ABSTRACT
This chapter discusses differences between an economy that is simply growing steadily and one that is booming. It focuses on cash flows due to income production, balance sheet relations, and transactions in real and financial assets. The chapter develops the role of uncertainty as a determinant of the demand for investment within a framework of Keynesian economics. It examines alternative modes of operation of monetary constraint. The chapter explores the domains of stability both of the financial system and of the economy. Financial instability occurs whenever a large number of units resort to extraordinary sources for cash. For secondary markets to be an effective determinant of system stability, they must transform an asset into a reliable source of cash for a unit whenever needed. In a euphoric economy the willingness to hold money or near money decreases. Tight money, defined as rising nominal interest rates associated with stricter other terms on contracts, may work to restrain demand in two ways.
