Abstract

Hayek and Keynes are usually perceived as antipodes in one of the grand macroeconomic debates of the twentieth century. But they also agreed on some basic issues of monetary theory, most notably on the harmful character of money hoarding and the desirability of a flexible money supply to offset or neutralise changes in the demand for money. In our paper we highlight some of the cultural implications of a permanent expansion of the money supply. We will focus on the specific case of credit expansion (ex nihilo creation of money through credit) which has held centre stage of the monetary evolution of the past two hundred years and, even more specifically, on credit expansion pushed to such an extent that it entails permanent price-inflation.