ABSTRACT
Portfolio theory has become the accepted framework for the analysis of monetary policy, as demand-for-money theory has been transformed into a theory of wealth allocation. In Tobin's models, quite explicitly, the dichotomy between the "portfolio", however rich, and flows of income and expenditure is absolute. In the Quantity Theory, money-income circulates in exchange for consumer goods and, circulating through financial markets, finances investment; it thus affects both interest and prices. John Maynard Keynes's theory establishes a border between money and income. Their only direct link is the transactions demand for money. The Keynesian transmission mechanism applies in a more obvious way to the case of open market operations. There are portfolio elements in Radcliffe as well: the ability of financial institutions to grant credit depends ultimately on the willingness of the public to hold financial institutions liabilities. Radcliffe is an alternative hybrid, but it may in fact be time to breed another.
