Re: S=I, an old debate.

["William B. Ryan" <william_b_ryan@xxxxxxxxxxx>]

Bruce McFarling writes:
http://csf.colorado.edu/mail/pkt/aug98/0207.html

"As income received is spent, any residual remaining is saving."

This statement is meaningful only at the statistical level of the
individual consumer or firm, where the spending of less than current
income NOW allows the spending of more than current income LATER.

But at the statistical level of the macroeconomy, those who are spending
LATER will exactly balance the saving by those who are saving NOW, so
that there is never a break in the flow of funds.

If there is growth in population, those who are saving NOW will
OUTNUMBER those who are spending LATER.  If there is increasing per
capita income, those who are saving NOW will be saving from a GREATER
INCOME than the past income of those who are spending LATER.

In either case, there would be a "leakage" from the flow of funds if it
were not the availability of CREDIT, which bridges the gap between the
PRESENT of those who are saving NOW, and the FUTURE of those who are
spending LATER.

It is CREDIT that refutes Say's Law.

http://www.geocities.com/CapitolHill/Senate/7018/



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