price was assumed to be "invariant over time;" however, market prices changed, as short-term demand changed. A commodity's value (money is a commodity), thus, was stable over the long-run, and represented the wages, rent, and profit components of production costs. In the short-run, however, a commodity's value was not necessarily stable.
Even in the late-twentieth century, many economists frequently attempt to link almost all economic phenomena to the concepts of supply and demand in some way. There are, however, economists who doubt the wisdom of many such attributions. One such criticism is based on the mathematical deficiencies of demand and supply curves.
In the short life of supply-side economics during the first Reagan term, the federal government implemented policies designed to make borrowing more attractive to businesses. The Reagan Administration assumed that making business loans cheaper would increase the demand for such loans, and that increased borrowing would lead to increased production to increased employment to increased consumption and so on until the economy landed in "Seventh heaven." Businesses did not respond. The Reagan Administration overlooked the fact that in a severe economic recession businesses cannot us borrowed money productively regardless of the price of that money.
Businesses most frequently borrow money when rates are on the rise, because when rates are on the rise economic output typically is on the rise, and businesses can make productive use of borrowed money, regardless (for the most part) of the cost of such money. Businesses by an large do not suffer the cost of money, as these costs as are all other costs are passed along to the end user.
Such is the case with commercial loans in California. The demand for commercial loans was low in California is 1993, as the state was in a deep economic recession. As the demand for business loans dropped, so too the cost of business ...