Saving “the Market” out of Cambridge: Folly of “Money Market”
Implicit or explicit, macroeconomists conceive that the so-called “liquidity preference” (L≡ M d ) and “money supply” (M≡ M s ) comprise “the money market . ” This market is often opposed to the “product market” of the real investment ( I ) and the real saving ( S ). As well known to students, the two of L and M join forces to produce the LM curve. Umm, the one out of the IS-LM model! Unfortunately, there cannot be anything like the LM curve. First, the time (duration), more than critical to the rest of us in Here on earth, is completely missing in the curve. Second, all the relevant terms, demand, supply, “liquidity preference” and the like are misnomers . As expected the LM curve is misconceived and stillborn so as to be firmly fixated in a textbook. Reality #1. John M. Keynes illustrates the “liquidity preference” function: M= L(r) (1936, p. 168)...