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Comment by digz | Hacker News Reader

So explain the credit crisis?

All savers, even if they aren't founders/owners of companies themselves, create jobs by keeping their money in the financial system. Whether by owning stocks, bonds, private equity funds, or savings accounts, the resources are allocated to where they are needed most. When that whole system dries up, you get a credit crisis.

Obviously, yes, demand is important. Confidence crises can wreak havoc.. but simply saying demand is the only thing that's important is ludicrous when dealing with such a complex and dynamic system.

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> So explain the credit crisis?

A bunch of bankers conspired to defraud credulous investors by selling them worthless mortgages as A-rated investments. This massive influx of capital into a non-productive sector of the economy nearly caused the entire system to collapse. These bankers then used the political influence bought with the money they made in order to shift the cost of their fraud onto the taxpayer.

Really, it's not that hard to understand. The only thing that is hard to understand is what this question has to do with the matter at hand.

Your entire understanding of the credit crisis is deeply flawed.

1) Savers do not create jobs. Spenders create jobs. When you get a situation where people would rather save their money than spend it (ie. Japan) then you get deflation, and the economy contracts leading to lost jobs. This is why Japan is trying desperately to increase inflation through Abenomics.

2) To explain the credit crisis would take a lot more than just a few paragraphs, but your fundamental statement that it was caused because people stopped parking their money in financial instruments is just wrong.

Your understanding of my point is deeply flawed.

1) Saving in itself does not create jobs, but savers allow for jobs to be created.

2) Not my fundamental statement at all.. My point was that the supply of credit (significantly shrunk due to reasons beyond a few paragraphs) can kill jobs.

What relevance does the credit crisis have?

Pointing out that markets require liquidity has nothing to do with the fact that there needs to be some sort of real economic value to sustain jobs.

It's not just rich people handing out jobs and deciding whether or not we should keep factories or companies open or not.

Capital is part of markets (granted a vital part). It's not the only, nor the most important part.

Never said it was the only part. My point was that when credit dries up, jobs are lost.... i.e., supply causing problems.

Lots of reasons for why credit can dry up, but the idea that jobs are only a function of demand is ludicrous.

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