THE INTELLECTUAL VOICE OF CAPITALISM ON THE INTERNET
The Jefferson School of Philosophy, Economics, and Psychology

Literature and Lectures by Edith Packer, George Reisman, and Others

Reisman's Blog

Reisman's Essays and News Commentaries

Library of Liberty

 The Jefferson School Mission Statement

Home

Join our mailing list  E-mail us TJS Contact Information and Customer Policies TJS Accepts Credit Cards View Cart

 
Reisman's Program of Self-Education in the Economic Theory and Political Philosophy of Capitalism 2.0, on CDs, in mp3 format.

CAPITALISM:
A Treatise on Economics
by
George Reisman


The Clearest and Most Comprehensive Contemporary Defense of the Capitalist Economic System Available

Click on image or description above to bring up the complete text in pdf.

Literature and Lectures by Edith Packer, George Reisman, and Others

Noble Vision, a novel by Genevieve LaGreca

Now available in paperback
 

  • Ludwig von Mises's Human Action in pdf, courtesy of Bettina Bien Greaves and Laissez-Faire Books
In Association with Amazon.com

An Important Message concerning ordering.

 

 

From Chapter 6: "The Dependence of the Division of Labor on Capitalism II: The Price System and Economic Coordination"

[Excerpt: "Why It's Reasonable that You Can Borrow Money Only to the Extent that You Have Money" (p. 187)]

This excerpt is taken from George Reisman, Capitalism: A Treatise on Economics. Ottawa, Illinois: Jameson Books, 1996. Copyright © 1996 by George Reisman. All rights reserved. May not be reproduced in any form without written permission of the author. The following limited exception is granted: Namely, provided they are reproduced in full and include this copyright notice and are made for noncommercial use, i.e., for use other than for sale, including use as part of any publication that is sold, copies of this excerpt may be downloaded into personal computers and distributed electronically or on paper printouts from a personal computer; reproduction on the internet is permitted provided the copy of the excerpt is accompanied by the following link to the Jefferson School's home page (which may, and hopefully will, be displayed elsewhere and more prominently): The Jefferson School of Philosophy, Economics, and Psychology. This limited right of reproduction expires on December 31, 1999.

This page has been visited Hit Counter times since August 7, 1999.

In the light of the preceding discussion [of the rate of interest tending to be lower than the rate of profit], the frequent complaint that one can borrow money only to the extent that one already has it, appears absurd. Nothing could be more natural or reasonable than that one must have money in order to borrow money. This is because if one is to acquire the funds of others at a fixed, limited rate of return, one must have the means of ensuring that these funds and the promised return are protected. In essence, all loans are margin loans. Only to the extent that the borrower himself possesses capital can he provide a margin of safety on a larger total capital. It is thus no less absurd to complain that people cannot borrow funds except to the degree that they already possess funds than it would be to complain that one cannot speculate on the stock exchange beyond the degree that one can provide the necessary margin. Every entrepreneur must himself be a capitalist or he must find a capitalist who is willing to be his partner in entrepreneurship. In every venture in which lenders have capital there must also be equity capital. To secure more borrowed capital, there must be more equity capital.