The Oxymoron of “Liquidity Preference”
To begin, no one with the right mind would “prefer” liquidity to anything. Ever since the so-claimed “General Theory of the Rate of Interest,” the concept of “liquidity preference” has been firmly settled in some minds of super-strong influence. Alas, the term is an oxymoron at best or as much strongly misleading at worst. Incidentally, “liquidity” is the nick name of money in Keynesian macroeconomics. First of all, we never hoard money preferably or wishfully. We are forced to hold money “just in case.” More specifically, we carry money around for the purpose of purchasing various goods, services and assets on the way of “muddling through” the long life. The more certain, the less money we hoard. In the year of 1930, six years ...