> Observe, however, that individuals do not ultimately pay with money, but rather with goods that they have produced. The chief role of money is to fulfill the role of the medium of exchange. Hence, the demand for goods is constrained by the production of goods and not by the amount of money as such. (The role of money is to facilitate the exchange of goods).

>To suggest that people could have an almost-unlimited demand for money—leading to unlimited savings and a “liquidity trap”—would imply that no one would be exchanging goods. Obviously, this is not a realistic proposition, especially given the fact that individuals require goods to support their continued existence.

Recessions are caused by decreases in savings and thus investments in capital goods. Less investment in capital goods means less production of consumer goods. When you have less production of goods, you also need less employment. Therefore a decrease in savings leads to recessions, not a decrease in spending.