Saving might be a virtue for people, but it is a vice for economies

Fabian Lindner of the German macro-economic research institute IMK has submitted a very timely and well-argued piece to the World Economic Reviw: “Does Saving Increase the Supply of Credit? A Critique of Loanable Funds Theory”. He takes on influential theses of luminaries from Larry Summers, over Ben Bernanke to Hans-Werner Sinn by tracing them back to the loanable-funds-fallacy – a fallacy which still rules standard textbooks. His main proposition is simple and not refutable: firms and economies do not operate at full capacity. All research and surveys show that

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