From: Ron Kean (ronkean@juno.com)
Date: Wed Aug 25 1999 - 03:43:32 MDT
On Tue, 24 Aug 1999 15:49:59 -0700 (PDT) Terry Donaghe
<tdonaghe@yahoo.com> writes:
>
>
> --- Ron Kean <ronkean@juno.com> wrote:
> > A person who is wealthy and spends no money has to
> > keep the money or> > wealth somewhere. If he keeps it in a bank
account
> > or other investment,> > it is lent out or otherwise invested,
presumably for
> > productive purposes.> > And if he just keeps the money in a vault,
the bank
> > which issued that> > money in effect gets an interest-free loan, and
does
> > the same thing, that> > is, invest the money.
> > > >
> > Ron Kean
>
> Agreed. What I meant was someone who kept his money stuff under his
> mattress and buried in coffee cans in the back yard. :)
>
>
> ===
> Terry Donaghe
Thanks for agreeing with the 'money in the bank' example. But let's
suppose the 'miser' buries Federal Reserve notes in a coffee can in the
back yard. In that case, the miser is making an interest-free loan to
the government, which cuts their expenses, which (all else equal) allows
the general tax burden to be lower. The lower tax burden would be a
benefit to society.
Suppose that the 'miser' hoards gold, instead of Federal Reserve notes.
In that case, he makes gold scarcer, and its price higher, thus
benefiting those who hold gold, and giving them incentive to sell it,
which tends to alleviate the increased scarcity of gold. In other words,
by hoarding gold, the miser has (at least temporarily) transferred part
of his purchasing power to others. Moreover, to the extent such
miserliness forces up the gold price, it increases the income of those
who lend gold out at interest, which gives them more money to invest,
which increases capital formation and job creation.
Suppose the miser buys a piece of land, fences it off, and refuses to
allow anyone to set foot on the land. Now the money he used to buy the
land and fence goes to others, who presumably tend to invest it
productively. Yet again the miser has succeeded in transferring wealth
to productive use. But what about the land the miser withdrew from
productive use? He paid the market price for it, which means that the
market says it was an even trade. And the miser gets no rent, since no
one will pay rent for land they are not allowed to use.
Ron Kean
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