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Payment vs. Funding: The Law of Reflux for Today

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  • Perry Mehrling

    (Pardee School of Global Studies, Boston University)

Abstract

The analytical tension in post-Keynesian thought between the theory of endogenous (credit) money and the theory of liquidity preference, brought to our attention by Dow and Dow (1989), can be viewed through the lens of the money view (Mehrling 2013) as a particular case of the balance between the elasticity of payment and the discipline of funding. Further, updating FullartonÕs 1844 Òlaw of refluxÓ for the modern condition of financial globalization and market based credit, the same money view lens offers a critical entry point into TobinÕs fateful 1963 intervention ÒCommercial Banks as Creators of ÔMoneyÕÓ which established post-war orthodoxy, and also to the challenge offered by so-called Modern Money Theory.

Suggested Citation

  • Perry Mehrling, 2020. "Payment vs. Funding: The Law of Reflux for Today," Working Papers Series 113, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:113
    DOI: 10.36687/inetwp113
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    More about this item

    Keywords

    credit creation; financial intermediation; law of reflux;
    All these keywords.

    JEL classification:

    • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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