The Basic Fallacy of Keynesian Theory Is Treating Goods and Credit as Two Quite Separate Things

This brings us to what is perhaps the basic fallacy of Keynesian thought. The Keynesian economist treats of goods and credit as though they were two quite separate things. He teaches that the output of goods creates a need for credit and currency. He warns that goods may go unsold, forcing down prices and causing unemployment, unless government: (1) adds to the supply of currency as the output of goods increases, and (2) sees to it that those who get the new money spend it promptly.

The classical view, on the other hand, is that goods themselves are the source of all sound credit and sound currency. Let us see what this means.

--Vervon Orval Watts, Away from Freedom: The Revolt of the College Economists (1952; repr., Auburn, AL: Ludwig von Mises Institute, 2008), 56.