Growing wealth by holding money

In a recent post I wrote

Glasner says that holding money costs you money ...

Reading that now, I am reminded of something I read many years ago: It is possible that one's wealth may be increased by hoarding money under the mattress (or somewhere like). For in a time of deflation your money becomes more valuable.

The irony in that is that if enough people with enough money decide to hoard as much as they can, prices will fall and their hoarded wealth will increase in value. Not irony, exactly. But it is a way to induce the death of a nation, or a civilization.


Found it!

I first came upon the word "hoarding" in The General Theory some thirty years ago. The economy was different then. Hoarding was not something in the news, not part of the world I understood. I had trouble with the concept. Below are some notes and quotes gathered since that time.

Friedman, Free to Choose, p.74:

"...a run that results in hoarding of cash by the public tends to reduce the total money supply."

Samuelson, Economics (1958 edition) p.269:

"A hoarder who earns no money interest on his mattress cache finds the real value of his wealth increasing every day as prices fall."

Hoarding reduces the amount of circulating money, which causes deflation, which causes the value of the hoard to increase. In other words, there are times when money under the mattress will increase in value, as though it were collecting interest in a bank.

Perhaps something David Glasner never thought of: Holding money doesn't necessarily cost you money. Yeah. And hoarding by itself, if there's enough of it, is enough to bring on the deflation that grows your wealth. Ooh, it is irony, isn't it.

Also, in case you were wondering, "the old apple tree" is there, too.