Replying to Avatar Mike Brock

Moreover, the value of savings is tied to the productive capacity of the economy. If an economy is more productive, each unit of saved currency can command more real goods and services in the future. However, if an economy’s productivity stagnates or declines, the real value of savings may decrease, regardless of whether the nominal amount of money saved grows.
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j'ai les clés 2y ago 💬 1

Plz ELI5

Why would the real value of savings decrease when an economy’s productivity stagnates or declines? I don’t follow this, especially in a global market for goods & services.

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Mike Brock 2y ago

You assume unrestricted access to said global market. Or that said market exists at all.

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Semi-Normal 2y ago

In the same way that monetary scarcity increases what can be purchased with that money, scarcity of goods increases the amount of money those goods can "buy".

If you save when goods are plentiful, and attempt to spend when goods are scarce, you will find that your "real" purchasing power has likely declined.