Consolidated Figures for Model 2

Consolidated Dollar Balances - Model #2

As I did in the previous model, I have provided for this model a summary of the balances after each transaction.

	Beginning	Transaction #1	Transaction #2	Transaction #3	Transaction #4
	Beginning Balances	Grower borrows $1,000.	Grower buys corn seed for $1,000.	Grower has no seed; makes no sale to seed dealer.	Banks absorbs entire loss of $1,000 principal*.

* Bank also loses the potential income of $175 interest. This consists only of an opportunity loss.

Notice that after each transaction the quantity of money and the amount of the bank’s deposit liabilities always equals $3,500. In this case of a total loan loss, the amounts of bank deposit liabilities and total money remain the same.

This scenario does not cause the loss of any money, in spite of the grower's misfortune.

The next page provides a numerical summary of these transactions...