Saving is the default. Investing and consuming are — or should be — choices.
A money is judged by how cleanly it lets each of the three happen.
Saving is not a behaviour fiat removed by accident; it is a behaviour fiat had to remove in order to function. A credit-based monetary system requires the steady expansion of credit to service the debt that anchored it in the previous period. That expansion requires that the units already in circulation lose value over time, because otherwise no one would take on new debt to chase appreciating money. The system runs only if the units melt. And if the units melt, savers — the people holding units without yield — are by structural necessity the people the system has to penalise first. The destruction of savings is not a side effect; it is a load-bearing wall.
What happened to the economic energy that would once have sat in savings is harder to see than the inflation tax, and arguably more damaging. That latent, potential economic energy did not vanish; it was conscripted. Some of it was forced into equity markets and other risk assets, which is why those assets have inflated faster than any productive metric attached to them. Some of it was absorbed by the state itself, which under a fiat standard can issue debt that the central bank will service through monetary expansion if the bond market refuses. And some of it kept alive the companies and projects that would not have survived in any monetary regime where capital had a real cost. The textbook term is malinvestment; the phenomenon worth naming, however, is the suppression of what Joseph Schumpeter called creative destruction — the immune system of capitalism, which clears out firms that have stopped producing value so that firms still producing value can compete for the capital they release. Instead governments often perversely keep alive these zombie companies as they have a veneer of value to the economically uninformed, or carry some vestige of what was once national pride. The zombies stay.
The cost of fiat is therefore layered: the inflation tax that can be measured, plus the misallocation tax that cannot, plus all the productive activity displaced by the misallocation that the inflation tax made possible.
The case for sound money is often framed in terms of personal financial outcomes — whether bitcoin will outperform some basket of stocks, whether holding cash is “worse” than holding equities, which portfolio is best held over twenty years. That framing concedes more than it should. Even if the optimal portfolio were fully knowable, even if a person could costlessly replicate the best investment decisions in history, the fiat system has done something to them that no investment outcome can undo: it has removed the option of holding wealth without taking risk. There is no version of being on the fiat standard in which the no-risk position remains available at any price. The state has converted the absence of an investment decision into its own kind of investment decision, and not in the holder’s favour.
This is what the loss of the savings function actually means. It is not that a person has to think harder about money, or learn to be a better investor, or delegate the decision more carefully. Under sound money, a person can retain their economic energy, waiting for the right opportunity to invest or spend; under the fiat standard, that choice is taken away, forcing near-immediate ‘investment’ (even at high risk) or consumption — often either mal-investment or mal-consumption. Even the optimal portfolio chosen under those conditions is still a portfolio chosen under duress; the no-exposure position is no longer purchasable at any price.
What sound money returns is not freedom from financial thinking. It is the option of not being forced into the market in the first place. Investment remains available. Consumption remains available. But so does neither, and neither carries no penalty. The reintroduction of a true default state is the part of the change that is hardest to feel before you have it, and the hardest to give up once you do.