Research On Money Credit And Asset Price Volatility

Monetary theory as the most active areas in economics has been flashing the wisdom spark of economists. But the explanation for the relationship between money and credit monetary theory are more confusing. Most books will directly see money as same as credit currency. In this paper, after tracking the origin of currency and its basis of credit, try to find a consistent logic and historical explanation for many problems in monetary theory. The basic conclusion is:in monetary economy we cannot be completely separated money from credit, nor consider them as two different concepts. The currency is determined by the reality of the resources in the real economy, corresponding to the actual wealth claim; credit is the lending of money for intertemporal allocation of wealth, is the promise to pay, bear a lot of uncertainty. On the modern monetary economy, money is neutral, but the credit is not.In the modern monetary economy, the function of money as a unit of account, a store of value and medium of exchange is not the only thing that important. Credit’s function in the intertemporal allocation of resources is more important. Along with the deepening and extending of the capital market, the boundaries between currency and other financial assets are increasingly blurred, and currency gradually loses the stable connection with the entity economy. The core problem of monetary is maintaining confidence in the currency, and confidence in the currency is based on the purchasing power of money. From this point, the first priority of monetary authorities is to maintain the value of the currency stable. At the same time the credit that most banks create can be used not only for the real economy cycle, but also for simple financial cycle, forming a credit and asset price bubbles reciprocal causation. But asset prices fluctuation through credit channel indirectly caused the real economy fluctuations. The main article along the " the credit basis of money--connection and difference between monetary and credit--the asset price volatility and credit relationship ", and put forward a possible research direction.