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Wilhelm Lautenbach’s credit mechanics – a precursor to the current money supply debate

Decker, Frank and Goodhart, Charles A. E. (2021) Wilhelm Lautenbach’s credit mechanics – a precursor to the current money supply debate. European Journal of the History of Economic Thought. pp. 1-25. ISSN 0967-2567

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Identification Number: 10.1080/09672567.2021.1963796

Abstract

This article assesses the theory of credit mechanics within the context of the current money supply debate. Credit mechanics and related approaches were developed by a group of German monetary economists during the 1920s-1960s. Credit mechanics overcomes a one-sided, bank-centric view of money creation, which is often encountered in monetary theory. We show that the money supply is influenced by the interplay of loan creation and repayment rates; the relative share of credit volume neutral debtor-to-debtor and creditor-to-creditor payments; the availability of loan security; and the behaviour of non-banks and non-borrowing bank creditors. With the standard textbook models of money creation now discredited, we argue that a more general approach to money supply theory involving credit mechanics needs to be re-established.

Item Type: Article
Official URL: https://www.tandfonline.com/toc/rejh20/current
Additional Information: © 2021 Informa UK Limited, trading as Taylor & Francis Group
Divisions: Financial Markets Group
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
JEL classification: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply; Credit; Money Multipliers
Date Deposited: 27 Aug 2021 13:30
Last Modified: 08 Nov 2021 19:06
URI: http://eprints.lse.ac.uk/id/eprint/111819

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