People Have Trouble Understanding Hoarding
27 June 2017 | Pago Pago, American Samoa
Money not being idle or not stuck under a mattress DOES NOT MEAN it is spent on current consumption or real investment in productive capacity, the only two options for money to be used in the manner of Say's law or in the real economy. That is the test. All other uses and activity are a variety of hoarding, often just pushing up prices of secondary assets -- issued stocks, issued bonds, the existing housing stock, existing art, land, etc., ad nauseum. This is how and why the financial economy grows and has become a parasitic distraction and diversion from the real economy
This the best way to look at the matter as well because it is focused on what is going on in the Say's or the real economy and what rests or circulates outside of it, most often in the financial economy, not contributing to the circular flow of money against the flow of new goods and services and new productive capacity in the real economy.
Everyone ever and always loses sight of the real, productive economy and becomes bogged down in the machinations of the financial economy and the hoarding that goes on within it. They lose sight and economic perspective. Many think, from the financial press, that is the real economy. Actually the real economy is much better reflected in the Fed's Beige Book quarterly reports by Fed district.
That is why the alternative perspectives suggested by many lose out. They literally cannot see what is real and what is not in regard to the economy and make silly arguments like investing in the stock market is real investment, not realizing it is a casino shuffle of hoarded money with prices likely to rise as more money joins in with their hoarded money. The real economy is no part of this foolishness.
The perspective is also useful because it lets you understand how the financial sector has grown from 2 percent of the real economy (when it mostly just financial intermediation) to 15% of the combined real and financial economy. Wall street is very busy developing new ways "to invest" your hoarded money from packaged debt backed ETFs to synthetic derivatives, all with clever sounding names and all designed with a noteworthy "house take."
It resembles a casino operation in more ways than one. Pieces of it are a part of the real economy, but most activity in it is just different varieties of hoarding with money going in, money going out, delays along each way, but a huge pile in the middle, just and simply hoarded. That is, not engaged or a part of the real consumption of goods and services and not engaged in real investment in new productive capacity. It is a huge financial superstructure imposed on top of the real economy for the sharks of Wall Street to snare or chisel at your hoarded money and make their living. It is substantially parasitic. Their fees, are also substantial.
Meanwhile, people struggle and quibble with the basics, like an airplane unable to get off the ground, precluding a more sophisticated and complex analysis that would be more interesting, at least to me.