Sorry to clog up the airwaves again but Paul's (PEN- L1026) post has drawn my attention to an error. I said ========================================================= [I am therefore slightly uncertain about Paul's conclusion [PEN-L 939] that a lower interest rate calls forth a larger supply of loanable capital...etc.. ========================================================= Paul said ========================================================= If I said this, it was certainly not what I intended to say. Firstly I do not believe there is such a thing as a supply of money or loanable funds. There is a statistical practice of adding up bank deposits and calling this a supply of money, which is another thing. I said that high interest rates, to the extent that they accelerate the polarisation of capital, simultaneously accelerate the growth of debt and hence of bank deposits. Hence it appears that high interest rates have called forth a larger supply of loanable funds. ========================================================= (i) I should have said a *higher* interest rate. (ii)I accept that I wasn't totally clear about Paul's point and I am happy to accept his own version of his argument. I make one point which might clarify things a bit: In Marx and still, I think, in the real world, there is a process which converts money (proper money) into loanable capital, there is a process which converts loans back into money, and there is a distinction between the two. Suppose for simplicity I keep money in a bedsock in the form of a gold hoard. If, as a result of a high interest rate, I take it out of the sock and loan it to someone, then I have converted money into loanable capital. If, as a result of a low interest rate, I call in my due loans and issue no new ones, then I have converted loanable capital into money. This is what, perhaps erroneously, I thought Paul was referring to. Pools of money arise naturally in the cycle of reproduction because private individuals are paid in money which they save up, if they are sufficiently well- off, to create a reserve for durables.. This is, after all, what gave rise to the Scottish banks which were essentially thrifts. The issue is more complex when money accumulates in bank deposits instead of bedsocks because, in a certain sense, the mere fact of placing the money with a bank has already converted it into loan capital, as is proven by the fact that the bank increases its lending on the strength of its deposits. However as a first simplification I don't think it unreasonable to treat money at call (current accounts) as money since current accounts are technically always at the disposition of the depositor. They are treating the bank as a bedsock. If the banks are allowed to get away with using this as a fund for part of their loans, then this is essentially a swindle (cf the crisis of the US thrifts) which should be treated as part of the business of the banks and not of the depositors who do not regard their deposits as loans but as a mere place of safe keeping; a perception which is backed up by their legal right to withdraw the money in 'cash' at a time of their choosing. But even here the 'cash' consists of bearer instruments backed by the government; I would certainly have trouble arguing that dollars or pounds do not consititute money just because they are not redeemable for gold. But I agree that it is upside down to speak as if the deposits themselves constitute the money. The deposits are the measure of the money which, at least in principle, exists independent of the deposits. Alan
