Uncertainty and Liquidity Preference

[Ted Winslow <winslow@xxxxxxxx>]

Why is holding money a rational way of dealing with the fact that, in the
main, the long run yields of capital assets can't be known so the
prospective yield of such assets is "fundamentally uncertain", i.e.
unknowable?

Uncertainty of this kind isn't capable of degree, is it?  It can't increase
and decrease.  "We simply do not know."  Consequently, variations in it
can't be invoked to explain variations in liquidity preference.

Moreover, on Keynes's premises isn't it practically certain that holding
money for a long time (the only way of using money to avoid the invariant
fundamental uncertainty of long run future yields on capital assets) will
be a losing proposition since the only practical way, according to Keynes,
of preventing the claims of accumulated rentier wealth from becoming, in
the long run, an unbearable burden on the "active classes" is through
inflation?

Ted Winslow


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