Re: [gang8] Re: What is Creditary Economics?

[Harry Veeder <eo200@xxxxxx>]

As I suggested in my post "Interest as reward or penalty?" , the reward
paradigm may be not be the right paradigm for understanding the nature of
interest...at least with respect to credit.

Harry




From: Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx>
Date: Thu, 17 Apr 2003 14:35:06 -0400
To: william_b_ryan@xxxxxxxxx, pkt@xxxxxxxxxxxxxxxx
Cc: pdavidso@xxxxxxx, Gang8 <gang8@xxxxxxxxxxxxxxx>
Subject: Re: [gang8] Re: What is Creditary Economics?


Bill:

Agree.

And so would Keynes notwithstanding his contention that "Interest to-day
rewards no genuine sacrifice." (General Theory, Ch. 24)

For financial services provided to the production sector represent essential
"factor input".

In this respect, 'financial services' are on par with those of "the
entrepreneur and his assistants" of which Keynes wrote:

"It is much preferable to speak of capital as having a yield over the course
of its life in excess of its original cost, than as being productive.....

"I sympathise, therefore, with the pre-classical doctrine that everything is
produced by labour, aided by what used to be called art and is now called
technique, by natural resources which are free or cost a rent according to
their scarcity or abundance, and by the results of past labour, embodied in
assets, which also command a price according to their scarcity or abundance.
It is preferable to regard labour, including, of course, the personal
services of the entrepreneur and his assistants, as the sole factor of
production, operating in a given environment of technique, natural
resources, capital equipment and effective demand.  This partly explains why
we have been able to take the unit of labour as the sole physical unit which
we require in our economic system, apart from units of money and of time."
(Ch. 16)

The point at issue between Paul and myself relates to purely theoretical
concerns which, many years ago, I raised with Robert Solow roughly as
follows:

"Why do mainstream economists reason AS IF productive investment is financed
with "savings" from current income and NOT with new credit created by the
banking system with a stroke of the pen/computer key?"

Of course, the question of "interest" as reward for giving up liquidity does
not arise with respect to such new credit.

Hence my question to Paul, "how does the
interest-as-reward-for-giving-up-liquidity concept apply to the U.S.
economy, where MPC has exceeded unity in recent
years?"

The brief answer, I submit, is that it does NOT apply.

Gunnar



----- Original Message -----
From: William B. Ryan <mailto:william_b_ryan@xxxxxxxxx>
To: pkt@xxxxxxxxxxxxxxxx
Cc: gunnar.tomasson@xxxxxxxxxxx ; pdavidso@xxxxxxx
Sent: Thursday, April 17, 2003 12:41 PM
Subject: Re: [gang8] Re: What is Creditary Economics?

Interest is the service charge for financial services
rendered.
--


On Thu, 17 Apr 2003 09:55:06
 Gunnar Tomasson wrote:
>Paul:
>
>Re. the following:
>
>> REALLY GUNNAR YOU ARE HOPELESS.  YOU RECEIVE INTEREST NOT FOR SAVING A
>DOLLAR
>> -- FOR IF YOU PUT THAT DOLLAR IN YOUR MATTRESS -- YOU SAVED IT BUT EARNED
>> NOTHING.
>
>Your $1 mattress strawman has no bearing on my argument - "I save/lend you a
>dollar at x% interest per annum."
>
>More to the point, how does the interest-as-reward-for-giving-up-liquidity
>concept apply to the U.S. economy, where MPC has exceeded unity in recent
>years?
>
>Gunnar
>
>
>
>
>
>----- Original Message -----
>From: "pdavidso" <pdavidso@xxxxxxx>
>To: "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
>Cc: <pkt@xxxxxxxxxxxxxxxx>
>Sent: Wednesday, April 16, 2003 10:33 PM
>Subject: RE: What is Creditary Economics?
>
>
>> >===== Original Message From Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx>
>> =====
>> >Paul:
>> >
>> >Re. the following:
>> >
>> >> >Warren:
>> >> >
>> >> >The point at issue is Economics 101.
>> >> >
>> >> >For Interest denotes (a) the PRICE of Credit, and (b) the RETURN on
>> >> >Savings.
>> >>
>> >>
>> >>
>> >
>> >If it walks like a duck ...
>> >
>> >I save/lend you a dollar at x% interest per annum.
>> >
>> >I give up/you receive a dollar's worth of liquidity at x% interest per
>> >annum.
>> >
>>
>> REALLY GUNNAR YOU ARE HOPELESS.  YOU RECEIVE INTEREST NOT FOR SAVING A
>DOLLAR
>> -- FOR IF YOU PUT THAT DOLLAR IN YOUR MATTRESS -- YOU SAVED IT BUT EARNED
>> NOTHING.
>>
>> WHEN YOU LEND THE DOLLAR TO ME -- YOU GAVE UP THE LIQUIDITY OF THAT
>DOLLAR --
>> I.E., YOU CAN NOT USE IT TO SETTLE A CONTRACTUAL OBLIGATION---  BUT I CAN
>AND
>> AM WILLING TO PAY YOU TO GIVE UP THE LIQUIDITY TO ME.
>> THEREFORE -- AS I SAID BEFORE:
>>
>> HERE IS YOUR PROBLEM GUNNAR-- THE RATE OF INTEREST IS NOT THE RETURN ON
>> >> SAVINGS!!!  IT IS THE RETURN FOR GIVING UP LIQUIDITY!!!
>>
>>
>> pAUL
>>
>> Paul Davidson
>> Editor, Journal of Post Keynesian Economics
>> University of Tennessee
>> SMC 503
>> Knoxville, Tennessee 37996-0550
>> office phone #;(865)974-4221; office fax# (865)974-1686 or (865)974-4601
>> home phone and fax # (865)692-0802
>> email pdavidson@xxxxxxx
>> http://econ.bus.utk.edu/davidsonextra/Davidson.html
>>
>>
>
>
>


