Failing to channel saving to investment will lead to the paradox of thrift, slowing growth in productivity, while simultaneously causing asset price bubbles.
Tag: saving
An explanation of what the saving-investment identity actually tells us about how the economy functions (everything in the blog so far has been leading up to this point).
A logical proof that the explanation in textbooks of why the saving-investment holds must be wrong, so that you can fully understand the implications of this identity, explored in the rest of this section.
The conclusion that textbooks draw from the saving-investment identity is unequivocally and completely WRONG. This post explains why, drawing on the information in “Money” section of the blog, to make sure that you do not fall into making the same errors.
An explanation of the saving-investment identity, a concept that has profound implications for the economy, which will be drawn out in the rest of this section.
It’s now been 16 weeks of posting every Friday, and I’ve reached the end of a series of posts setting out some fundamental concepts. I…
This is an extra blog post – it doesn’t fit into the regular flow of 500-word Friday blog posts explaining how the economy works and…
Over the last 2 weeks I have given a brief overview of financial assets and their vital role as the main form of saving in…
Last week I introduced financial assets, and pointed out that purchasing these assets is in fact a way to save. Most assets actually represent a…
This is going to be my final model (woop woop). I’m calling it Intermediateland, because in Intermediateland they’ve invented financial assets, and financial assets do…