Mises Daily Thursday: You Can’t Create More Savings by Printing More Money

Frank Shostak writes:

Savings has nothing to do with money. For instance, if a baker produces ten loaves of bread and consumes one loaf, his savings is nine loaves of bread. In other words, the “savings” in this case is the baker’s real income (his production of bread) minus the amount of bread that the baker consumed. The baker’s savings now permits him to secure other goods and services.

For instance, the baker can now exchange his saved bread for a pair of shoes with a shoemaker. Observe that the baker’s savings is his real means of payments — he pays for the shoes with the saved bread. Likewise, the shoemaker pays for the nine loaves of bread with the shoes that are his real savings.