The Broad Context of Interest Rates and Interest Payments

Our subject is Interest Rates and Payments; and “The Macrodynamic Rate of Return”.

Interest rates are intrinsic to the process; they are neither extrinsic nor exogenous.  The context of our subject is the intelligibility of the entire process.  Thus, there are several inner aspects of the process which merit consideration.

To provide background and context to interest rates, we recite immediately the initial sentences of a review-to-follow of several aspects of the economic process.

  1. The inquiry into the intelligibility of the economic process is a general inquiry.
  2. The objective economic process has a general theory independent of the psychology of its human participants.
  3. The basic requirement for dynamic equilibrium is that the rate of savings vs. consumption must be adjusted to the rate required by the process of surges and taperings.
  4. The normative function of interest-bearing credit money is to bridge the gap between payments made and payments received in the production and sale process.
  5. The Central Bank’s artifice of manipulation of interest rates to adjust savings to the shifting requirements of the intrinsically-cyclical economic process is, because of a double edge, inept, distortive, and counterproductive.
  6. Functional Macroeconomic Dynamics consists of a unified set of relations among several distinct but related functional velocities and accelerations of products and money. Interest payments and interest rates are merely two-among-several payments and rates implicit in the unified set of explanatory relations of the objective economic process. As such, they are not more sacred (or “magical”) than any other payments or rates. Their manipulation is not the one and only golden lever.
  7. Changes in the charged interest rate tend normally to run parallel to the inflation and deflation caused by imbalances of the “crossovers.”
  8. Interest payments to lenders have two components for the two distinct services provided by the lenders in the productive process.
  9. Interest payments – flows of money – for the rental use of money to enable and complete transactions are part and parcel of those economic transactions.
  10. Manipulation of any of the natural internal elements and relations of the process is, of its nature, unfavorably distortive.
  11. The same amount of money for investment can be used over and over again.
  12. We are concerned to relate three precisely-distinct functional categories of income and expenditure to one another.
  13. When capital goods move from being “under production” or “in the process” into “installeduse within the process,” they enter the category of “static wealth.”[1]
  14. Scientific functional explanatory conjugates must not be confused with the accountants’ unities.
  15. Our analysis does not seek its solid foundation relating the activities of firms attempting to maximize accounting profits to the activities of households attempting to maximize psychological utility.

I

  1. The inquiry into the intelligibility of the economic process is a general inquiry.  The inquiry proceeds on a more general plane to terminate in a more general conclusion.

It is, we believe, a scientific generalization of the old political economy and of modern economics that will yield the new political economy which we need. … Plainly the way out is through a more general field. [CWL 21, 6-7]

What is generalization? What is meant by “a field of greater generality”?  What is an inadequate level of abstraction?

Generalization comes with Newton, who attacked the general theory of motion, laid down its pure theory, identified Kepler’s and Galileo’s laws by inventing the calculus, and so found himself in a position to account for any corporeal motion known.  Aristotle, Ptolemy, Copernicus, Galilei, and Kepler had all been busy with particular classes of moving bodies.  Newton dealt in the same way with all.  He did so by turning to a field of greater generality, the laws of motion, and by finding a deeper unity in the apparent disparateness of Kepler’s ellipse and Galilei’s time squared. … Similarly the non-Euclidean geometers and Einstein went beyond Euclid and Newton. … The non-Euclideans moved geometry back to premises more remote than Euclid’s axioms, they developed methods of their own quite unlike Euclid’s, and though they did not impugn Euclid’s theorems, neither were they very interested in them; casually and incidentally they turn them up as particular cases in an enlarged and radically different field. … Einstein went beyond Newton by employing the new geometries to make time an independent variable; and as Newton transformed the formulation and interpretation of Kepler’s laws, so Einstein transforms the Newtonian laws of motion. … It is, we believe, a scientific generalization of the old political economy and of modern economics that will yield the new political economy which we need. … Plainly the way out is through a more general field. [CWL 21, 6-7]

economics corrected political economy in the wrong way, … not by moving to the more general field and so effecting the correction without losing the democratic spirit of the old movement, but by staying on the same level of generality and by making up for lost ground by going into the more particular fields of statistics, history, and a more refined analysis of psychological motivation and of the investigation of decisions to exchange. ¶Plainly the way out is through the more general field. [Lambert and McShane, 102-3]

It will be shown…. (9) that prices can not be regarded as ultimate norms guiding strategic economic decisions, (10) that the function of prices is merely to provide a mechanism for overcoming the divergence of strategically indifferent decisions or preferences. [CWL 15, 5-6]

Because the general includes the particular, a generalized economics virtually includes the casual and incidental particular price and quantity boundaries of economics.[2]  Thus any particular rate of interest or particular rate of return intrinsic to the process can be calculated only through a particular solution of the governing general differential intelligibility.  And we might add, particular market rates of interest or rates of return are of only casual and incidental interest to a generalized economics.

