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The issue is more complex than your friend suggest and he is not completely right but at the same time there is a kernel of truth to what he is claiming. There are differences in the effect of savings short and medium and long run. However, to fully explain this I will have to use some math to ground the reasoning and make everything consistent. Consider ...


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Keynesians likely don't worry about household savings being too high, especially in an environment in which households face a soft cap on nominal income and so must spend a rising proportion of their real income to survive. In stable(ish) times, household savings become, one way or another, investment by businesses. If that investment does not materialize ...


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I like the analogy of money as a vote on the allocation of resources (land, labour, enterprise, and capital). When you purchase a lot of onions at a grocery store, you boost the demand for onions and thus put more of the world's resources on the production of onions. By not purchasing anything, you're effectively voting "abstain" and allowing the rest of the ...


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