Payment vs. Funding: The Law of Reflux for Today

Perry Mehrling ()
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Perry Mehrling: Pardee School of Global Studies, Boston University

No 113, Working Papers Series from Institute for New Economic Thinking

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.

Keywords: credit creation; financial intermediation; law of reflux (search for similar items in EconPapers)
JEL-codes: B2 E5 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2020-01
New Economics Papers: this item is included in nep-his, nep-hme, nep-mac, nep-mon, nep-pay and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:113

DOI: 10.36687/inetwp113

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