We are not going to discuss (the casual and incidental particulars of ) wealth or value, supply and demand, price levels and price patterns, capital and labor, interest and profits, production, distribution, and consumption. Because we are not, it certainly will be objected that our discussion has nothing to do with economic science, for economics is precisely the study of wealth and value, (interest and profits), supply and demand, and so on.  The answer is as follows.  The discussion moves on a more general plane to terminate in a more general conclusion.  Because the general includes the particular, a generalized economics cannot but include the particular economics. [CWL 21, 8]

One might be reminded here of a parallel in hydrodynamics: if what is at issue is a general specification of the dynamics of free water waves, a premature introduction of general boundary conditions or worse, specific channel conditions, botches the analytic possibilities….the Robinson-Eatwell analysis is hampered … by their building the economic priora quoad nos of profits, wages, prices, etc., into explanation, when in fact the priora quoad nos[3] are last in analysis: they require explanation. [McShane 1980, 124][4]

The basic terms of the sciences …  are defined by their respective relations to one another.  To distinguish between the defining relation and the defined term can be no more than a notional operation; and even then it cannot be carried through, for if one prescinds from the defining relation, one no longer is thinking of the term as defined but of some other term that is mistakenly supposed to be absolute.  Finally, while there are relations other than such defining relations, still they are not adequately distinct from them; for these other relations are concrete; their primary relativity consists in the defining relations; and their secondary determinations are neither relations nor the reality of relations but the contingent concrete differentiations of the primary relativities. [CWL 3, 496/516]

Paraphrasing in part:

The basic terms of the science of macroeconomics …  are implicitly defined by their respective functional relations to one another.  To distinguish between the defining functional relation and the defined functioning can be no more than a notional operation; and even then it cannot be carried through, for if one prescinds from the defining functional relation, one no longer is thinking of the functioning as defined but of some other term that is mistakenly supposed to be absolute rather than purely relational.

Further,

while there are relations other than such defining functional relations, still they are not adequately distinct from them; for these other relations are concrete relations; their primary relativity consists in the defining functional relations; and their secondary determinations of prices and quantities are neither relations nor the reality of relations but the contingent concrete differentiations of the primary relativities.

Analytically – whether in physics or economics – there is, first, a general specification of the most fundamental relationships consisting of fundamental terms in their systematically fundamental relations, then a derivation or deduction of a superstructure of terms and relations. These fundamental and derived relations constitute the comprehensive theory. Subsequently there is the application of initial conditions, or of boundary conditions or secondary determinations, to get a particular solution of the general specification. This particular solution would constitute the particular law.

Newton used this scientific procedure in the development of his generalized mechanics; and Laplace could then apply the boundary values to pin down the laws of particular, elliptical planetary motion.

  1. The objective economic process has a general theory independent of the ever-shifting psychology of its human participants; i.e. regardless of the subjective sense of utility, indifference, timing preference, or the protean combinations of individuals’ rationality and irrationality. There exists the theory of functional Macroeconomic Dynamics which explains the objective conditions of equilibrium and disequilibria, and is thus independent of psychology and anthropology.

We seek the general laws of circulation in the production and exchange process.

A study of the mechanics of motor-cars yields premises for a criticism of drivers, precisely because the motor-cars, as distinct from the drivers, have laws of their own which drivers must respect. But if the mechanics of motors included, in a single piece, the anthropology of drivers, criticism could be no more than haphazard. [CWL 21, 109]

Paraphrasing:

A study of the mechanics of the economy yields premises for a criticism of participants, precisely because the economy, as distinct from the participants, has laws of its own which the participants must respect.  But if the mechanics of the economy included, in a single piece, the anthropology of participants (including irrationality and protean subjectivity), criticism could be no more than haphazard.

