The Difference Between Saving and Investing

I really am getting sick of reading nonsense like this. Nonsense where our friends on the Left completely miss the point about banking and its failings.

One significant point they always miss is the difference between saving and investing. So let me make it clear.

The process of saving is where one aims to maintain and secure their wealth over time. So buying assets like property or precious metals would count as saving.  Because you assume they will maintain the majority of their value over a long period of time and it is highly unlikely they will lose all of their value.

Investing by contrast is where one aims to increase their wealth over time. So buying shares in a successful or growing company would count as investing.  Because you hope that the company’s shares will increase in value over time. But you also accept they may lose all of their value.

Now why is this important. Because when you put money in banks you do the latter. You invest your money in a bank you do not save it. Banks take the money you invest and invest it in businesses, people, and stock markets. The only difference between this and a normal investment is the banks keep the vast majority of the profits.

This is one of the great frauds at the heart of our banking system. And until groups like Move Your Money grasp this basic point they are never going to come up with a solution to our banking woes.

Because their is no reason why an ‘ethical’ Fractional Reserve Bank can’t create an investment bubble in ‘sustainable’ causes.

  2 comments for “The Difference Between Saving and Investing

  1. Apr 7, 2012 at 12:31 am

    I think you’re right in what you say, but there seems to be a sophism in your terminology (- and that can be painful!)

  2. Paul Marks
    Apr 7, 2012 at 9:59 pm

    One point that should be made is as follows….

    If more “money” is lent than was ever really saved (i.e. credit-money expansion takes place) then there is (by definition) a credit bubble – and there will be, sooner or later, a bust (a crash).

    Rob Waller is quite correct – it does not matter a tinker’s curse what the borrowing was for (it could be for the most noble thing in the universe). If the borrowing was financed by a credit bubble, rather than by real savings, then there will be a bust.

Comments are closed.