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Duncan Foley raised the following question:
Since capital can move from the other sectors to banking, wouldn't the
force of competition tend to equalize the rate of profit on banking capital
to the average rate of profit?
The mechanism might be a wider or narrower spread between bank's lending
and borrowing rates of interest.
Chai-on Lee would like to answer:
(1) banking capitals have the power of creating money capitals.
(2) actual lender is not the banking capital but the other commodity producers. The producer from whom the borrower buys products now might not be the actual lender since he receives cash in exchange for his/her products from the borrower. The borrower buys now but does not sell now, who only promises to sell in future. As far as the exchange sphere is concerned, the other producers give him/her a credit as they can buy from him/her only in future.
(3) we shall call this a forced credit. All the other producers are forced by the creation of deposit account to sell their products to the borrower on credit.
(4) The interest charges on the credit attributed to the banking capital is paid directly from the borrower but in fact is usurped from the actual lenders. I would call it an overhead social cost of credit commodity circulation.
With Regards
Chai-on
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