Economists are broadly of the opinion that economic activity makes people better off in general. For example, if you invested in your friend’s new store, you’re helping him (try to) be more productive. He benefits; you benefit, and his customers benefit. His competitors may suffer, but the benefits to others are larger than those losses.
Unless you’re investing in something that has a large negative impact (say creating lots of smog) you are probably making the world a better place.
What you write may be true, but it’s far from certain. If you keep your money in a mattress instead of investing it, you are not hoarding any actual resources that might be put to a productive use. You are only hoarding green pieces of paper whose value and usefulness from an individual’s perspective is perfectly clear, but whose aggregate role in the economy is complicated and ill-understood. The question of what consequences for the whole economy follow when you empty your mattress and invest the dollars is not at all easy, and I’m not sure if anyone is able to give a full and accurate answer.
(Not that any of this should matter for an investor, but your reasoning in the above comment does seem fallacious to me.)
More technically, holding AU dollars instead of other financial instruments effectively raises the demand for the good used to produce AU dollars (I would guess that is AU government bonds) relative to other financial instruments, but doesn’t raise the total demand for investment directly.
Economists are broadly of the opinion that economic activity makes people better off in general. For example, if you invested in your friend’s new store, you’re helping him (try to) be more productive. He benefits; you benefit, and his customers benefit. His competitors may suffer, but the benefits to others are larger than those losses.
Unless you’re investing in something that has a large negative impact (say creating lots of smog) you are probably making the world a better place.
What you write may be true, but it’s far from certain. If you keep your money in a mattress instead of investing it, you are not hoarding any actual resources that might be put to a productive use. You are only hoarding green pieces of paper whose value and usefulness from an individual’s perspective is perfectly clear, but whose aggregate role in the economy is complicated and ill-understood. The question of what consequences for the whole economy follow when you empty your mattress and invest the dollars is not at all easy, and I’m not sure if anyone is able to give a full and accurate answer.
(Not that any of this should matter for an investor, but your reasoning in the above comment does seem fallacious to me.)
Yes, you are correct.
More technically, holding AU dollars instead of other financial instruments effectively raises the demand for the good used to produce AU dollars (I would guess that is AU government bonds) relative to other financial instruments, but doesn’t raise the total demand for investment directly.