ABSTRACT
Keynes’s radical critique of the Loan Funds Theory reveals the epistemological rupture between Keynesian and Neoclassical Economics. In this paper, I will study the nature of this rupture, specifically concerning the different components of the liquidity preference and the mechanisms through which uncertainty propagates into the different spheres of the economy. Based upon Kahn’s and Cardim de Carvalho´s works, I will explain why, as money, the financial system is also not neutral, as to how it affects the determination of the interest rate and the productive sector. In the first part of the text, I will analyze the fundamentals of Keynes’s critique of the Loan Funds Theory. In the second part, I will study, from the perspective of Cardim de Carvalho´s works, the relationship between liquidity preference, interest rate, and speculative finance.
KEYWORDS:
interest rate; financial system; liquidity preference