From: Allin Cottrell (cottrell@WFU.EDU)
Date: Thu Jun 08 2006 - 20:54:53 EDT
On Thu, 8 Jun 2006, Ian Wright wrote: > You think there is a dimensional problem because you conflate the > price of money-capital with profit income. > > The price of money-capital, like the price of any commodity, is an > exchange ratio against money. It has got nothing to do with time. Ian, what do you think rides on this point? I still can't make any sense of your claim. Let r = 0.1. The borrower parts with $10 and receives $100. (Well, interest is not generally paid up front, but never mind that.) But the idea that $10 is the price of $100, simpliciter, is just economic nonsense. A loan has to be repaid. When? There's the time dimension. I pay $10 for the privilege of getting the use of $100 now (at t = t0), to be repaid at t = t1. The rate of interest I'm paying depends on the magnitude t1 - t0. To put it differently, r = 0.1 is just a wildcard, undefined, unless I know the period to which this interest rate applies. Allin Cottrell
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