Inadequacy of revenues and endogenous economic cycles in a monetary economy of production

The recurring cycles of economic activity in a capitalist economy have prompted a variety of explanations. Some of these focus on the excessive indebtedness of economic agents during a growth phase, which may result from overly optimistic behavior or excessive risk-taking. From a post-Keynesian circuit theory perspective, this article shows that this excess debt could also result from firms’ current production expenditures generating insufficient income to enable them to purchase production. In this case, society must go into debt to consume what it produces, creating ever-increasing debt. This situation tends to be reversed during a depression. Based on these assumptions, endogenous cycles of economic activity can be modeled within the framework of a monetary economy of production.