Official NIPA measures of disposable income and savings are rooted in a Keynesian framework that treats spending as equal to income, leading to the view that consumer spending drives the economy.

The author argues that real economic growth depends on production, genuine saving of real goods, and capital investment that expands the productive structure—not on monetary spending or artificially inflated monetary savings.

Central-bank money creation generates “something for nothing” exchanges that increase reported monetary savings while actually eroding real savings, which are the true foundation of rising living standards.

In the National Income and Product Accounts (NIPA), disposable income is defined as the summation of all personal money income minus tax payments to the government. Personal income includes wages and salaries, transfer payments, income from interest and dividends, and rental income. Once we deduct personal monetary outlays from disposable money income, we get the personal savings.

The NIPA framework is based on the Keynesian view that spending by one individual becomes part of the income of another individual. The spending of the purchaser is the income of the seller. From this it follows that spending equals income.

So if people maintain their spending, this keeps overall income going. Hence, why consumer spending is said to be the motor of the economy. Now, an increase in the supply of money affects the total amount of money spent. Consequently, the greater the expansion of the money supply, the more of it will be spent and, therefore, the greater the NIPA’s national income will be.

Saving and Wealth: What Is the Relation?

To maintain their lives and well-being, individuals require access to goods. An increase in various goods permits the increase in individuals’ living standards. What allows an increase in the production of consumer goods is the maintenance and the enhancement of the structure of production. With a better productive structure, greater........

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