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Dirk Ehnts — Keynes on the quantity theory and techniques of recovery (letter to FDR)

Summary:
Changes in expenditure rather than changes in the money stock are causal in economic performance. Changes in money stock do not necessarily result in changes in expenditure. Velocity of money depends on liquidity preference. If the money stock increases while the population increasingly desires to save rather than spend, no change in economic performance will follow. A chief point of the General Theory is that spending as "effective demand" drives an economy. As a consequence fiscal policy is more influential economically than monetary policy in that it concerns spending which can be targeted through specific appropriations.Here we are with MMT reiterating the point that Keynes was making to FDR in this letter. econoblog 101Keynes on the quantity theory and techniques of recovery

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Changes in expenditure rather than changes in the money stock are causal in economic performance. Changes in money stock do not necessarily result in changes in expenditure. Velocity of money depends on liquidity preference. If the money stock increases while the population increasingly desires to save rather than spend, no change in economic performance will follow. A chief point of the General Theory is that spending as "effective demand" drives an economy. As a consequence fiscal policy is more influential economically than monetary policy in that it concerns spending which can be targeted through specific appropriations.

Here we are with MMT reiterating the point that Keynes was making to FDR in this letter.


econoblog 101
Keynes on the quantity theory and techniques of recovery (letter to FDR)
Dirk Ehnts | Lecturer at Bard College Berlin
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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