chapter  3
The creation of money
Pages 14

In the last chapter we discussed the nature of assets and the public demand for holding them; but nothing has been said so far on how the total supply of assets and their rate of accumulation are determined. The creation of the national debt is, of course, a matter of economic policy, and so not amenable to this kind of analysis. The creation and accumulation of real assets, however, depend among other things on interest rates and credit conditions; and these in turn are determined by the relation between the pattern of supply and the pattern of demand for financial assets of different degrees of liquidity. This is the subject matter of the present chapter.