In this section, Commons starts by again trying to clarify the mistakes made by Macleod. The banker in making a profit moves in one transaction to lend and create money for debtor and then receive a profit at the end of that period as enforcement of the duty to pay the debt is enforced. The merchant makes money via two transactions whereby there is a buying price for the inputs and a selling price for the outputs. Unlike the banker, these are two separate negotiated transactions.
Commons turns to the importance of a lapse of time versus a flow of time which he will continually emphasize throughout this chapter. A lapse of time relates to a debt and debt payment. There is a specified time where an amount must be repaid to a lender at a specified rate of interest. A flow of time is the recognition of profit as a merchant tries to gain forma number of buying and selling transactions over time.
The final section talks about the impact of the bank discount rate on foreign exchange flows between countries. The discount rate being or lower between places will cause a flow of gold and cash to occur to the place with a higher discount rate and therefore a better payoff for investors. Commons credits Macleod with understanding this dynamic before many others.
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