Saving is good

We can double the wealth of ordinary people within 20 years. How? There is only one way: Save and use those savings to make more and better tools.

Why tools? Imagine starting a business washing cars. On day one, you have a sponge and a bucket. You can wash 10 cars in a day. Later you buy a power washer. Now you can wash 20 cars in a day. The power washer is a tool that makes you more productive and therefore increases your wealth.

Of course, tools are far more than just machines. Detergent is a tool. When you add it to the bucket, you can clean faster or better or both. If you have the idea of cleaning cars in one street instead of travelling between streets, that idea improves your productivity. Ideas are tools. Roads, water pipes and a host of other things are tools.

Why do we need savings to get tools? If you spend today baking bread, you can eat. If you spend the day making an oven, you can’t eat. So today you need someone else who makes more bread than they eat and gives you bread. A person saves when they eat (consume) less than they make (produce). The other person is saving bread to support your oven making.

In short: rising prosperity only flows from rising productivity, which only flows from making more or better tools. Tools can only be made or improved by using savings.

If you see the crucial role of saving, you realise how destructive is the idea of spending to get rich. The more you spend, the less you save. Government today acts as if saving were evil. It continually undermines savings by printing fake money. It manipulates interest rates to discourage saving. It is the biggest anti-saver in the country, spending billions more than it “earns”.

Some say that government can help society by gathering savings and channelling those savings into infrastructure and other tools. There are two problems. First, individuals are always better at deciding which tools to make than government. That’s because individuals are closest to the facts and stake their own wealth on getting it right. Government is cut off from the facts and has the carefree mind of someone spending someone else’s money. The second problem is that government cannot gather savings without reducing savings available in the hands of individuals. This is obvious in the case of tax. What the government takes from you in tax, you cannot use to support someone else’s oven making. Borrowing is the same. Whether government takes it from you in tax or borrows it from you, you don’t have it anymore. What about just printing money? Printing money has the same effect as counterfeiting. It makes the counterfeiters and their friends richer at the expense of ordinary people. It has no effect on the amount of bread we can eat.

If seeing ordinary people better off is your dream, vote for politicians who believe in saving. Make them stop the war on savers.