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Debt and Debt Management: Reflections on a Fable by Kalecki

In: Financial Markets in Perspective

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  • Jan Toporowski

    (SOAS University of London)

Abstract

Kalecki explained debt resolution by means of a fable about monetary circulation between mutually indebted individuals. This chapter generalizes the processes of debt payment in that fable to show how interest and debt payments depend on the financial circulation of money, rather than profits or income derived from the nonfinancial economy. Financial circulation makes debt payments dependent upon the liquidity in the financial system and marks a break with the classical theory of interest in which interest is tied to the rate of profit. Bank lending, securitization, and central bank buying of financial assets all have their part to play in maintaining debt payments to avoid default and financial crisis.

Suggested Citation

  • Jan Toporowski, 2022. "Debt and Debt Management: Reflections on a Fable by Kalecki," Springer Studies in the History of Economic Thought, in: Arie Arnon & Maria Cristina Marcuzzo & Annalisa Rosselli (ed.), Financial Markets in Perspective, pages 145-156, Springer.
    • Handle: RePEc:spr:spshcp:978-3-030-86753-9_8
    DOI: 10.1007/978-3-030-86753-9_8
    as

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