->>I disagree that this is a chicken and egg situation. The causal relationship is that loan advances create deposits. <<<
You are making an a priori assumption about the causal relationship. Douglas' theorem says simply that the rate of flow of deposits equals the rate of flow of loans. You could just as easily claim that deposits create loans. It could not be disproved because it would also be an a priori assumption. -- ->>Some of which (eg, demand deposits within banks) are never used to create new loan advances, while other "deposits" (or, more correctly, borrowings) might well be used for creating new loans. <<< Do you see what a tangled web you weave when you argue a priori rather than from observation? You just said that loans create deposits. Now you say that deposits can be used to create loans. Continuous dynamic processes, as a matter of logic, have no beginning or end, i.e. no cause and effect. Every element is proceeding simultaneously. You make sense out of them by looking at them as they concatenate through time. That is, you observe them. The fact that something might seem to come first does not mean that something is the cause of what may seem to come next. Eliminate the egg there is no chicken. Eliminate the chicken there is no egg. I'll skip over some parts that we'll fill in later. There is an observable flux of loans from the financial sector, and the observable reflux from the rest of the economy in amortization of those loans. This flux and reflux can be graphed on a chart against time. The respective flux and reflux curves remain identical regardless of the rate of interest-- which is simply a matter of bookkeeping. What changes is the bookkeeping allocation of the reflux. At a zero percent rate of interest all the reflux is credited to principal. At any positive rate of interest a defined and agreed portion of the reflux is credited to interest. It means simply that profit is shared between entrepreneur and banker; what the entrepreneur pays the banker is in payment for financial services rendered. Between consumer and banker it means that the consumer shares with the banker the appreciation in his wealth that through his financial services the banker helped create. It is part of the way we got to where we are rather than being confined to the jungle hanging from trees. Which does not obviate the fact that banking is a monopoly that must be controlled. -- ____________________________________________________________ Get advanced SPAM filtering on Webmail or POP Mail ... Get Lycos Mail! http://login.mail.lycos.com/r/referral?aid=27005 ==^================================================================ This email was sent to: [EMAIL PROTECTED] EASY UNSUBSCRIBE click here: http://topica.com/u/?a84IaC.bcVIgP.YXJjaGl2 Or send an email to: [EMAIL PROTECTED] TOPICA - Start your own email discussion group. FREE! http://www.topica.com/partner/tag02/create/index2.html ==^================================================================
