I've always seen this as an over-simplification that leads down an incorrect path of thinking. It "doesn't exist" if you think the only thing that has an effect on the economy is the number of dollars in circulation at a given instant. A person that has money saved may behave differently in the economy vs that same person with no money saved. They may buy different things or take bigger financial risks with the money they are spending.

I agree, but I don't think that was the issue being discussed.