The Monetary Theory of Production
In mainstream economic theory money functions as an instrument for the circulation of commodities or for keeping a stock of liquid wealth. In neither case is it considered fundamental to the production of goods or the distribution of income. Augusto Graziani challenges traditional theories of monetary production, arguing that a modern economy based on credit cannot be understood without a focus on the administration of credit flows. He argues that market asset configuration depends not upon consumer preferences and available technologies but on how money and credit are managed. A strong exponent of the circulation theory of monetary production, Graziani presents an original and perhaps controversial argument that will stimulate debate on the topic.
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amount analysis assumption bank credit bank debt bank deposits bank loans banking system banks and firms barter economy budget constraint capital central bank chapter circuit theorists circulation approach commercial banks commodities market commodity money consequence consider consumer credit potential defined determined distribution equal equilibrium condition F.A. Hayek fact financial market financing investment government deficit government expenditure government sector Graziani increase inflation initial finance interest rate Irving Fisher Keynes Keynesian labour liquid balances liquidity preference loans granted macroeconomic means of payment monetary base monetary circuit monetary economy monetary theory money prices money stock neoclassical model neoclassical theory neutrality of money ofbank ofmoney ofthe paid in advance possible post-Keynesian present problem production profits purchasing power rate of interest real terms real wages reserve ratio savers Schumpeter securities seigniorage similar single agents single bank stock of money sumer supply tion Tobin wage bill wage earners wealth Wicksell Wicksell’s