Asked about the chances of signing Spain striker David Villa from Barcelona, Moyes added: "If he was loanable and he wanted to join Everton, we'd be more than happy to have him".
And the adjustment of GDP is what makes both loanable funds and liquidity preference hold at the same time.
Theorem 3: If the probability distribution of the pledged assets yield does not depend on the value of the pledged assets V, then x does not depend on V, and the loanable amount is a linear function of the value of the pledged assets.
For in the end, banks don't change the basic notion of interest rates as determined by liquidity preference and loanable funds — yes, both, because the message of IS-LM is that both views, properly understood, are correct.
ZIRP was never about increasing bank lending, and to believe that it was is to believe in the loanable funds model.
And that's IS-LM: The point where the curves cross determines both GDP and the interest rate, and at that point both loanable funds and liquidity preference are valid.
It is all based on something economists know as Loanable Funds Theory, which describes a market in which there is some limited pool of savings available to satisfy the demand for credit.
The problem with Japan's financial system is not just a lack of bank capital or loanable funds.
The tricky thing about interest rates is that there are seemingly two theories of interest rates — loanable funds, which is about supply and demand for savings, and liquidity preference, which is about the tradeoff between money and bonds.
One view says that the interest rate is determined by the supply of and demand for savings – the "loanable funds" approach.
Another point: it is really important, I think, to understand how liquidity preference and loanable funds can both be true at the same time; IS-LM is the way to do that.
