The Elgar Companion to John Maynard Keynes
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The Elgar Companion to John Maynard Keynes

Edited by Robert W. Dimand and Harald Hagemann

The most influential and controversial economist of the twentieth century, John Maynard Keynes was the leading founder of modern macroeconomics, and was also an important historical figure as a critic of the Versailles Peace Treaty after World War I and an architect of the Bretton Woods international monetary system after World War II. This comprehensive Companion elucidates his contributions, his significance, his historical context and his continuing legacy.
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Chapter 43: The finance motive

Jan Kregel


Keynes’s criticism of traditional theory argued not only that a priori saving was not a constraint on investment expenditures, but that savings did not provide the financing for investment expenditures. It was thus a critique of the “crowding out” hypothesis. The finance motive was advance to demonstrate that savings had no impact on interest rates, which were determined by liquidity preference, or on the ability of entrepreneurs to borrow, which was determined by the willingness of banks to expand their balance sheet by accepting business liabilities against the concession of new deposits.

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