Finance and risk

To explain the relationship between monetary policy and credit supply, this chapter underlines that both Keynes and Schumpeter based their analysis on bank money, namely, money created through a credit agreement. The relationship between finance and risk, which is crucial in one of the mainstream interpretations of the crisis, was described by referring to the concepts of Keynesian uncertainty and Schumpeterian innovation. Keynes’s and Schumpeter’s analyses highlight the monetary nature of uncertainty, as they allow the definition of a causal relationship between the presence of bank money and the innovations implemented by entrepreneurs. This causal sequence explains the relationship between finance and risk that characterizes the mainstream explanation of the crisis.