Quote from: hugolp on July 13, 2011, 07:48:06 PM

Quote from: jtimon on July 13, 2011, 07:22:34 PM

Quote from: hugolp on July 13, 2011, 06:12:58 PM

I think you are missing one point though. If people decide to consume more or less at some point, it will change the money they can save and therefore the money there will be availabel for investment. In an extreme case if people got fed up of saving and increased consumption a lot, therefore not being able to save interest rates could raise even when growth was happening. Obviously, since people is consuming like crazy and not investing for the future, future growth would suffer, but theoretically you could have interest rates raising infront of strong growth. But such a change in behaviour from everybody at the same time is not probable at all (in a free market).

But if growth also leads (apart from an increase in demand for money to invest) to lower prices (or more valuable products) which promotes spending over saving.

Why? I dont think growth necesarely leads to a specific change in the balance between investing and consuming. It can go anyway.

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Doesn't it also leads to high interest?

As I said, I dont think the balance between savings and consuming needs to change in a pre-determined way. In general growth leads to lower interest rates because there is more resources available (and this can happen even if the relation between savings and consumption has not changed because the overall production is bigger). The only case where growth does not lead to more savings is if all the increase goes to consumption.

If we forget Bernanke, growth leads to price deflation. Right?
Also high capital yields encourage investments.

Quote from: hugolp on July 13, 2011, 07:48:06 PM

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On the other hand, high interests and falling prices incentive saving.

High interest rates yes, falling prices not necesarely. In fact, you have an empirical evidence with Bitcoin. The merchants have reported that when the exchange usd-btc was raising for bitcoin people spent more in the Bitcoin economy lured by the lower prices. The meme about lower prices stopping consumption is just false.

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What promotes falling prices? Saving, spending or both?

Savings.

Lowered prices don't stop consumption, falling prices do. Maybe the people who spend their bitcoins when their price in dollars rose were expecting the price to go down again.
You said yourself that falling prices promote saving.

On the other hand, as you say, lowered prices (or more valuable products) lead to consumption.
I don't understand how can growth lower interest rates.
It is really a complex topic.

On the subject of growth springing inequalities, I agree that some innovations can in fact eliminate those inequalities.
I can't watch the video right now but, for example, I'm very excited about Arduino and Google's ADK, and I believe that many small business will emerge.