Endogenous money, financial Keynesianism and beyond

‘Finance’ has been at the core of many, old and new, theoretical developments outside the mainstreams of macroeconomics. The focus here will be on circuitism, concentrating on finance for production and on the financial instability hypothesis put forward by Minsky. In the second and third sections of the paper I give a general picture of the ‘monetary circuit’. In the fourth section I discuss the old circuit theory of money of Wicksell, Schumpeter and Keynes (the Keynes before the General Theory). In the fifth section I make some comments on the Mises–Hayek line, also grounded in Wicksell's circuitism. In the sixth section I present an alternative path to the circuit and Keynesian-like conclusions, the path leading from Marx to Luxemburg to Kalecki: here the debate on finance underlines the presence of a radical problem of effective demand. In the seventh section I introduce Minsky's ‘financial Keynesianism’, where finance is related to investment demand and financial instability. I see Minsky as complementary rather than opposed to the circuitist line of thought. I argue in the conclusions that these traditions are relevant to understanding the recurring changes in capitalism and the current crisis. Indeed, the term ‘financial Keynesianism’ has taken a more concrete meaning, converging with what some authors prefer to define as ‘privatized Keynesianinsm’. In my view, some of Minsky's – and also Parguez's – views about economic policy are not only in accord, they also provide a way out from the blind alley of mainstreams and the limits of Keynesianism.