Economics Dictionary of ArgumentsHome
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| Speculative demand: Speculative demand in economics refers to the demand for money held for the purpose of profiting from future changes in interest rates or asset prices. It is one of the three motives for holding money, the others being transactions demand and precautionary demand. See also Demand, Speculation, Clearing._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Speculative Demand - Dictionary of Arguments
Rothbard III 767 Speculative Demand for money/Rothbard: It is true (…) that the only use for money is in exchange. From this, however, it must not be inferred, as some writers have done, that this exchange must be immediate. Indeed, the reason that a reservation demand for money exists and cash balances are kept is that the individual is keeping his money in reserve forfuture exchanges. That is the function of a cash balance - to wait for a propitious time to make an exchange. Future/purchasing power: One of the most obvious influences on the demand for money is expectation of future changes in the exchange-value of money. Thus, suppose that, at a certain point in the future, the PPM (purchasing power of monetary unit) is expected to drop rapidly. How the demand-for-money schedule now reacts depends on the number of people who hold this expectation and the strength with which they hold it. It also depends on the distance in the future at which the change is expected to take place. The further away in time any economic event, the more its impact will be discounted in the present by the interest rate. Whatever the degree of impact, however, an expected future fall in the PPM will tend to Iower the PPM now. For an expected fall in the PPM means that present units of money are worth more than they will be in the future, in which case there will be a fall in the demand-for-money schedule as people tend to spend more money now than at the future date. A general expectation of an imminent fall in the PPM will Iower the demand schedule for money now and thus tend to bring about the fall at the present moment. Rothbard III 768 Demand for money: There is, however, a "real" or underlying demand for money. Money may not be physically consumed, but it is used, and therefore it has utility in a cash balance. Such utility amounts to more than speculation on a rise in the PPM. This is demonstrated by the fact that People do hold cash even when they anticipate a fall in the PPM. Such holdings may be reduced, but they still exist, and (…) this must be so in an uncertain world. In fact, without willingness to hold cash, there could be no monetary-exchange economy whatever. >Cash balance/Rothbard. Pesudo equilibrium: The speculative demand therefore anticipates the underlying nonspeculative demands (…) Suppose, then, that there is a general anticipation of a rise in the PPM (a fall in prices) not reflected in underlying supply and demand. It is true that, at first, this general anticipation raises, ceteris paribus, the demand for money and the PPM. But this situation does not last. For now that a pseudo "equilibrium" has been reached, the speculative anticipators, Who did not "really" have an increased demand for money, sell their money (buy goods) to reap their gains. But this means that the underlying demand comes tot he firce, and this is less than the money stock at that PPM. >Demand for money/Rothbard, >Clearing/Rothbard._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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