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Wednesday, September 30, 2015

Question regarding Spending vs. Saving to improve the economy

Keynesians often advocate for more incentives to "get people spending" to improve the economy, while saving or "hoarding" is not good for the economy. I'm familiar with the rebuttal that money saved is also being circulated in the economy, since banks lend out savings to people who need loans and will spend that money. In other words, increased spending in consumer goods will reduce the amount spent in capital goods and vice versa. However, what if banks instead make loans to people who will use that money for an investment in another country? If money from domestic saving is transferred to projects abroad, wouldn't consumer spending be better than capital spending for that country? Hoping you Austrians could clear this up for me.

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