Our elementary model of monetary flows must be completed by the control of a typical household sector L’s savings g_LK. Where an industrial sector I’s capital account k_IK is the residual of what a business has spent but not yet earned (i.e., the integrated difference between sales and costs, including the costs of capital) a household sector L’s savings g_LK are the residual of what a household has earned but not yet spent (i.e.: the integrated difference between income=wages+interest and consumption).

One of neoclassicism’s more stalwart positions opposite its heterodox antagonists maintains that savings must equal investment, that a dollar cannot be spent on credit except as another dollar is diverted from immediate consumption into savings; hence all k_IK must always be exactly offset by all g_LK. Heterodoxy’s position to the contrary has it that capitalism cannot be described other than by a persistent leveraging of investment beyond savings. Though SFEcon does not exist without the neoclassical premise of marginalism, our normative macroeconomics incorporates what we regard as heterodoxy’s superior holding on the question of leverage.

The idea of leverage has (as we shall soon see) a dynamic counterpart in the notion of an investment term T years for saved funds. A variable investment term further incorporates the notion of the risks inherent in financial placements: not only can the value of money change during the period of its commitment, the length of the investment term T can also change.

The figure below has a household sector LK’s financial state g_LK disaggregated into the elements of a third-order delay. As with our model of asset depletion we segment this pipeline into three levels: A, B, and C — the sum of which defines savings g_LK. By convention, savings positions g_LK are negative quanta. Their magnitude is diminished by the action of a positive r_LK, which is the difference between consumption and wages. Ideally, consumption can be greater than wages because it is partially offset by passive income e_LK. Passive income augments savings by the action of positive e_LK decrementing a negative g_LK.

But savings, unlike physical assets, are not exhausted after their logistical term of 1/V_J years has run. Presumably one’s principal is returned after an economy K's stated or anticipated investment term T_K, giving one the option to reinvest by adding-to or drawing-from principal. The reclaiming of principal is effected by a rate labeled MATURITY that channels effluent from level C_LFK to level A_LFK.

Level A_LFK is the point at which adjustments to savings can be injected into the loop. Consumption-minus-wages r_LK entering this chamber are more or less offset by passive income e_LK. Stasis requires that 1) interest earned e_LK be just sufficient to supply the difference r_LK between wages and consumption; and 2) the investment term T must be such that the effluent from A_LFK is exactly offset by inflow from C_LFK. This is to say that stasis requires savings be uniformly distributed around the circuit of loanable funds.

Model 0’s artificial limit of one financial intermediary per economy K assures us that all dividends e_IK generated by the industrial sectors will be continuously distributed as interest payments e_LK among the household sectors LK. With the total of interest payments e_LK to be distributed defined, distribution is easily accomplished in proportion to a household sector LK’s financial position g_LK relative to the total of all savings.