Money stocks and interest flows (was: James A. Baker III)

["Alan G. Isaac" <aisaac@xxxxxxxxxxxx>]

On Thu, 21 Dec 2000, Gunnar Tomasson wrote:
> Given
> (a) outstanding credit (money supply) of 100, and
> (b) loan interest rate of 10% per loan period, then
> (c) end-period repayment of principal and interest will total 100 + 10 =
> 110.

> Absent NEW credit to the original debtor(s) in the amount of 10, accrued
> interest CANNOT be paid.


While this story may suggest it is unwise for a person
to borrow in the absence of anticipated income,
it tells us nothing about monetary economies
(where the money STOCK has no necessary relationship
to income FLOWS).

Alan Isaac