… the double-circuited and credit-centered economy is as naturally demanding as any motor engine. [CWL 21, Editor’s Introduction, xxvii]

Further as regards our search for a general theory and particular laws rather than ways to compile the corporate accountant’s results:

Now the viewpoint of the present discussion is neither that of the bookkeeper nor that of the equilibrium analyst. Equations (39) to (42)[5]are regarded not as a set of facts recorded by bookkeepers, nor as an ideal which entrepreneurs strive yet fail to attain, but as a first approximation to the law of circulation in the basic circuit.  The first approximation to the law of projectiles is the parabola: one might, if one chose, consider the projectiles as aiming at or tending towards the ideal of the parabola yet ever being frustrated by wind resistance; one might elaborately describe the trajectory of the projectile as an indefinite series of parabolas, each one in succession the goal of its tendency only to be deserted because adverse circumstance set it on another track.  In such a description of trajectories there is to be found at least a superficial resemblance with the statement that an economy is tending towards equilibrium at every instant, though towards a different equilibrium at every successive instant.  But whatever the resemblance, and however deep and significant the difference, we here propose to take a circuit and examine first the implications of this law and then the second approximations that are relevant to our inquiry.  [CWL 21, 142-43]

  1. The basic requirement for dynamic equilibrium is that savings vs. consumption must be adjusted to the shifting requirements of the process of surges and taperings; that is, as understood in the Diagram of Rates of Flow and in our explanatory equations, the “crossovers” which adjust savings for capital expansion and spending for consumer goods in order to satisfy the mutual dependence between circuits must balance. To satisfy this requirement, there must be in some circumstances anti-egalitarian and in other circumstances egalitarian shifts in the allocations of incomes.

To increase the rate of saving (in a capital-goods-expansion phase), increase the income of the rich. … to decrease the rate of saving (in a consumer-goods-expansion phase), increase the income of the poor. … The foregoing is the fundamental mode of adjusting the rate of saving to the phases of the productive cycle.  It reveals that the surplus expansion is anti-egalitarian, … but it also reveals the basic expansion to be egalitarian, for that expansion postulates that increments go to low incomes … [CWL 15, 135-37]

  1. The normative function of interest-bearing credit money is simply to bridge the gap between payments made and payments received in the production and sale process. These gaps occur between productive outlays by units of enterprise and receipts upon sale by units of enterprise. The credit money may be in the form of a working-capital loan, a long-term fixed-asset loan, or an equity investment in fixed assets.  For a detailed model, please visit the topic titled The Series and the Stack. (under construction)
  2. The Central Bank’s artifice of manipulation of interest rates to adjust savings to the shifting requirements of the intrinsically-cyclical economic process is, because of its double edge, inept, distortive, and counterproductive.

We repeat what we quoted in the Preliminary Guidance section of this topic:

Traditional theory looked to shifting interest rates (to manage the economy).  The difficulty with this theory is that a.) it lumps together a number of quite different things and b.) it overlooks the order of magnitude of the fundamental problem… [CWL 15,  141-144]

The ineptitude of the procedure arises not only from its inadequacy to effect a redistribution of income of the magnitude required … the effect of raising interest rates to encourage savings (for investment) is not to keep the rate of saving and the productive process in harmony as the expansion continues but simply (and counterproductively) to end the expansion by eliminating its long-term elements. [CWL 15,  141-144]

Rates of interest, when increasing, encourage saving (but discourage long-term borrowing).  This double edge is not the per se means of effecting the enormous shift in saving to bring about the transition from a slump or a basic expansion to a surplus expansion.  What is needed is a contraction of purchasing power that will direct spending from the basic market of the poor to the surplus market of the rich.  The surplus phase is anti-egalitarian … [CWL 15, 141 ftnt 198]

Similarly a lowering of interest rates may encourage the expansion of basic industry; but it also will encourage the expansion of well-intentioned but not well-thought-out innovations, the number of bankruptcies, etc.  What is needed is the egalitarian shift in incomes, that will compensate for the previous and shorter anti-egalitarian shift, and will produce the things that people really need and can learn to purchase.   [CWL 15, 141 ftnt 198]

  1. Functional Macroeconomic Dynamics consists of a unified set of relations among several distinct but related functional velocities and accelerations of products and money.Interest payments and interest rates are merely two-among-several payments and rates contained in the unified set of functional relations of the overall functioning process.  As such, they are not more sacred (or “magical”) than any other payments or rates.  Their manipulation is not the one and only golden lever.  So, in practice, an empowered central authority could, as it does by inept and counterproductive manipulation of the market interest rate, dictatorially and artificially manipulate the market pricing of materials, freight, labor services, legal services, managerial services, completed products, or whatever to force a particular distortion of the market pricing of a particular element.  Thus, an exogenous and artificial force would cause an associated strain in the allocational price-quantity system.  It would distort the technical relations of the process, misallocate factors of production, and perhaps generate black markets.

