This book studies the dichotomy between real exchange and the monetary economy. Money has substantial nonneutral effects because other goods on the market have to compete with its unique costless liquidity services. Wealth holders, for instance, will only spend their money on goods the pecuniary or non-pecuniary returns of which match money's liquidity premium or its interest. Hence money, with its asymmetric cost-benefit structure and its intransitivity in exchange, influences prices, for instance, by preventing future scarcities or abundancies of goods being adequately reflected in their spot prices. One of the cash holders' options, namely the freedom of timing his transactions, reveals itself as the transactors' uncertainty, leaving an externalities problem to be dealt with. Because money is a means of transaction, interest paid on outside funds must be considered not as capital costs but as an unusual form of transaction costs. The same applies even more obviously to the interest paid by economic agents for money freshly acquired from the money issuing system.
These and other central problems of monetary economics are investigated, and then resolved by the concept of a "neutral money" financial innovation, that is, bank money whose benefits from liquidity are neutralised by carrying or storage costs attached to that money (Keynes; Allais) instead of paying subsidies on cash balances (Friedman; Samuelson).