peaceandlove
10-13-2009, 06:12 AM
The Virtue of Hoarding
Mises Daily by George F. Smith | Posted on Friday, October 09, 2009
Most people would admit to hoarding money only with a tinge of guilt, because to be a hoarder carries with it the suggestion of being a miser — a Scrooge. And yet, every participant in an economy based on indirect exchange holds some amount of money and can be said to be hoarding it, that is, declining to spend it. Hoarding is a strategy for achieving personal goals or for dealing with economic uncertainty.
However, some economists argue that hoarding money causes recessions. In the Keynesian universe, hoarding is a great evil because it means people are stifling demand for the economy's products and services.
Unspent dollars means reduced sales, and as sales decline, profits drop, layoffs increase, and the total social income decreases, making less money available for consumption. Hoarding induces more hoarding as the economy sinks into a downward spiral. If not corrected by timely government policy — deficit spending and inflation — the hoarders could shut down the economy.
Continues: http://mises.org/story/3707
Mises Daily by George F. Smith | Posted on Friday, October 09, 2009
Most people would admit to hoarding money only with a tinge of guilt, because to be a hoarder carries with it the suggestion of being a miser — a Scrooge. And yet, every participant in an economy based on indirect exchange holds some amount of money and can be said to be hoarding it, that is, declining to spend it. Hoarding is a strategy for achieving personal goals or for dealing with economic uncertainty.
However, some economists argue that hoarding money causes recessions. In the Keynesian universe, hoarding is a great evil because it means people are stifling demand for the economy's products and services.
Unspent dollars means reduced sales, and as sales decline, profits drop, layoffs increase, and the total social income decreases, making less money available for consumption. Hoarding induces more hoarding as the economy sinks into a downward spiral. If not corrected by timely government policy — deficit spending and inflation — the hoarders could shut down the economy.
Continues: http://mises.org/story/3707