Capital Formation

• 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