The Monetization of Profits in a Monetary Circuit Framework

This paper offers an explanation of the realization of profits in money. Following Edward Nell's lead, we place Marx's spheres of production and circulation at the centre of the analysis. Production is represented a la Sraffa-von Neumann while circulation is analysed following the basic insights of the Franco-Italian theory of the monetary circuit. Once production has taken place, money is created by banks ex nihilo and then circulates through certain channels allowing the reproduction of the system and monetizing profits plus the payment of interest on long-term debts within one single circuit. The novelty of our approach lies in the treatment of the financing of investment in fixed capacity.