liquidity control

Discussion in 'Economics' started by morganist, Mar 8, 2009.

  1. is liquidity control important in economics?

    i was thinking does the level of money in the economy have much baring on the success of business. there are two main thoughts demand and supply side demand side stating more money more output and the supply side stating minimum money supply to reduce inflation.

    in reality does either technique matter. my point being the reason for economic success is the ability for businesses to function. credit, labour, transportation etc. therefore whatever the money supply does it matter. both supply and demand side have advantages low inflation means no devaluing of assets. high inflation means less repayments on loans and usually higher interest rates.

    neither of them have any affect on the other factors directly and when they do affect the other factors there are pro's and con's to both perspectives.

    in short my point being is too much empahsis put on money supply. I am not stating this as my opinion but just starting a debate to see what others think, as this has been the main concern in economics for the last thirty years and it is possible to argue that other functions has been sidetracked.