A Unified Theory of Monetary Dynamics

José Villacis

Abstract


In the end, the only and eternal vocation of money is circulation. This circulation causes the contrary effect to income expansion, studied by the income velocity of circulation of money, by the income multiplier and by the bank money multiplier. These three issues are thought to belong to the same operation. Therefore, a unified money theory can be established.

A dynamic economy finances investments with the savings existing in the system but, the economy is simultaneously growing in real and nominal terms. Such growth in circulating capital is only possible through the creation of money in the economic system. In general terms, the system tends to finance growth with the spontaneous creation of money.


Keywords


Circulation of money, income multiplier, bank money multiplier.

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References


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DOI: http://dx.doi.org/10.18533/rss.v1i4.11

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