S= I + (S-I)

There is an amazing intelligent discussion going on at this site among some exceptionally thoughtful people.  The discussion looks like groupware where the participants are so knowledgeable and skilled that it is like attending a pro ball game.  Appreciating the level play but knowing that although I can play the same game too, it is nowhere near how they can play it.  All I can do is watch and enjoy and cheer when they make their points with clarity and elegance.

This is the game:  Revealing clarity and understanding an existing murky system.  Shining light on it for us all to see.  Turning on light bulbs.

I had to say it over and over.  Play with it this in my head:  S= I + (S-I)  Saving equals Investment plus the difference between Saving and Investment.  Cullen Roche says the backbone here is Investment.  That is his primary point of entry to the big complex ball of money.

This is how it rolled around in my head.

Investment is Saving.  True.  I have investments that once was money that I could have spent on consumption.  Instead I put it in investment.  Stocks.  "Oracle"  I sold some and and consumed a trip to Hawaii. with a friend.  The trip to Hawaii was saved for 30 years.  If the total trip cost $4,000 then it was paid for by 400 dollars I saved by investing 30 years ago.  Somehow that made the whole trip more enjoyable.  I love deferred gratification.  I have been doing it all my life starting with college and then a navy career.  Time is short, no more deferrals!  I have a deposit on an airplane that I do not yet know how to fly.

Saving is not Investment if it is not invested?  Well, maybe not true.  Saving in the medium of money as a store of value is an investment in that store of value by default but just having a pile of money removes it from utilization for production which is what money does when invested.  Inflation gives a negative return on a mattress deposit?

Yes, I can see it.  Cullen Roche said it often enough and I read what he said over and over in all the places he said it that it does sink in. 

S= I + (S-I) is the rock to stand on, to build the model on.  A core idea.

That is how he looks at it and builds on it.

I would look at it in terms of two objects whose relationship is implemented by an action.

Investment and Savings are the two objects.  The action that relates them is investing.

Savings = Money I  can use in any way I wish.  I can spend it on consumption or save it.  Investment is one way to save.  Doing nothing with Money is another but that is not Investment.  Calling it "Investment by Default" because I did nothing with the money except trust that it would always be wherever I hid it.  That gums up the idea so forget about even thinking in that direction.  Call it Money Not Invested.  Investment means put to use in production with hope or expectation of return in greater but, realistically accepted, lesser amount of money in relation to the initial amount of money invested.

If Savings = Money not yet used for Investment or Consumption then the act of investing is the action that implements the relationship of  Money to Investment.  Consuming is the action that implements the relationship of Money to Consumption?  This does not sound like an elegant or accurate way to present the relationship.  The word Consumption is a bad choice for a noun name in the rule that the relationship between two noun things is implemented by an action verb.

To resolve this let me put it this way:  Money is Invested in Production.  Money is Spent in Consumption.  Production = Consumption in simplest terms.

Good.  The verbs Investing and Spending have some meaning in implementing the relationship between Investment, Production, Spending and Consumption.  This kind of thinking might even lead to ideas of Capital....Labor....

Obviously, Cullen Roche defines Investment as money saved by employing it in Production not Consumption.  Hmmmm.... What about investing in an object like a baseball card, work of art, trading money for an alternate form of object value that is not employed in the production of something for trade?  I need to think about that but for now that is the same as not investing.  Meaning it is only put a different thing under the mattress as a surrogate for money.

S= I + (S-I)  I am starting to get it.  I just have to put it in the object oriented relationship way of looking at things that is my way of thinking.