Bring back cool reasonable voice of Keynes

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In the FT, from my Green New Deal colleague Ann Pettifor:

Sir, Your editorial "In praise of free markets" (September 27/28) conflates regulation of trade markets with that of financial markets.

This is a flawed analysis, one at the core of most economic orthodoxy - that money, like land, oil, soya beans, diamonds or gold, is a commodity, and therefore that trade and markets in money are no different from markets in, say, soya beans.

They are not. Money, capital, interest rates are all social constructs. We do not dig capital out of the ground and it does not grow on trees. Interest rates are set by committees of men. And so, unlike oil or soya beans, "there are no intrinsic reasons for the scarcity of capital", as Keynes argued in the General Theory.

Astonishingly the private finance sector has succeeded, against all odds, in creating a shortage of capital and forcing up the London interbank offered rate on this scarce capital.

The second extraordinary achievement of the private finance sector is the creation of debts vast as space, debts that clearly will never be paid, and that are bankrupting the finance sector.

The consequences of this incompetence are and will be immense. Pensions, homes and jobs will be lost, and there will be social unrest.

For these reasons orthodox economists and their flawed monetary theory must be abandoned, just as they were after the last great financial crisis of the 1930s.

John Maynard Keynes' cool, rational voice on monetary theory and monetary policy must once again be heeded.

Ann Pettifor, London NW1, UK

As far as I can see there is no counter-argument.

Although Keynes did buy the conventional assumptions of economics: that wants are unlimited and the means to fill them are constrained. This is wrong. Needs are limited and the capacity to meet them exists. The problem is the wasteful excess of artificially generated wants right now.