The Senior Lecturer’s arguing with accounting identities now

And for the sake of the record (and getting back to the theme of national income accounting that has bugged my blogging this weekend) S ≠ I. which means savings do not equal investment in any shape or form.


Accounting Identity: Saving Equals Investment
A fundamental macroeconomic accounting identity is that
saving equals investment.
By definition, saving is income minus spending.
Investment refers to physical investment, not financial
That saving equals investment follows from the national
income equals national product identity.

8 thoughts on “The Senior Lecturer’s arguing with accounting identities now”

  1. It is far easier to consider saving and investing as two quite separate concepts.

    ‘Saving’ is individuals or households spreading consumption more evenly over a lifetime, so in the good years they spend less than they earn.

    ‘Investing’ is businesses adding to the total productive capacity.

    There is lots of overlaps and lacunas and things which are neither.

    Individuals buying shares off other individuals neither investing nor saving. This does not add to productive capacity.

    Some businesses build up big cash piles, this is more akin to ‘saving’ than ‘investing’.

    And some individuals’ savings are merely matched by other individuals’ debts. So there is saving on the one side, but the other side is not ‘investing’, it is dis-saving.

    And so on.

  2. And some individuals or households spend money on adding to their own productive capacity – buying a washing machine instead of doing it by hand, or paying for vocational training.

    This is of course investing, paid for out of ‘savings’ or by dis-saving (spending spare cash on a washing machine or a training course).

  3. Also…can’t help wondering if the Skripal farce was really behind this. One theory I heard was that the Novichok was made by Porton Down and was to be produced as evidence at the false flag chemical attack in Syria and thus force Russia out. The stuff was to be smuggled by Yulia (who being Russian could also possibly be sacrificed to support the narrative). The Russians found out and DID attack Russians (actually British spies remember) in Salisbury with a nerve agent, but it was BZ, which incapacitated them and could be sprayed in public. The Russians took back the Novichok but the Home Office screwed up and panicked, talking about nerve agents. Hence a day later a major alert. Nothing of course happened and the false chemical attack preceded as planned but as a damp squib. May made to look foolish. Rudd forced to resign. Apparently Tillerson was kicked out for same reason. Note, everything Russia has said since – including claiming the Brits made the Novichok and warning of a false flag in Syria is consistent with this

  4. Why would the UK government plan and execute a false flag WMD attack on their own soil to get Russia out of Syria? Seems a bit cost for tangential reward.

    And all this would be planned with the most incompetent government department in the history of mankind, the Hone Office? Forgive my scepticism.

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