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Free Market Economy
Capital Formation
Capital Formation
Parent term
Free Market Economy
In a free market economy, capital is formed through savings.
More about Capital Formation
Mentioned by the Following
Entities
A&C Advisors
SPRK Investors
Silicon Valley Venture & Innovation
iConnections
People
Ross Laser
Scott Twibell
Zafer Younis
Experts
Ross Laser
Scott Twibell
Zafer Younis
Child Terms
Notes
When people produce more than they consume, they create savings
Savings is
capital
that can be
invested
or loaned out to others
Savings/Capital are scare, so
investors
invest wiselfy
Capital Formation
Under Modern Central Banks
Central banks have distorted how
Capital
is created
Instead of through savings, Central Banks can create
currency
out of nothing
Doing this distorts
free markets
- causing
inflation
and stealing
value
from existing real savings
Fake
money
makes
capital
less rare - leads to bad decisions, squandering, malinvestment, etc
Many enterprises only work because
money
is cheap
Concern is that when
money
becomes less cheap, many businesses who rely on cheap
money
will fail