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Solving the paradox of monetary profits

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  • Keen, Steve

Abstract

Bruun 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 Info

Article 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 ()
Pages: 1-32

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Handle: RePEc:zbw:ifweej:201031

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Keywords: Endogenous money; circuit theory; credit crunch;

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Cited by:
  1. Bezemer, Dirk J., 2010. "Understanding financial crisis through accounting models," Accounting, Organizations and Society, Elsevier, vol. 35(7), pages 676-688, October.
  2. Kakarot-Handtke, Egmont, 2013. "Debunking Squared," MPRA Paper 51659, University Library of Munich, Germany.
  3. Keen, Steve, 2013. "A monetary Minsky model of the Great Moderation and the Great Recession," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 221-235.
  4. Dirk J. Bezemer, 2012. "Modelos contables y comprensión de la crisis financiera," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 14(26), pages 47-76, January-J.
  5. Kakarot-Handtke, Egmont, 2013. "Redemption and Depression," MPRA Paper 50924, University Library of Munich, Germany.
  6. Kakarot-Handtke, Egmont, 2012. "The emergence of profit and interest in the monetary circuit," MPRA Paper 43241, University Library of Munich, Germany.
  7. Lancastle, Neil, 2012. "Circuit theory extended: The role of speculation in crises," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(34), pages =1-27.
  8. Kakarot-Handtke, Egmont, 2011. "What is wrong with heterodox economics? Kalecki’s profit theory as an example," MPRA Paper 31177, University Library of Munich, Germany.
  9. Cornelia Metzig & Mirta Gordon, 2012. "Heterogeneous Enterprises in a Macroeconomic Agent-Based Model," Papers 1211.5575, arXiv.org.
  10. de la Fonteijne, Marcel R., 2014. "An inconsistency in using stock flow consistency in modelling the monetary profit paradox," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 8(15), pages 1-7.
  11. Kakarot-Handtke, Egmont, 2014. "Profit for Marxists," MPRA Paper 54800, University Library of Munich, Germany.
  12. Kakarot-Handtke, Egmont, 2014. "Mr. Keynes, Prof. Krugman, IS-LM, and the End of Economics as We Know It," MPRA Paper 53608, University Library of Munich, Germany.
  13. de la Fonteijne, Marcel, 2013. "The Monetary Profit Paradox and a Sustainable Economy - A Fundamental Approach," MPRA Paper 55235, University Library of Munich, Germany, revised 10 Apr 2014.

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