This paper argues that it is important to distinguish between the real rate of interest on money and the profitability of business enterprise. The former is a purely financial or monetary phenomenon （as claimed by Ke...This paper argues that it is important to distinguish between the real rate of interest on money and the profitability of business enterprise. The former is a purely financial or monetary phenomenon （as claimed by Keynes） and the latter is in the nature of a surplus over and above the costs of production, including financing costs. There is an inverse relationship between the real rate of interest on money and the average mark-up or profit share. A synthetic theory of profit illustrates these points.展开更多
This paper develops a model where two lenders to subprime borrowers compete with the interest rates charged and the severity of loan covenants. The model has a stable equilibrium, which demonstrates how an increase in...This paper develops a model where two lenders to subprime borrowers compete with the interest rates charged and the severity of loan covenants. The model has a stable equilibrium, which demonstrates how an increase in the number of borrowers or an increase in the cost of meeting covenants will reduce the severity of the covenants required by lenders, and each of these changes will increase the difference in the severity of the loan covenant levels. An increase in the expected losses to the lender from relaxing covenants will increase the severity of loan covenants, and this will also make the levels of severity more dispersed. Additional analysis demonstrates how exogenous shifts affect the interest rates charged by the lenders and their profits展开更多
文摘This paper argues that it is important to distinguish between the real rate of interest on money and the profitability of business enterprise. The former is a purely financial or monetary phenomenon （as claimed by Keynes） and the latter is in the nature of a surplus over and above the costs of production, including financing costs. There is an inverse relationship between the real rate of interest on money and the average mark-up or profit share. A synthetic theory of profit illustrates these points.
文摘This paper develops a model where two lenders to subprime borrowers compete with the interest rates charged and the severity of loan covenants. The model has a stable equilibrium, which demonstrates how an increase in the number of borrowers or an increase in the cost of meeting covenants will reduce the severity of the covenants required by lenders, and each of these changes will increase the difference in the severity of the loan covenant levels. An increase in the expected losses to the lender from relaxing covenants will increase the severity of loan covenants, and this will also make the levels of severity more dispersed. Additional analysis demonstrates how exogenous shifts affect the interest rates charged by the lenders and their profits
