Actually it seems to be your assumptions that need questioning: the
idea of "conflating all saving" is itself wrong.

Saving is a matter of time preference, specifically, preferring to
consume in the future. That implies carrying forward surplus value
from today to be spent tomorrow. It matters not whether you stash gold
in a mattress of buy stock of Webvan: you merely hope to have X+delta
at T+t time where {X, T} represent the present and {d,t} represent
increments and can be zero.

In order for you to then invest your gold in Webvan, said company has
to offer you a higher rate of return than merely holding the gold.

Gold will increase in value if more produce is offered in exchange
at time T+t; assuming stock of gold is constant (which it is, to an
approximation). Of course, I prefer the word price since gold has
no intrinsic value.

So what Webvan has to offer you (a sane investor) is a better return
than the rest of the aggregate efforts of human-kind, assuming of
course, that said aggregate efforts are barter-able with gold (that
is, can be bought with gold).

This is precisely what makes unbridled capitalism and free-floating
interest rates so wonderfully efficient. That damn company cannot get
away with peddling something that doesn't improve all our lives. It
has a high return on investment barrier to cross in a hard-money
economy (defined in this case as a fixed supply of gold).

Conversely, when Greenspan is pumping money, it's pets.com's time to
shine! And of course, what most don't seem to realize is that the
current crop of startups is mostly just Bernanke's easy money that
needs a place to park itself. That's why VCs just can't get enough
flow and bitch about deal-sizes.

Another way to phrase the 'investment barrier' is to say that the
ratio between spending preferences now and in the future determines
the interest rate. A high interest rate implies only higher-credit
(in the sense of faith in their success) companies will get money. The
highly 'speculative investment' in pet-dating will simply not happen.
Note again, I don't like the word investment, savings is just fine as
a word for deferment of consumption, and speculation itself is not bad.
Here 'speculative investment' is a synonym for unproductive stupid shit
money's being spent on.

Nor will houses be given to bad-credit home-buyers, incidentally, which
really troubles some. But ask yourself -- if Bob-the-builder built a house and the
home-buyer promised him ten apples, and couldn't pay him dem apples,
would Bob in hindsight have wanted to build that house for him? If he
defaults on Bob, Bob is impoverished. If the Fed bails him out (or
actually bails the home-builder out) all of us are impoverished
(currently above 50K USD per person in the USA approx). Charity is
fine, forced-labor is not.

In your (and Krugman's, and most of mainstream (read tenured)
economics') conception, the idea that stashing gold is not productive
is merely another way of saying "gold stashers don't fund Webvan" when
looked at through this lens.

Damn well they don't! Everybody should have the right to sit on the
side-lines and watch. It is almost Gandhian in its non-participation
(excepting grand-nieces, but that's another story).

That is precisely what stashing your savings under the mattress in a
hard-money economy does, allows you to step away from the pets.com
frenzy.

Wall Street has another way to say it: While the music's playing, you've
gotta get up and dance. If a bank didn't take the bail-outs it would
have gotten bought out, lock, stock & barrel by one that did. While
Ben's fiddling, you've got to join the orgy. It doesn't matter if the
country burns in the meanwhile.

So the problem with this inflationary money supply is simply that it
distorts interest rates, thereby funding unproductive
enterprises. The Webvan's get funded, Facebook & Twitter IPO, and we
wring our hands and say: hey why aren't we flying to Mars, or curing
malaria? Why are our best and brightest kids tweaking ad algorithms
for Google and writing stupid Miley Cyrus hash-tag trend-divining programs?

This is why.

In periods of hard-money we saw great advancements in the standard of
living of peoples around the world[correlation?]. The free market
always beats a planned economy. It doesn't matter if the planning is
overt like the Soviet model or merely a 'plan' to distort time
preferences. From 1600 to 1900, perhaps we didn't have a vast increase
in leisure, but damn, we got productive things done first. Now if you
really think a John Deere on every lawn, and immediate notification of
the latest Miley Cyrus nipslip is so important, sit back and enjoy the
end of empire, because it's going to happen anyway.

When the system collapses, the only ones ahead will be those who've
moved into "real value" in the Misesian sense. That's why the Wall St
types are buying 20mn$ condos in NY and chateaux in the south of
France -- they know something you don't. Compared to what they get
paid (in newly created funny-money) those condos are at a damn
discount. And eating cake in France while the peasants can barely
afford bread in Austerity-USA? Well, that's sweet too.

Information is power, and those with it don't want you to have
it. Therefore you will always get misinformation first. Don't believe
the propaganda. Read and learn (but don't read Krugman, the man's a colossal
jackass) but mostly, just work through the logic. Logic won't lead you astray
(unless you are Yudkowsky trying to figure out economics).