Keynes' "Monistic" Theory of Cash Demand for Hoarding Purposes: Interest Is the Reward for Not Hoarding

According to Keynes' liquidity preference theory, interest is paid for the "desire to hold wealth in the form of cash" and received as "the reward for parting with cash" against some instrument of saving. It is "the reward for not hoarding," not "the reward for not spending." In other words, the owner of a savings account receives interest because he does not hoard, not because he does not spend money; and he loses interest because he hoards money, not because he spends it. The demand for cash comes from the desire to transform savings accounts into cash. It is denied that money is demanded in order to be spent, not to be hoarded. In short, the switching from savings accounts into cash for hoarding, not the withdrawal of savings accounts for spending, is considered the only possibility. At least on the surface, this is a "monistic" theory of cash demand for hoarding purposes.

--L. Albert Hahn, "Anachronism of the Liquidity Preference Concept," in The Economics of Illusion: A Critical Analysis of Contemporary Economic Theory and Policy (New York: Squier Publishing, 1949), 147.