

You shouldn't teach a course in banking. Because you do not understand the money creation system in America. I am more qualified to discuss this issue than you.

We don't know each other, so a statement like that is foolish at best. I'm not taking the bait and I am certainly not interested in engaging in personal attacks.

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05-16-2015 , 09:25 AM

#12

TomCollins

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Join Date: Jul 2003 Posts: 43,058

Quote:

Originally Posted by Al Mirpuri

Neither does anything productive, unless you spend it in a way that will allow you to be more productive.

But of course Keyensians will say b.

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05-16-2015 , 09:27 AM

#13

TomCollins

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Join Date: Jul 2003 Posts: 43,058

Quote:

Originally Posted by TiggerToo

If expansion is the goal, saving is the answer. A dollar saved can be leveraged by a bank into 5 or more dollars in loans that are then spent.

Sent from my HTC6525LVW using 2+2 Forums

Creating money out of thin air doesn't actually produce anything valuable. It just makes it more expensive for those who wish to buy things. If the goal is to raise GDP for statistics sake, anything that increases inflation is a good thing.

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05-16-2015 , 10:41 AM

#14

TiggerToo

centurion

Join Date: Jul 2013 Posts: 196

Quote:

Originally Posted by TomCollins

I agree that if the money supply grows out of proportion with the underlying goods and services it represents, inflation is the result.

By definition in the US monetary system, money is created "out of thin air." Whether or not we should do it that way is a different question.

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05-18-2015 , 11:06 AM

#15

Al Mirpuri

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Join Date: Feb 2003 Posts: 5,485

Many thanks everyone for the replies.

I have learnt:

1. Economics is a difficult subject just as I thought.

2. The usefulness of my $1 depends upon (amongst other things I am sure) the good I wish to bring about.

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05-18-2015 , 08:37 PM

#16

Abbaddabba

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Join Date: Jul 2005 Posts: 5,807

Sounds like what you're getting at is the absurdity of using GDP as a measure of economic well being, which it is on it's own.

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05-22-2015 , 02:28 PM

#17

VictorChandler

journeyman

Join Date: Dec 2011 Posts: 393

... It Depends...

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08-07-2015 , 10:26 PM

#18

Al Mirpuri

Pooh-Bah

Join Date: Feb 2003 Posts: 5,485

I have read some more economics and I now realize the value of a $1 spent or saved is dependent upon whatever specific good I wish to bring about. This understanding is itself a product of the theoretical approach accepted.

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