>No they don't. Savings is only a number in a computer and lending is not limited to the available savings because private banks create money when lending. So, the quantity of savings have not effect in how much financial capital can be invested in the economy.
If that were 100% true (there is a caveat) then the ideal savings rate would be 0% and that would be truly awful for every entity in the economy regardless of whether they are companies or private individuals. All savings would become excess savings and interest rates would need to be in the double digit negatives.
In practice this would actually run into a contradiction, if the savings rate were 0% that would mean all income is immediately consumed or invested, meaning the economy runs at full capacity at all times, any increase of the monetary supply would immediately translate into inflation because all goods that are being produced are already being consumed, the additional money would result in additional consumption that causes a shortage of goods which then translates into increased prices aka inflation. At some point you would run into the physical limits of the economy.
As your savings rate is 0%, the amount of money that can be created without inducing inflation is also $0. The potential for lending is "effectively" limited by available savings.
I didn't say anything about the ideal savings rate being 0%
The quantity of savings is divorce of the quantity of money available for investing or, in other words, lending money doesn't come from savings. That's an empirical fact.
Of course, households and firms are going to choose to keep savings, and that's OK. If people choose to spend more and keep less savings then, Central Banks could accommodate the Interest Rate in order to make lending more expensive and avoid inflation, or the government could increase taxes or some other solution that retires money from the economy.
If that were 100% true (there is a caveat) then the ideal savings rate would be 0% and that would be truly awful for every entity in the economy regardless of whether they are companies or private individuals. All savings would become excess savings and interest rates would need to be in the double digit negatives.
In practice this would actually run into a contradiction, if the savings rate were 0% that would mean all income is immediately consumed or invested, meaning the economy runs at full capacity at all times, any increase of the monetary supply would immediately translate into inflation because all goods that are being produced are already being consumed, the additional money would result in additional consumption that causes a shortage of goods which then translates into increased prices aka inflation. At some point you would run into the physical limits of the economy.
As your savings rate is 0%, the amount of money that can be created without inducing inflation is also $0. The potential for lending is "effectively" limited by available savings.