"Saving does not create "loanable funds" out of thin air. There is no presumption that the additional bank balance of the saver will increase the ability of his bank to extend credit by more than the credit supplying ability of the vendor's bank will be reduced. If anything, the vendor is more likely to be active in equities markets or to use credit enhanced by the sale to invest in his business, than a saver responding to inducements such as IRA's, exemption or deferral of taxes on pension fund accruals, and the like, so that the net effect of the saving inducement is to reduce the overall extension of bank loans. Attempted saving, with corresponding reduction in spending, does nothing to enhance the willingness of banks and other lenders to finance adequately promising investment projects. With unemployed resources available, saving is neither a prerequisite nor a stimulus to, but a consequence of capital formation, as the income generated by capital formation provides a source of additional savings."
from http://www.cfeps.org/public/VickreyWP1.htm
"Fifteen Fatal Fallacies of Financial Fundamentalism"
also: "Why John Q. Public Can't Save" http://www.mosler.org/docs/docs/johnq_wsj.htm
"With Johnny's savings tied up in pension plans, IRA's, etc., he reduces his net savings by borrowing to spend beyond his income... What happens as Johnny nears his credit limits? Sales slow as Johnny's spending slows. Inventories increase, jobs are lost, output, profits and income slow, as do tax payments, while unemployment compensation rises. All this causes Uncle's surplus to become deficit. Suddenly Johnny is both out of work and, ironically, saving again."