Quote from: Hideyoshi on December 29, 2013, 06:23:21 AM

Quote from: Impaler on December 28, 2013, 08:39:22 PM

But when you look from the perspective of the entrepreneur you see how this falls apart. The entrepreneur in a capitalist society has to borrow money to make purchases of capitol goods and that means the interest rate is a KEY factor in determining how much money entrepreneur will be lent. Some entrepreneur will have highly profitable ideas/opportunities some will have less, a whole spectrum will exist but only the entrepreneur with an expected return above the rate of interest will be funded.

I am wondering who is really entrepreneur in our economy, people with good ideas, or banks? It is banks with money who give loans who do all investing, not entrepreneurs. So I am wondering why banks, or in deflationary, savers with lots of money, can not themselves be entrepreneurs. This is like difference in customers borrowing to spend versus saving to spend.

Inflationary (pay = pay for loan)
buy --- buy --- buy --- buy --- buy --- buy pay --- pay --- pay --- pay --- pay

Deflationary (pay = put money into saving)
buy --- buy --- buy --- buy --- buy pay --- pay --- pay --- pay --- pay --- pay

At beginning there is difference, but after it is same buy and pay.

In a sense yes, bankers and entrepreneurs are together doing all investments and my earlier comments on opportunity cost show that it doesn't matter WHO is providing the money, the interest rate gives the same incentive to DO or not do the investment if it is with borrowed money or your own money because the interest rate is for EVERYONE in an economy including the entrepreneur, it is as they say the most important price in the whole economy.

Your whole description of inflation and deflation in terms of 'pay in advance' vs 'pay after' is missing the point. Every possible investment activity involves turning liquid money into illiquid goods and then back into (hopefully) more money MANY MANY times in the course of a year, ideally as fast as you possibly can. The distinction of starting with your own money from savings or with loaned money is irreverent. What matters is your internal rate of return vs your interest rate. You must exceed interest rates to be considered 'a good investment' even if your self capitalized.