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Endogenous money and shareholders' funds in the classical theory of banking

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  • Jerome de Boyer

Abstract

By its nature, bank money is endogenous, but its issuing is risky and presupposes the presence of banks' shareholders' funds. Shareholders' funds give banks the means of dealing with the difficulties involved in the process of money creation and which are inherent to the banking activity: convertibility constraint, credit and liquidity risks. Unlike the Richardian paradigm, Smith's 'real bill theory' and Thornton's 'lender of last resort theory' point out the functions of shareholder's funds. Therefore their monetary-banking approachs seem more complementary than contradictory. In other respects, the theory of endogenous money and credit introduces risks and capital in the analysis of exchange and lead to questioning the classical market theory constructed on the model of bartering

Suggested Citation

  • Jerome de Boyer, 1998. "Endogenous money and shareholders' funds in the classical theory of banking," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 5(1), pages 60-84.
    • Handle: RePEc:taf:eujhet:v:5:y:1998:i:1:p:60-84
    DOI: 10.1080/10427719800000003
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    References listed on IDEAS

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    1. David E.W. Laidler, 2016. "The Golden Age of the Quantity Theory," Economics Books, Princeton University Press, edition 1, number 4959.
    2. Mathias Dewatripont & Jean Tirole, 1993. "La réglementation prudentielle des banques," ULB Institutional Repository 2013/9537, ULB -- Universite Libre de Bruxelles.
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    Cited by:

    1. Sylvie Diatkine, 1998. "Banque centrale et système bancaire : les débats anglais au début du XIXe siècle," Revue Française d'Économie, Programme National Persée, vol. 13(2), pages 201-230.
    2. Curott, Nicholas, 2016. "Adam Smith’s Theory of Money and Banking," Studies in Applied Economics 47, The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.

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