Keynes on Monetary Policy, Finance and Uncertainty

This book provides a reassessment of Keynes’ theory of liquidity preference. It argues that the failure of the Keynesian revolution to be made in either theory or practice owes importantly to the fact that the role of liquidity preference theory as a pivotal element in Keynes’ General Theory has remained underexplored and indeed widely misunderstood even among Keynes’ followers and until today. The book elaborates on and extends Keynes’ conceptual framework, moving it from the closed economy to the global economy context, and applies liquidity preference theory to current events and prominent hypotheses in global finance. Jörg Bibow presents Keynes’ liquidity preference theory as a distinctive and highly relevant approach to monetary theory offering a conceptual framework of general applicability for explaining the role and functioning of the financial system. He argues that, in a dynamic context, liquidity preference theory may best be understood as a theory of financial intermediation. Through applications to current events and prominent hypotheses in global finance, this book underlines the richness, continued relevance, and superiority of Keynes’ theory of liquidity preference; with Hyman Minsky standing out for developing Keynes’ vision of financial capitalism.

This is a book for the times. It revisits Keynes’s ideas on money, banking and monetary policy in a way which illuminates our understanding of the current crisis and how policy should address it. In particular, Bibow demonstrates the central role of liquidity preference, a cornerstone of Keynes’s theory which has been paid inadequate attention in the renewed focus on Keynesian fiscal policy. This is a scholarly contribution which directly addresses important policy issues in a compelling manner.Sheila Dow, Emeritus Professor of Economics, University of Stirling, August 2010"This book on the relevance of Keynes's insights into the complex workings of finance and monetary policy, when uncertainty is taken seriously, is timely and very well done. The global financial crisis revealed the inadequacy of the mainstream 'New Consensus Macroeconomic' theoretical framework. In this very well written book, Joerg Bibow offers a clear exposition of a much richer Post-Keynesian alternative that applies liquidity preference theory to current events and prominent themes in global finance. The New Consensus Macroeconomics does not even address liquidity preference or money."Philip Arestis, Cambridge University, August 2010

Jorg Bibow is Associate Professor of Economics at Skidmore College, New York, USA and Research Associate at the Levy Economics Institute of Bard College, Annandale-on-Hudson, New York, USA