> Without savings/investments you cannot produce goods or services.
Savings \neq investments. It's been said that one reason the U.S. economy hasn't picked up as much as we'd like in the past few years is that gun-shy banks and corporations were sitting cash instead of investing it.
In theory the optimal economic policy is one that balances (1) creating incentives for investment against (2) encouraging demand for the products of that investment. The latter isn't a given, by the way: The "if you build it, they will come" notion that demand will always exist --- and, therefore, supply-side incentives for investors are supposedly all that's needed --- rests on the "no problem, we'll just assume we have a can opener" assumption that Homo economicus normally behaves rationally, with a view to optimizing his or her economic position. Those assumptions have been widely and, it seems to me, justly criticized (as the author of the post seems to agree).
The US savings rate is still historically low and on a downwards trend. The savings rate is definitely lower than the optimal capital/labour ratio, but economists disagree on how much.
Savings \neq investments. It's been said that one reason the U.S. economy hasn't picked up as much as we'd like in the past few years is that gun-shy banks and corporations were sitting cash instead of investing it.
In theory the optimal economic policy is one that balances (1) creating incentives for investment against (2) encouraging demand for the products of that investment. The latter isn't a given, by the way: The "if you build it, they will come" notion that demand will always exist --- and, therefore, supply-side incentives for investors are supposedly all that's needed --- rests on the "no problem, we'll just assume we have a can opener" assumption that Homo economicus normally behaves rationally, with a view to optimizing his or her economic position. Those assumptions have been widely and, it seems to me, justly criticized (as the author of the post seems to agree).