From Chapter 14 of Henry Hazlitt’s timeless book The Failure of the “New Economics”
According to Keynes, holding cash for the “speculative motive” is wicked. This is what the Monetary Authority must stop. It is Keynes’s usual trick of giving the dog a bad name as an excuse for shooting him. But it is a nice question whether those who hold cash because they distrust the prices of investments or of commodities are holding cash in order to speculate or in order not to speculate. They hold cash (beyond the needs of the transactions-motive) because they distrust the prices of investments or of durable consumption goods; they believe that the prices of investments and/or of durable consumption goods are going to fall, and they do not wish to be caught with these investments or durable goods on their hands. They are seeking, in short, not to speculate in investments or goods. They believe that next week, next month, or next year they will get them cheaper.
This may be called speculating in money, as Keynes calls it; or it may be called a refusal to speculate in stocks, bonds, houses or automobiles. The real question to be asked about it, however, is not whether or not this is “speculation,” but whether it is wise or unwise speculation. It is usually most indulged in after a boom has cracked. The best way to prevent it is not to have a Monetary Authority so manipulate things as to force the purchase of investments or of goods, but to prevent an inflationary boom in the first place.