The market interest rate, as intrinsic rather than extrinsic or exogenous, is not to be a “response to external stimulus”.  It is an internal relation within the process; it varies according to its composition by other elements in the process as the process unfolds through the phases of its creative-destructive path.  The market interest rate in a properly-managed exchange economy is just another element in the “immanent intelligibility of the productive process as a process of value.”  The normative cost of the rental of money, varying from phase to phase, should not be monkeyed with.  The Central Bank should enter the money market only to issue enough money to enable orderly exchange; it should not enter the money market to monkey with normal technical interrelations.  Other participants – notably the government and the private sector – should effect corrective measures that are prior to and more effective than artificial manipulation.

Keynes believed that the policy of greatly expanding the role of government in directing the economy – what he called ‘the battle of Socialism against unlimited private profit’ – would eventually result in a moral management of the levers of economic control (government spending, interest rates, volume of credit, and volume of money).   But Lonergan was sure that the regime of an economic brain trust issuing bureaucratic directives from above downwards would serve neither morality nor democratic freedom.  [CWL 15, Editors’ Introduction li]

Economic correctness should be effected by enlightened free participants through the allocation of compensation and the balance of the crossovers.  That is, continuity and equilibrium of the whole functioningdepend upon adapting to the norms provided by the unified set of explanatory and normative functional relations among several distinct but related velocities and accelerations of products and money.

We set out in this chapter to indicate the existence of an objective mechanical structure of economic activity, of something independent of human psychology, of something to which human psychology must adapt itself if economic activity is not to become a matter of standing in a tub and trying to lift it. [CWL 21, 56]

What is needed is the egalitarian shift in incomes, that will compensate for the previous and shorter anti-egalitarian shift, and will produce the things that people really need and can learn to purchase.  [CWL 15, 141 ftnt 198]

… payments (including interest) stand in a network that is congruent with the technical network of the productive process. … their connection with production is immediate: they emerge not through repercussions or as responses to external stimulus but are, so to speak, the immanent manifestation of the productive process as a process of value. … production is not a merely technical affair … it is an economic affair, … production for sale, production in view of and at every instant adapted to payments. [CWL 21, 114]

  1. Changes in the charged interest rate tend normally to run parallel to the inflation and deflation caused by imbalances of the crossovers. First, investment money (pure surplus income) may leak from the surplus circuit to the basic circuit to inflate basic prices.  In response and provided the monetary system is not menaced by inflation, lenders, seeking to supply the surplus circuit with enough money for expansion and to at least keep pace with inflation so as to preserve the purchasing power of the depositors’ and investors’ money, then charge higher rates.  Simultaneously, the inflated basic prices of the inflated basic demand may be misinterpreted as a signal to overexpand; sanguine entrepreneurs demand to borrow even more and, thus,  stimulate a higher cost of money.

Further, apart from imbalances of the crossover flows, or violations of the norms of an equilibrated circulation, or from the distortions resulting from mistaken expectations about future profits or misinterpretation of changes in prices, interest rate changes can be effected by a real change in the opportunities and prospects of individual investments. Invention and innovation affect the prospects for borrowing, investing, and the acquiring of static wealth. Improved prospects for higher money values of more efficient capital and associated potential dividend income are manifested in the higher rate of return demanded by bankers, bond investors, and equity investors.

