Fiat banking has three things. a pile of ink and paper, a flow out and a flow in. That is three things, and if we apply symmetry, we get two possible symmetric things together. If we leave out symmetry we get six possible combinations. If we distinguish between the printing press and the recycle bin, then we get 24 possible combinations.
Now, into that mix, add 250 years of some 1,000 economists trying to figure it out. And no one ever discovered balanced flow? I mean, I can only see 40 possible groups of economists, each group having one of the 25 combinations in their theory. Monkeys on a typewriter would have gotten this.
There is no magic with interest and principal, they are going to equilibriate, or you will end up slammed against a boundary. There is no magic with price theory, prices ultimately find equilibrium, as does principal and interest. There is nothing to confuse anyone. You are going to have balanced flow or you will slam up against a boundary, its that simple.
Think of it as a mud puddle, the toddler fills it with one trickle and empties it with another trickle. Gravity prevents the toddler from having just one trickle, he has to have two, an empty trickle and a fill trickle. Using government as an empty trickle is just adding a recirculation, you will still end up slammed against a boundary.
Where the frig is George Selgin when we need him? Nor can I believe Chris Sims or Jim Hamilton missed this, not John Cochran. Maybe Uncle Milt kind of got it.
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