Solving the paradox of monetary profits
AbstractBruun and Heyn-Johnsen (2009) state the paradox that economics has failed to provide a satisfactory explanation of how monetary profits are generated, even though the generation of a physical surplus is an established aspect of non-neoclassical economics. They emphasise that our ability to explain phenomena like the Global Financial Crisis (GFC) will be limited while ever we are still unable to explain this fundamental aspect of capitalism. In fact this paradox can be solved very simply, using insights from what is known as 'Circuit Theory'. In this paper the author shows how monetary profits are generated, and uses a monetary circuit of production model to derive policy conclusions about how to overcome a 'credit crunch' that reverse the guidance given by the standard but empirically falsified 'money multiplier' model of credit money creation. --
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Bibliographic InfoArticle provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.
Volume (Year): 4 (2010)
Issue (Month): 31 ()
Endogenous money; circuit theory; credit crunch;
Other versions of this item:
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
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