1. See Keynes, ‘The Ex-Ante Theory’, Econ. Jour.
47 (1937) p. 668. Both the neoclassical and neo-keynesian schools tend to assume that m=1, that is, that all household savings are used to buy securities. Such an assumption ignores uncertainty as increases in the quantity of money are never, when m = 1, held as a store of value. (See Chapters 11 and 13 below.)
2. F. P. R. Brechling, ‘A Note on Bond-Holding and the Liquidity Preference Theory of Interest’, Rev. of Econ. Stud.
24 (1957) p. 191 At the same time changes in the spot price of securities can generate a wealth effect on the demand for all consumer goods. As Keynes noted, ‘A country is no richer when it swaps titles to capital at a higher price than a lower one, but the citizens, beyond question, feel richer’ and consequently households are likely to feel less necessity to save out of normal income and therefore the consumption function is increased. [See Keynes, Treatise on Money, 11 197.] Nevertheless, for purposes of the following discussion, it is important to note that the increment in consumption is likely to come at the expense of ‘normal’ savings out of income, rather than, in the aggregate, the liquidation of paper profits in the spot markets for placements.