Dishoarding Desire

Dishoarding Desire

Dishoarding, the desire to hold fewer assets in the form of money. Hoarding and dishoarding are basically related to the demand for money, which, in the language used by Keynes, is part of the liquidity preference theory.

Hoarding and dishoarding are now usually defined in terms of balances of money held by people. A distinction is made between 'active' money in circulation and financing current transactions and 'inactive' money held in idle balances. An increase in dishoarding means that the community wants to hold a smaller quantity of money in idle balances, so it increases its purchases of goods and services out of idle balances (without changing its expenditure out of current income).

In the loanable funds theory of the rate of interest dishoarding is an important part of the supply of loanable funds. An increase in dishoarding, with no change in the demand for loanable funds, will cause the rate of interest to fall. The dishoarded money constitutes an increase in the demand for securities, causing their prices to rise and the rate of interest to fall.

In terms of Keynesian theory this case would be described as a reduction in liquidity preference to satisfy the speculative motive.

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