Quote from: cartman on July 21, 2011, 01:32:54 PM

capital yield > interest ~~> capital yield~~ > 0

I didn't meant that part.

Quote from: jtimon on July 18, 2011, 05:58:10 PM

If the demand for that capital was fully satisfied, the capital yield would tend to zero.

With this I mean that the existence of capital yield for a given type of capital proves that the demand for that capital is not fully satisfied and that capital yields aren't profits, because if they were, competition would vanish them.

Quote from: cartman on July 21, 2011, 01:32:54 PM

Quote from: jtimon on July 20, 2011, 04:00:33 PM

Quote from: Rassah on July 19, 2011, 04:51:57 PM

If you take the gross interest, and subtract assumed inflation rate and the risk premium, the only thing left would be profit, which in our vastly large, liquid, and competitive currency market, is pretty much 0. That's profit on just currency lending alone. But most profit comes from either sale of services or goods. Paper itself doesn't give a profit other than through someone else's work, and that someone else is free to chose where they get their paper in an extremely competitive and saturated market. So I just can't wrap my head around this claim. Where is this hidden, and seemingly impossible, profit coming from? Is it a relic of when banks were few, information wasn't easily exchanged, and banks could get away with charging you way more for the loan than your risk called for?

So the liquidity premium/basic interest doesn't exist? It's only profit that tends to zero by competition, inflation and risk premiums for money?
Do you at least agree that it would cause (if it existed) the undesirable effects I'm describing?

I pretty much agree with the gross interest consisting of risk premium and profit. The aggregate profit I would call growth of economy. If there is nothing to grow (Japan by the way is a great example, as mentioned here before!), profits of all firms tend to zero (a few may last a bit longer and grow faster and quickly reach the equilibirum). So one could assume, the interest still consists of the risk premium. This is theoretically correct, but if there are no borrowers, there is also no risk premium. Also it becomes almost inifitely easy to pay back loans, since interest tends to zero. So both components of interest tend to zero. Imagine a market where nobody wants any money! There can neither be interest nor can there be use for the money-owners.
One could loosen the assumptions here and say "in reality, it never reaches zero", because of several reasons:
-there is always some rate of technological development
-there is always someone who needs money because he did miscalculation within his budget
-there is always someone who thinks he can make money from investment even if he can't

Here again, if they were profits they would tend to disappear or remain only when there's growth as you claim. If it can't go to zero by competition, I would prefer to not call it profit or that we pick another word to distinguish that kind of profit (the one that tends to zero).
If the basic interest/liquidity premium/liquidity profit is equal to the average growth of the economy, Why must money profit as much as the average growth without risk?

Quote from: cartman on July 21, 2011, 01:32:54 PM

Nevertheless, the implications of my theory remain valid: Higher growth rates lead to higher wage gap, higher wealth gap and to a higher worth of money and education.

I agree with those claims, although I would say that is necessary that the growth comes somehow from innovation.
What I don't agree with is that the interest would disappear without growth.

Quote from: cartman on July 21, 2011, 01:32:54 PM

I am lazy but somewhere you wrote something like "how can there be interest while a depression".
I am not sure if we ever had a worldwide recession at a time where we also surveyed data about interest and growth. In the latest recession there still was economic growth in the average world (I think around 4%). The only thing that makes my model somewhat unrealistic is, that large differences in interestrates are possible between countries. e.g. why doenst china suck up all the low interest money of japan and US and boost their growth a little? interestrates should then converge; again this is somewhat prohibited by customs and central bank policies. Maybe this is already happening on a larger scale as I think and it just takes its time.

Yes. Somewhere I said something like "That basic interest exists within depressions proves that doesn't need growth to be there".
Correct me if I'm wrong.
Is your argument that we've never had a global depression and that the interest only came from the growth in other countries?