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Paul:

Re. the following:

> REALLY GUNNAR YOU ARE HOPELESS.  YOU RECEIVE INTEREST NOT FOR SAVING A
DOLLAR
> -- FOR IF YOU PUT THAT DOLLAR IN YOUR MATTRESS -- YOU SAVED IT BUT EARNED
> NOTHING.

Your $1 mattress strawman has no bearing on my argument - "I save/lend you a
dollar at x% interest per annum."

More to the point, how does the interest-as-reward-for-giving-up-liquidity
concept apply to the U.S. economy, where MPC has exceeded unity in recent
years?

Gunnar





----- Original Message -----
From: "pdavidso" <pdavidso@xxxxxxx>
To: "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>
Sent: Wednesday, April 16, 2003 10:33 PM
Subject: RE: What is Creditary Economics?


> >===== Original Message From Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx>
> =====
> >Paul:
> >
> >Re. the following:
> >
> >> >Warren:
> >> >
> >> >The point at issue is Economics 101.
> >> >
> >> >For Interest denotes (a) the PRICE of Credit, and (b) the RETURN on
> >> >Savings.
> >>
> >>
> >>
> >
> >If it walks like a duck ...
> >
> >I save/lend you a dollar at x% interest per annum.
> >
> >I give up/you receive a dollar's worth of liquidity at x% interest per
> >annum.
> >
>
> REALLY GUNNAR YOU ARE HOPELESS.  YOU RECEIVE INTEREST NOT FOR SAVING A
DOLLAR
> -- FOR IF YOU PUT THAT DOLLAR IN YOUR MATTRESS -- YOU SAVED IT BUT EARNED
> NOTHING.
>
> WHEN YOU LEND THE DOLLAR TO ME -- YOU GAVE UP THE LIQUIDITY OF THAT
DOLLAR --
> I.E., YOU CAN NOT USE IT TO SETTLE A CONTRACTUAL OBLIGATION---  BUT I CAN
AND
> AM WILLING TO PAY YOU TO GIVE UP THE LIQUIDITY TO ME.
> THEREFORE -- AS I SAID BEFORE:
>
> HERE IS YOUR PROBLEM GUNNAR-- THE RATE OF INTEREST IS NOT THE RETURN ON
> >> SAVINGS!!!  IT IS THE RETURN FOR GIVING UP LIQUIDITY!!!
>
>
> pAUL
>
> Paul Davidson
> Editor, Journal of Post Keynesian Economics
> University of Tennessee
> SMC 503
> Knoxville, Tennessee 37996-0550
> office phone #;(865)974-4221; office fax# (865)974-1686 or (865)974-4601
> home phone and fax # (865)692-0802
> email pdavidson@xxxxxxx
> http://econ.bus.utk.edu/davidsonextra/Davidson.html
>
>



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