Solving the Paradox of Monetary Profits

Keen, Steve

doi:10.2139/ssrn.1726776

Cited by 8 publications

(22 citation statements)

References 19 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Firms pay interest on their good (performing) loans to banks and receive interest on their deposits from banks. Households receive interest on their deposits from banks (Graziani, 2003;Keen, 2010;Voloshyn I. and Voloshyn M., 2016).…”

Section: Model Of Economy With Default Of Firmsmentioning

confidence: 99%

“…Presented there are the values of the model's parameters used for numerical simulation too. Keen (2010), the rate-parameters designated by the Greek symbols in Table 5 are inverse to periods of turnover. For instance, rate ϕ L of repayment of good loans equaled 1/7 yr means that firms repay their loans every 7 years.…”

Section: Equations Linking Flows and Stocksmentioning

confidence: 99%

“…The net wealth of banks begins to fall due to the accumulation of credit losses. Whereas, the net wealth of households begins to fall due to profit paradox (Keen, 2010), when workers of households have insufficient money in order to buy out all produced goods due to the existence of a price markup.…”

Section: Conclusion and Directions For Further Investigationmentioning

confidence: 99%

See 2 more Smart Citations

Stock-Flow Consistent Modeling of Default Events Sequence in a Closed Economy

Voloshyn¹

2017

Visn. Nat. Bank Ukr.

View full text Add to dashboard Cite

By sequentially examining the full chain of events starting from the default of firms through the fire-sale of goods towards the write-offs of bad loans, we develop a new matrix of financial transactions. This matrix is incorporated into the transactions-flows matrix of the closed economy consisting of households, firms, and banks. On the basis of the balance sheet and transactionsflows matrices, this study further constructs a stock-flow consistent model of the closed economy. We also provide the results of a numerical simulation and argue that our model allows studying how such key parameters as the probability of default, the rate of fire-sales (new injected parameter), the recovery rate, and interest rates on loans and deposits affect the performance of banks and firms, observing economic dynamics in time.

show abstract

Section: Model Of Economy With Default Of Firmsmentioning

confidence: 99%

Section: Equations Linking Flows and Stocksmentioning

confidence: 99%

See 1 more Smart Citation

Stock-Flow Consistent Modeling of Default Events Sequence in a Closed Economy

Voloshyn¹

2017

Visn. Nat. Bank Ukr.

View full text Add to dashboard Cite

show abstract

“…National accounting implies that changes in net assets arising from transactions (i.e., net addition to assets less net incurrence of liabilities) are identically equal to the net 510 JOURNAL OF POST KEYNESIAN ECONOMICS saving of the economy (i.e., gross saving less investment), which adds to the existing stock. 3 However, in a capitalistic economy, which is a monetary economy of production, financial assets play the role of flows because they can be used over and over again as a means of payment to look after real economic activities (consumption, investment) or purely financial transactions (Godley and Lavoie, 2007;Graziani, 2003;Keen, 2010;Keynes, 1937;Schumpeter, 1949). 4 The characteristic of finance as a flow implies that a steady level of investment (i.e., a nearly zero level of net saving) should require a more or less constant amount (stock) of financial instruments to be used over and over again (flow).…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Financial assets overhang in Europe

Spanò

2015

Journal of Post Keynesian Economics

View full text Add to dashboard Cite

This work analyses external imbalances across Europe using data on sectorial gross value of assets over sixteen years (1995–2011) in founder countries of the European Union and in the whole euro area. The empirical analysis strongly supports arguments against the thesis that in Europe sovereign debt is the problem and fiscal austerity the solution. On the contrary, it suggests that the current crisis should be analysed in the light of the growing disproportion of the financial sector compared to real sectors of the economy. This study divides the financial assets generated by the domestic financial companies and by the foreign sector into two aggregates: a proxy for financial resources channelled to the real domestic sectors and a proxy for “financial assets overhang” held within the financial and foreign sector. The financial assets overhang, which boosted the relative size of the financial sector across the continent, should be considered as the main source of excess finance to be rigidly constrained

show abstract

“…In Keen (2010a) the author tried to solve the monetary paradox too and came, in contrary to circuitists, to the conclusion that capitalists can make monetary profit with a possibility to earn enough to repay the debt and with positive balances for all actors. I will prove that Keen made a fundamental mistake and is using the Stock Flow Consistency Principle in an inconsistent way by combining it with behavior equations in a dynamic model.…”

Section: Introductionmentioning

confidence: 99%

An Inconsistency in Using Stock Flow Consistency in Modelling the Monetary Profit Paradox

Fonteijne¹

2014

Economics

View full text Add to dashboard Cite

In order to understand the sources of profits or monetary profits of capitalists and firms, the author examines the phrase of Marx: 'Die Gesamtklasse der Kapitalisten kann nichts aus der Zirkulation herausziehen, was nicht vorher hineingeworfen war.' (The class of capitalists cannot extract from the circulation what has not previously been thrown in.) Steve Keen studied the monetary paradox and contrary to circuitists he came to the conclusion that capitalists can make a monetary profit with the possibility to earn enough to repay their debt, with positive balances for all actors. The author demonstrates that Keen made a fundamental mistake and is using the Stock Flow Consistency Principle in an inconsistent way by combining it with behavioral equations in a dynamic model. The solution presented here shows not only problems with the numbers but with the method. This solution resolves a dispute between Keen and circuitists and implies that, in a Wicksellian pure credit economy, it remains impossible for all actors to gain a monetary profit. JEL C50 C60 E11 E12 E20 E25 E44 G00

show abstract

Solving the Paradox of Monetary Profits

Cited by 8 publications

References 19 publications

Stock-Flow Consistent Modeling of Default Events Sequence in a Closed Economy

Stock-Flow Consistent Modeling of Default Events Sequence in a Closed Economy

Financial assets overhang in Europe

An Inconsistency in Using Stock Flow Consistency in Modelling the Monetary Profit Paradox

Contact Info

Product

Resources

About