Comment by imtringued
3 years ago
>Unless you want savings limits and expiry dates on your money.
I don't believe in saving limits or expiry dates in the sense of losing 100% of your money. But think about what impact limiting savings has on debt. In aggregate, there can only be as much debt as there are savings. This means if you want to limit debt in the economy, you are going to have to limit savings as well.
This is particularly relevant with debt brakes. A country with a debt brake but without a savings brake is going to run into a pretty fundamental limitation.
Savers can delay their spending decisions and this ultimately delays the ability to repay debts but since debtor's are at the mercy of lenders, we blame the debtor for the lenders tardiness.
Savings and debt in an economy are related, but not 1:1. See the money multiplier [1].
[1] https://en.m.wikipedia.org/wiki/Money_multiplier
Which, as the article says, is an inaccurate model of how modern monetary economies actually work. Bank loans create new money, they don't lend out existing deposits, and repayments destroy that money. Reserve requirements - in countries that have them - don't affect whether a loan can be made or not.
> Bank loans create new money, they don't lend out existing deposits
Do you mind clarifying? I agree banks create new money, but they do that by lending out existing deposits. A bank can’t lend out money that don’t have on their books…
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