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RESEARCH PRODUCT

Money, "finance" and interest

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The purpose of this paper is to show that there is no such thing as a pure money interest in the usual meaning of the phrase, that is, interest bearing on pure bank money. Basically, money cannot bear interest because it is not a net asset. This does not however imply that banks cannot charge interest on liquidities they have created. The concept of "finance" brings to light the process through which a liquid capital owned by the banks is formed in the economy. It then becomes clearer that what is commonly called "money interest" paid to banks is in fact a macroeconomic cost of production and therefore a net asset for the whole of the economy, including the banks.