  1. Interest payments to lenders have two components for the two distinct services provided by these lenders in the productive process: 1.) The borrower is paying the lender to cover the lender’s GAAP operating costs and profits. ) In addition, the borrower is paying rentfor the use of the means of exchange; he is “occupying” the saver’s or the banking system’s “property.”  Thus, interest payments for the two distinct services will constitute receipts to the lender and will subsequently circulate like any payments, such as initial or transitional or final payments for goods and services.  The interest payments first become receipts in the double-circuited scheme of outlays, incomes, expenditures, and receipts, then they are dedicated by the recipient to his preferred use  – initial outlays, transitional outlays, consumer goods or reinvestment directly by himself or indirectly by others.
  2. Interest payments – flows of money  –  for the rental of money to enable and complete transactions are part and parcel of economic transactions.  They are the rental cost  – alongside the legal fees, sales taxes, and gratuities  –  needed to get the transaction done.  If they grease the skids of a basic purchase, they are classified as a basic expenditure.  They stand merely as payment for factors of production “in a network of payments that is congruent with the technical network of the productive process.”  As such, these payments themselves are intrinsic to the dynamic, intelligible process. They are an endogenous component in the process.
  3. Manipulation of any of the natural internal elements and relations of the process is, of its nature, unfavorably distortive. The manipulation of interest rates is not the only distortive act.  Many elements “stand in a network that is congruent with the technical network of the productive process.”

… payments (such as wages and interest) stand in a network that is congruent with the technical network of the productive process. … their connection with production is immediate: they emerge not through repercussions or as responses to external stimulus but are, so to speak, the immanent manifestation of the productive process as a process of value. … production is not a merely technical affair … it is an economic affair, … production for sale, production in view of and at every instant adapted to payments. [CWL 21, 114]

  1. The same amount of money for investment can be used over and over again. Money moves in a circular fashion, thus, period after period, the same amount of money can be used and reused to purchase an accumulating amount of consumer goods or capital goods, whichever the case may be.  In a simple scheme, the same $100 will purchase $100 worth of goods in period 1, $100 of goods in period 2, and so on. Round and round and round the same $100 goes period after period after period.  Cumulatively, assuming completion of one turnover per period, in ten periods $100 may purchase $1,000 worth of goods and services; in 50 periods $100 may purchase $5,000 worth of goods and services.

Once money has entered the system through the money-creation function of the banking system,[6]it is always in someone’s bank account, ready to flash into use again in a supply-demand transaction and to be transferred into someone else’s bank account, unless the Central Bank and the commercial banks withdraw it from the system

if the real flows of goods and services move, as it were, in straight lines from the potentialities of universal nature (to terminating in a standard of living), on the other hand, the dummy flows of money and monetary substitutes, of cash and credit, move in circles.  The same currency is used over and over; the same accumulation sustains indefinitely a given volume of credit. … [CWL 21, 57-58]

Conversely, (in the last sentence of the excerpt) , a given volume of fiduciary credit finances indefinitely a repetition of accumulations of goods and services.  So, the continuing circulation sustains the renewable credit; and the renewable credit sustains the continuing accumulation.

  1. We are concerned to relate three precisely-distinct functional categories of income and expenditure to one another. We are doing functional “analysis.”  We are trying to get to the bottom of the diagrammed representations of a system by analyzing “down” to a set of abstract foundational relations.  For us, this word analysisdenotes scientificnessand it points to a) interdependent functional relations, b) correspondences, c) formulations in algebra and calculus, d) consideration of curves and curvature, work and curl, flux and divergence, e) coherent theory and complete explanation.  We are not doing accounting, trying to balance non-explanatory debits and credits and determine the excess of accounts receivable over accounts payable.  Rather we are trying to explain a concrete process.

The immanent intelligibility will be purely relational.  The terms of our analysis will be implicitly defined by their functional relations to one another.

Let us say, then, that for every basic insight there is a circle of terms and relations, such that the terms fix the relations, the relations fix the terms, and the insight fixes both.  If one grasps the necessary and sufficient conditions for the perfect roundness of this imagined plane curve, then one grasps not only the circle but also the point, the line, the circumference, the radii, the plane, and equality.  All the concepts tumble out together, because all are needed to express adequately a single insight.  All are coherent, for coherence basically means that all hang together from a single insight.  [CWL 3, 12/36]

In Functional Macroeconomic Dynamics there are three categories of functional income-flows-to-humans; in bookkeeping classifications they are partly included, but concealed, in many accounts: wages, salaries, fees, rent for shelter, rent charges as interest or dividends, royalties, retained earnings; the use of these three functional income flows will be determined by their human recipients – including owners as well as employees and outside parties – as

  • Basic income for expenditure on consumer goods
  • Ordinary surplus income for expenditure on maintenance and repair of wear and tear in order to maintain the existing productive capacity of the system
  • Pure surplus income for expenditure on expansionary capital goods

These three categories of income – determined by their recipients – are interrelated to one another and implicitly defined by their functional relations to one another.  And though few in number, they cover the economic process entirely and will enable us to explain the entire process.

