On Tue, 24 Aug 1999 15:49:59 -0700 (PDT) Terry Donaghe
> --- Ron Kean <firstname.lastname@example.org> wrote:
> > A person who is wealthy and spends no money has to
> > keep the money or> > wealth somewhere. If he keeps it in a bank
> > or other investment,> > it is lent out or otherwise invested,
> > productive purposes.> > And if he just keeps the money in a vault,
> > which issued that> > money in effect gets an interest-free loan, and
> > the same thing, that> > is, invest the money.
> > > >
> > Ron Kean
> Agreed. What I meant was someone who kept his money stuff under his
> mattress and buried in coffee cans in the back yard. :)
> Terry Donaghe
Thanks for agreeing with the 'money in the bank' example. But let's suppose the 'miser' buries Federal Reserve notes in a coffee can in the back yard. In that case, the miser is making an interest-free loan to the government, which cuts their expenses, which (all else equal) allows the general tax burden to be lower. The lower tax burden would be a benefit to society.
Suppose that the 'miser' hoards gold, instead of Federal Reserve notes. In that case, he makes gold scarcer, and its price higher, thus benefiting those who hold gold, and giving them incentive to sell it, which tends to alleviate the increased scarcity of gold. In other words, by hoarding gold, the miser has (at least temporarily) transferred part of his purchasing power to others. Moreover, to the extent such miserliness forces up the gold price, it increases the income of those who lend gold out at interest, which gives them more money to invest, which increases capital formation and job creation.
Suppose the miser buys a piece of land, fences it off, and refuses to allow anyone to set foot on the land. Now the money he used to buy the land and fence goes to others, who presumably tend to invest it productively. Yet again the miser has succeeded in transferring wealth to productive use. But what about the land the miser withdrew from productive use? He paid the market price for it, which means that the market says it was an even trade. And the miser gets no rent, since no one will pay rent for land they are not allowed to use.