The credit-led supply of deposits and the demand for money: Kaldor's reflux mechanism as previously endorsed by Joan Robinson

The purpose of this note is to reconsider the puzzle arising from a theory of endogenous credit-money: if the supply of bank credit is the source of b ank deposits, what would occur when the supply of bank deposits exceeds the demand for deposits! It has recently been argued that changes in interest rate differentials would be the primary mechanism through which such an ine quality could be reduced back to equality. The argument here is that such a mechanism is a secondary one, akin to Kaldor's reflux principle, which is itself the primary mechanism, when properly generalised to increases in adv ances generated by the private, the public, and the external sectors, and w hen reflux is extended to all agents, including households and banks.