From millions of exchanges one advances to precise (functional) aggregates, relatively few in number, and hence easy to follow up and handle. [CWL 15, 53 and 177]

In a Porphyrian scheme: function is divided into supply and demand; both supply and demand are divided into surplus and basic; and surplus is divided into ordinary and pure.

They are, again, basic income for a standard of living, ordinary surplus income for repair and maintenance of existing capital, and pure surplus income for expansion of the stock of capital.

  1. When capital goods move from being “under production” or “in the process” into “installed usewithin the process,” they enter the category of “static wealth.”[7] And wealth is not in and of itself income-to-be-spent.  And, conversely, income-to-be-spent must be distinguished from static wealth.

Thus the productive process … is not wealth, but wealth in process. … with regard to producer goods a distinction has to be drawn: they are in the process as a means of production; they are in the process in the sense that labor is in the process or that management is in the process, namely, their use forms part of the process; … once they (have been) completed they are no longer under process, any more than labor or management is under process and being produced.  A ship under construction is part of the process; but once the ship is completed and begins to transport ocean freight, it is not the ship but only the use of the ship that is part of the process. … producer goods, factories and machinery, railways and power units, warehouses and offices are (initially) in the productive process, (but) once they (have been) produced, they themselves have passed beyond the process to enter the category of static wealth, even though their use remains a factor of production. [CWL 15, 21-22]

  1. Scientific functional explanatory conjugates must not be confused with the accountants’ unities. One must not fall into the trap of attributing the same meaning to certain macrodynamic terminology such as aggregate rate of return of investment and aggregate pure surplus income as one attributes to the micro GAAP terminology such as rate of return on individual-project investment and corporate profit. The macroeconomist must analyze the current rates of returning among the dynamic interdependent functionings of the current, purely-dynamic process.
  2. Our analysis does not seek its solid foundation relating the activities of firms attempting to maximize profits to the activities of households attempting to maximize psychological utility. We are not constructing an edifice on shifting sands or protean notions, feelings and whims. We seek a comprehensive and coherent set of laws independent of human psychology.  We are seeking the intelligibility of interrelated, abstract functionings, so as to explain in a single set of equations both the equilibria and disequilibria of the concrete economic process. Dynamic implies velocitous and accelerative functional flows of goods and services, implicitly defined by the functional relations in which they stand.  We think not in terms of personalities, firms and corporate accounting ratios!  Let the bookkeeper calculate whatever balances and ratios he will.  We are concerned to understand and represent in classical equations intelligible, mutual, functional relations – so as properly to conduct and manage – the purely current dynamic Gross Domestic Functional Flows.

[1]As treated elsewhere, “static wealth” is not a flow of income.  However, dividends paid for “rent” for use is a flow of income.

[2]  CWL 21, 8

[3]The priora quoad nos– first for us – are the things which we notice first because they are related to our sensitive selves, e.g. hot and cold, fast, slow.  The priora quoad se– first among themselves – are the things or terms which are related to each other, e.g. pressure, volume, temperature, space, time, mass, etc.

 

[4]More fully, the quote is: One might be reminded here of a parallel in hydrodynamics: if what is at issue is a general specification of the dynamics of free water waves, a premature introduction of general boundary conditions or worse, specific channel conditions, botches the analytic possibilities….the Robinson-Eatwell analysis is hampered, not only by an absence of paradigmatic heuristic thinking in a field whose principles involve ends, but also by their building the economic priora quoad nos of profits, wages, prices, etc., into explanation, when in fact the priora quoad nos are last in analysis: they require explanation. McShane, Philip (1980) Lonergan’s Challenge to the University and the Economy, (Washington, D.C.: University Press of America) P. 124[4]

 

[5]CWL 21, 141

[6]For simplicity, we do not consider here reserve requirements or the lags between receipts and expenditures.

[7]As treated elsewhere, “static wealth” or money value of ownership is not a flow of income. However, dividends paid as “rent” for use of the owned assets is a flow of income.