A Comment on Hester's Paper

Donald Hester correctly points out that the term "intermediation" is imprecise, so I prefer to avoid the term and to discuss the subject using the more familiar terms substitution and wealth or income effect. The wealth effect is relatively more important if intermediation is introduced as a part of the discussion of inside and outside money, particularly if money is defined broadly, and relatively less important if the discussion is about the comparative growth rates of bank and non-bank financial institutions.