"Forced Saving" Occurs When Real Resources Are Transferred (As a Direct Result of Monetary Expansion) from Producing Consumer Goods to Producing Capital Goods

Hayek contested the alleged 'neutrality' of money. Variations in money could instigate change in real economic variables; and Hayek's work emphasises the all-pervasive, short-run effects of changes in the money supply. Wicksell's analysis had ignored those effects, but his introduction of the concept of 'neutral money' itself suggested 'recognition of the fact that money need not be neutral' (Schumpeter). The subsequent search for the conditions in which money is neutral had only one logical outcome: for as soon as a set of conditions is established for ensuring monetary stability, it follows that money itself 'exerts an influence and hence that it is not neutral' (Schumpeter). Hayek emphasised that monetary disturbances affected real sectors of the economy through induced changes in relative prices and interest rates; and he focused upon the mechanism by which these occurred. Central to his analysis is the concept of 'forced saving' which occurs when real resources are transferred (as a direct result of monetary expansion) from the production of consumer goods to the production of capital goods.

--G.R. Steele, Monetarism and the Demise of Keynesian Economics (New York: Palgrave Macmillan, 1989), 32.