Printing Money Doesn’t Equal More Savings

In this article titled, You Can’t Create More Savings By Printing More Money, Frank Shostak (mises.org) shows us that what you produce is actually what you can consume or exchange for something that you haven’t produced but want to consume. What you don’t consume or exchange is what you save. Savings is real production. Money is what we use to make the exchange process easier. Money is how we figure out exchange ratios between goods and services. Exchange ratios represented by prices in money is how 1 gallon of gas costing 2$ can be exchanged for two 1$ candy bars, or four 50 cent news papers, without ever exchanging the actual goods. Printing money isn’t the creation of any good of service. It is the creation of the demand for a good or service that is not backed by actual production. Printing money is theft.

Here are some excerpts from the article.

“Savings has nothing to do with money. For instance, if a baker produces ten loaves of bread and consumes one loaf, his savings is nine loaves of bread. In other words, the “savings” in this case is the baker’s real income (his production of bread) minus the amount of bread that the baker consumed.”

“When a baker sells his bread for money to a shoemaker, he has supplied the shoemaker with his saved, unconsumed bread. The supplied bread sustains the shoemaker and allows him to continue making shoes. Note that the money received by the baker is fully backed by his unconsumed production of bread.”

“Money can be seen as a receipt, as it were, given to producers of final goods and services that are ready for human consumption. Thus when a baker exchanges his money for apples, the baker has already paid for them with the bread produced and saved prior to this exchange. Money therefore is the baker’s claim on real savings. It is not, however, savings.”

“The printing of money therefore cannot result in more savings as suggested by mainstream economists, but rather to its redistribution”

“…. savings is not about money as such, but about final goods and services that support various individuals that are engaged in various stages of production. It is not money that funds economic activity but the flow of final consumer goods and services. The existence of money only facilitates the flow of the real stuff.”

Related ArticleWhat Comes First, Production or Consumption, at austrianaddict.com.

Related ArticleCapital Consumption, aka Eating Our Seed Corn, by austrianaddict.com.

Related ArticleDoes The Supply Of Money Have To Increase To Accommodate Increasing Production, by austrianaddict.com.

 

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