Reply To: Cash Balance vs. Investment


Thanks, here’s what I was originally thinking…Since the total money stock must equal the sum of all individual cash balances, and as you said “One can determine the money stock in the economy by adding up all money proper plus all money substitutes, i.e., all redemption claims to money payable on demand at par” then money in checking and savings accounts must constitute only cash balances (assuming they are redeemable on demand at par for cash). Since true savings-investment, at least in the Austrian sense, cannot be immediately redeemable but payable only at the end of a stage of production or the maturity of the investment contract (i.e. a bond or certificate of deposit) it seems to me that it would make sense to say that one’s cash balance is composed of currency, checking deposits, and savings deposits whereas one’s savings-investment is composed of things like certificates of deposit, bonds, etc. It was then my conclusion that, even in a fractional reserve system, checking/saving deposits can not be considered true investment and should be considered as one’s cash balance just as much as money stored under the mattress is. Is this a reasonable line of thinking?