Despite What They Tell You, Money Doesn't Just Curl Up and Fall Asleep
AP Photo/Elise Amendola, File
Despite What They Tell You, Money Doesn't Just Curl Up and Fall Asleep
AP Photo/Elise Amendola, File
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Centuries ago John Stuart Mill made the essential point that no act of saving ever shrinks demand. And for centuries demand-side economic thinkers have been ignoring this basic truth.  

Of the misconception that consumption drives economic growth, they’ve viewed the act of saving with terror. Their emotion has long been well overdone. Hysterically so.  

We know this because an entrepreneur can’t be an entrepreneur without capital. Neither can a business expand or enhance its processes on the way to the creation of much more with fewer inputs.  

Not only are entrepreneurs given life by savings, so is the productivity of existing businesses. Adam Smith was writing logically when he described savers as society’s ultimate benefactors.  

Figure that it’s easy to consume. Joyous. But businesses and entrepreneurs are most crucially in need of what’s not spent. 

Back to Mill, short of savers hiding their unspent wealth in the proverbial coffee can, unconsumed wealth doesn't go unspent. Banks don’t pay for deposits only to sit on them, nor do brokerages or any other financial intermediary. What’s not spent is immediately shifted to those who have consumptive desires, or once again to entrepreneurs and businesses needful of savings to get started, or expand.  

Money never lays idle. It moves, and its movements reflect the movement of goods and services to consumers who’ve borrowed savings with consumption in mind, or once again to businesses and entrepreneurs eager to try something new, or enhance what’s already being tried.  

All of what’s obvious requires mention as supply siders begin to mimic their reliably overwrought elders in the emotion department: demand-side Keynesians. Eager to explain what is said to be a non-inflationary environment, supply siders have begun to embrace Keynesian talking points about money seemingly falling asleep.  

In a recent column, one well-meaning thinker asserted that “Unwanted money can’t disappear, but it can fuel an expanding economy and it can bid up the price of other assets.” The statement was contradictory in addition to being wrong. Implicit in the writer’s stab at erudition is the impossible notion that at times, access to resources goes unclaimed in the economy. In other words, the thinker is presuming a credit glut. It’s out there, but no one wants it. About such a view, Henry Hazlitt once wrote that he couldn’t even believe the ignorant could be so easily fooled. Per Hazlitt, the notion of “too much credit” presumed that all of society’s needs had been met such that entrepreneurs and businesses had run out of ideas.  

Back to reality, we’re nowhere close to reaching the frontier of human progress. As a result, we’ll never reach a point where economic resources are “unwanted.” If anyone doubts this, just ask any bank loan officer, VC, or private equity investor how many yeas each utters versus nays when interfacing with those desirous of credit, not to mention how many nays those eager to start VC or private equity funds receive versus yeas as they raise their own funds.  

There’s no such thing as “unwanted money” in any economy. As for the notion that “unwanted” funds would drive up asset prices, readers can rest assured that the mythical (unwanted money) would never coincide with rising asset prices to begin with. After which it’s worth pointing out that if the impossibility that is “unwanted money” were migrating to assets, it could only purchase those assets insofar as an equal amount of “wanted money” exited the space. For every buyer there’s a seller. 

The main thing is that money once again doesn’t disappear. This rates repeat in consideration of commentary from another normally wise thinker who recently contended that “Just because a reckless central bank foists tons of fake money on banks, businesses, and households does not mean any of them must spend it.” OK, and without getting into the rather specious presumption that central banks shower money on others (why, oh why, is it never showered on me, or countless entrepreneurs forced to shutter their businesses each day due to a lack of access to funds?), this supply sider was making a rather absurd demand-side, Keynesian argument. He implied prudence on the part of banks, businesses and households such that they’re holding back as central bankers go hog wild. No, that’s not serious.  

Once again, just because an entity or an individual doesn’t spend doesn’t mean the money crawls onto the deck chair and closes its eyes. What’s unspent is shifted. Always. That it’s always shifted speaks to the folly of Keynesianism that supply siders usually highlight. Nowadays some are parroting those they normally ridicule.  

They are in order to make a case for a supposed lack of inflation. Supposedly if money isn’t spent (an impossibility: see above), it’s removed from so-called “money supply.” No. Furthermore, such an argument presumes that inflation is a consequence of lots of money in circulation as opposed to very little. No, that’s backwards.  

We know it’s backwards because money flows signal the flow of actual market goods and services. That’s why good, trusted money is everywhere, while devalued money that’s not trusted is very difficult to find. Translated for those who need it, the Mark in post-WWI Germany ceased being circulated precisely because those exchanging market goods trusted it so little. At the same time, currencies like the dollar were routinely used in transactions. The same is true today, and if readers doubt it they need only visit Iran, North Korea and Venezuela with toman, won, and bolivars in one pocket, and dollars in another.  

Inflated currencies are logically the least supplied, at which point inflation is a choice. It’s not forced by markets; rather it’s a decision arrived at by monetary authorities. Is there no inflation today? Don’t look to supply of dollars, just look at the value of the dollar versus something known to be stable. After which don’t rely on government measures. Just use common sense, while never, ever, believing that money “sleeps.”  


John Tamny is editor of RealClearMarkets, Vice President at FreedomWorks, and a senior economic adviser to Toreador Research and Trading ( His next book, set for release in March of 2021, is titled When Politicians Panicked: The New Coronavirus, Expert Opinion, and a Tragic Lapse of Reason. Other books by Tamny include They're Both Wrong: A Policy Guide for America's Frustrated Independent Thinkers, The End of Work, about the exciting growth of jobs more and more of us love, Who Needs the Fed? and Popular Economics. He can be reached at  

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