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"Hoarding" is a Keynesian Slur

"Hoarding" is a Keynesian Slur

Sep 13, 2023
Marty's Ƀent

"Hoarding" is a Keynesian Slur

"No currency should be able to buy the same basket of goods over very long timespans through hoarding."

This is a line that people who have been infected with Keynesian brain rot like to trot out. In fact, it is one of the cornerstones of their convoluted economic theory and drives central bank policy decisions around the world. The ability of money to increase in purchasing power over time has been made impossible due to the fact that central banks have a baked in inflation target that they use to create "price stability". It's weird that Nick Maggiulli thinks he's providing the world with a "hot take" because what he's saying is conventional wisdom in mainstream economics today.

This has been one of the most effective psychological operations that has ever been conducted on the public in human history. The high priests of central banking started running with this narrative and people have come to believe that it is a law of physics. Economies cannot operate efficiently unless there is a steady flow of new monetary units being created and introduced to the economy. If new monetary units aren't being created people will hoard their money and grind the economy to a halt.

Unfortunately for humanity, the normalization of this line of thinking has led to the wholesale debasement of people's purchasing power. Especially those who do not have enough money or access to store their wealth in the financial and real estate assets that benefit from the flows produced by monetary base expansion. The policy of targeting a steady rate of inflation to induce "price stability" has widened the gap between the haves and the have nots, which is the root cause of many of the stresses that plague our world today yet are commonly misdiagnosed as being caused by partisan politics or corporate greed.

The reality is, "hoarding" money, otherwise known as saving money, is not detrimental to economic growth. In fact, it is an accelerant for economic and productivity growth over the long run because when humans are forced to think more strategically about capital allocation and opportunity costs they tend to make better investment decisions that result in an increase in the quality of goods and services that are ultimately delivered to the market. The increase in quality goods and services leads to others being able to leverage those goods and services to do more productive things throughout the economy.

Beyond this, the idea that saving money leads to stagnation throughout the economy is based on the assumption that each individual actor within the economy is operating on the same timeline with the same information. This notion is completely ludicrous. People have different needs, different wants, and different balance sheets at any given point in time. On top of that, they have access to different information that would affect their investment decisions, the timing of those decisions and how much capital they decide to put to work. When push comes to shove, people are going to dig into their savings to buy a new car, do repairs on their home, go to the grocery store, or start a new business. They are not going to "hoard" their money at the detriment of their quality of life.

Furthermore, those who save money and keep it out of circulation are increasing the purchasing power of that money for everyone else, which will inevitably tip the scale for an individual who is thinking about starting a new company that provides certain goods and services to the market that are needed. The economy isn't some monolithic actor. It is the combination of billions of individual actors who make decisions based off of their individual needs, wants and their capacity to act at a particular point in time.

"Hoarding" is a Keynesian slur that is used to trick people into believing that saving their money in an attempt to give themselves optionality in the future is a bad thing. When in reality the exact opposite is true. It is a very good thing. Keynesian policy is the actual scourage on the planet. It takes away the individual's ability to effectively save their purchasing power over time, which reduces the optionality they have in the future. That reduced optionality leads to enormous stress and despair for the Common Man.

Final thought...

Thank God for the rain in Austin this week.


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