> Michael wrote: > > > >So I still want to continue with my naive question. > > > > > I've begun to think of a bank loan as a permission slip to use real > assets -- like steel or wheat, or cotton, or even the labor of people or > machines. And when those assets are used (up) they're gone. > > The piece of paper, the IOU, is a claim to have the real things > back. But they're gone. They have to be produced anew, somehow. So what > is a bad loan? Just a piece of paper that no longer can deliver the > production? But the ability to produce -- the steel, wheat, whatever -- > exists whether the paper IOU exists or not. So a bad loan just means the > lender is poorer than it thought, but the society isn't -- or is it? > > Was the S&L bailout just taxing everybody to make the lenders whole > again? But that would be a transfer, wouldn't it? > > Gene Coyle _______________ I think here the concept of productive and unproductive labor can be used profitably here. A bad loan could mean that the surplus was used more like a revenue and failed to be reinvested as capital. We should also keep in mind that the output structure at any given time t reflects the decision to save (invest) or consume made in time period t-1and before. I think, in a growing economy a simple change in taste (which probably would take place with change in income) would lead to short term crisis. Just an hypothesis. Cheers, ajit sinha > > > > > > >
