> If they're put in a bank, the bank loans it out to someone else. If they buy treasury bills, the government then takes the money and spends it.
good call, this is Econ 101 stuff that most people just don't know. Saving money in a bank or government bonds is not the same as locking it in a vault or burying it in your backyard. It is still out moving around in the economy.
I think difference between savings and investment (or consumption) is in reversibility. Savings are reversible, basically if you "invest" in any liquid enough assets that keep value, then you save. Investment (and consumption) is irreversible, once you made the decision, it's done deal - somebody does the work, energy is spent, entropy is produced and so on.
That's why, contrary to mainstream economic opinion, it is useful to save. Saving lets you react to investment from competitors, by postponing the decision after they made their move. This gives you advantage (power) if you're big enough.
While the article certainly worded that portion poorly, there is a difference between monetary velocity of retained earnings parked in a mutual fund, and earnings plowed back into a business. In the former scenario, it takes a much longer time for the money to flow back into the purchase of goods and services. By reinvesting in the business, there is far less of a time lag for that to result in growth-generating economic activity.
What is this money doing if there is not profit perspective? Nothing. Nobody is claiming that we are short of money, the claim is that this money is not invested.
good call, this is Econ 101 stuff that most people just don't know. Saving money in a bank or government bonds is not the same as locking it in a vault or burying it in your backyard. It is still out moving around in the economy.