Procrustean Art of Backtracking: “Upward-Sloping Saving”
When we purchase pieces of paper representing partial ownership of Nvidia, we must sacrifice the interest rate on “savings” or pay the interest rate on “borrowings.” So the following is popular narratives in macroeconomics as regards the shape of investment curve in the “loanable funds” market: Investment depends on the … interest rate because the interest rate is the cost of borrowing. The investment function slopes downward: when the interest rises, fewer investment projects are profitable. (N. Gregory Mankiw, Macroeconomics ) On the other hand of the so-called “market” is the saving function. When we save money with the bank, or lend money to the bank, we can expect the benefit of the interest rate thereon. Macroeconomists would explain: Saving depends on the interest rate because the interest rate is the benefit of lending . The saving function slopes upward: when the interest rises, more saving projects are profitable. Armed with the two hands of investmen...