The core theory posits that in a post-Keynesian circuit economy, endogenous money is created exclusively through bank lending to firms for production financing prior to the existence of equivalent deposits or savings. This mechanism challenges neoclassical equilibrium assumptions by establishing that aggregate demand inherently exceeds supply during growth phases due to debt expansion, requiring dynamic differential equation modeling rather than static analysis. The framework redefines profit and financial stability as functions of money turnover rates within a triangular inter-sectoral clearing structure involving commercial banks, households, firms, and the central bank.
The core theory posits that in a post-Keynesian circuit economy, endogenous money is created exclusively through bank lending to firms for production financing prior to the existence of equivalent de…