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Economic Theory of Bank Credit$
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L. Albert Hahn

Print publication date: 2015

Print ISBN-13: 9780198723073

Published to Oxford Scholarship Online: November 2015

DOI: 10.1093/acprof:oso/9780198723073.001.0001

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The Effect of Credit on Savings

The Effect of Credit on Savings

Chapter:
(p.118) (p.119) [2.]C. The Effect of Credit on Savings
Source:
Economic Theory of Bank Credit
Author(s):

L. Albert Hahn

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198723073.003.0006

No genuinely new savings can be made without a preceding credit creation. However, the amount of savings in the economy determines whether a new credit increases the number of granted credits at a given time and therefore contributes to the expansion of credit. Only if a new credit is not simultaneously met with increased savings does it have the full effect on the quantity, composition, and prices of goods. Credit expansion not only increases savings proportionally but savings are accumulated at an increasing speed. The increasing propensity to save is due to the peculiar psychological state of economic man who is inclined to save rather than consume additional income. He who produces more, does not necessarily consume more, but saves the amount not required for consumption.

Keywords:   savings, credit expansion, accumulation of savings

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