Re:Money Creation in the Modern Economy
by sokoloff on Sunday January 15, 2023 @05:31AM
(#34388373)
When a builder Alex builds an original building (typically using a construction loan), we both agree that’s productive (that construction loans are good things to exist).
Now that the building is standing, Billie wants to buy it. Maybe they want to live in it; maybe they want to rent it out. Is that purchase productive or unproductive? Since it’s the way Alex gets the money to pay off the construction loan (and thus be able to build another building), I think it’s as productive as the construction loan. (Further, no bank would make the original construction loan if there was no prospect for it to be paid off, so builders would have to hold buildings for their economic life if no one else could get loans to buy them.)
Now some more time passes and Charlie wishes to take a loan to buy the building from Billie. Is that productive? Well, it supports Billie’s ability to pay off their loan which supported Alex’s ability to pay off theirs, which is what supported the building existing at all, so…
Re:Money Creation in the Modern Economy
by sokoloff on Sunday January 15, 2023 @10:08AM
(#34389938)
Ok. I read your previous as suggesting that even Billie’s loan was unproductive or Alex was doing something wrong. (Alex has built a spec property and intends to leave it empty until sale as they’re in the construction business.)
Now that the building is standing, Billie wants to buy it. Maybe they want to live in it; maybe they want to rent it out. Is that purchase productive or unproductive? Since it’s the way Alex gets the money to pay off the construction loan (and thus be able to build another building), I think it’s as productive as the construction loan. (Further, no bank would make the original construction loan if there was no prospect for it to be paid off, so builders would have to hold buildings for their economic life if no one else could get loans to buy them.)
Now some more time passes and Charlie wishes to take a loan to buy the building from Billie. Is that productive? Well, it supports Billie’s ability to pay off their loan which supported Alex’s ability to pay off theirs, which is what supported the building existing at all, so…