Saving-investment balances and the Great Reflation

Once again, simple Keynesian thought-experiments that hinge on saving-investment balances prove to be the best way to think through what is going on at the moment. Macroeconomics is less about supply and demand, more about saving-investment decisions.

Anyway, in thinking about this series for Exante, the following short macro accounting framework was useful.

One thought on “Saving-investment balances and the Great Reflation”

  1. ‘Macroeconomics is less about supply and demand, more about saving-investment decisions.’

    I’d say there is no ‘less’ or ‘more’ here, S (desired) > I (desired) is trivially synonymous with agg. supply > agg. demand (for ‘goods’ – nonfin. assets – & services):

    Since

    * S = I + (X-M) – equivalent to ‘change in net worth equals change in real assets plus change in net financial assets’ – is true for any open economy (including any sector or any individual legal subject) and

    * (X-M) for the aggregate economy is zero by definition, so that S = I

    S (desired) > I (desired) means X (desired) > M (desired): desired sales (supply) > desired purchases (demand). By definition.

    In some more detail:
    https://blog.anep-economics.org/?p=1421&lang=en

    Like

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