Keynesians conflate saving with hoarding. “We must have inflation”, they proclaim, “without it, the economy would grind to a halt as every man turns into a greedy hoarder of his money”.
But these Keynesians fail to consider the broader implications of what they suggest. Their understandings of human action are too narrow to imagine second and third order effects of soft money and cheap credit. Even the most honest of gold bugs will admit that monetary premium is derived, not from inherent utility in the underlying commodity (such as in the case of gold, only 10% of that which is produced annually is used in industry), but from the store of value social consensus.
But there is more to this story than just discouraging hoarding of money. Hoarding of assets, we would conclude, is far more dangerous and damaging to an economy than saving. Capital accumulation is how individuals become more wealthy. More wealthy individuals means a more wealthy society. Spending is the opposite of the accumulation of wealth. Accumulated capital is the necessary catalyst for entrepreneurship.
Human action cannot be changed, and while policymakers would love to create an impossible world where “investment” is forced upon the saver, to discourage the “hoarding of capital”…markets always find a way. Asset inflation encourages the hoarding of assets, rather than the hoarding of money, which a priori, is worse for a society that seeks to increase the availability of cheaper and higher quality goods and services for the consumer.
Consider the amount of real estate financial engineering that happens to favor those who use real estate as their store of value. Zoning laws which artificially limit the productive use of private property to create artificial scarcity in markets where the underlying resource is plentiful. Homelessness rises while productive members of society struggle to afford the means with which they are able to live comfortably and safely.
It is certainly true that inflationary currencies force “investment”, but it is the nature of this investment that creates bubbles. Investment that happens out of necessity rather than carefully observed opportunity to profitably satisfy human action is more appropriately called malinvestment. Keynesians cannot actually be so vehemently against hoarding, as they so claim, as their own solutions promote a much more damaging form of the same behavior.
Book of the Month: The Dao of Capital, By Mark Spitznagel
-“what I have dubbed Austrian Investing contrasts starkly to the far more typical investing approach that only weighs current contemporaneous opportunities, one against the other, hungry for yield, blind to the changing opportunities likely to materialize around the next bend (the atemporal head-on clash, which, unlike the shi approach, assesses each exaggerated present moment as the same).”