I reread Keynes' 1940 book 'How to Pay for the War' last night to prepare for a debate this week (online, of course, and invitation only). This is from page 62:
Five thoughts.
First, Keynes understood that a government can create as much cash is it needs, at its own will.
Second, the discussion of foreign reserves was in a de-facto gold standard era: we are no longer on the gold standard.
Third, Keynes understood sectoral balances and that it is government spending that creates private saving.
Fourth, inflation is distortionary of relative value and so distribution within the economy, but not necessarily of physical production, and this issue has to be addressed (the answer was a universal basic income; the family allowance).
Fifth, tax controls inflation.
Why have we forgotten?
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Most disciplines progress over time, but economics (funded by the wealthy) chose to deliberately erase some of the progress made by Keynes.
It’s a bit like the story of adding lead to petrol, because it made people some rich, even though it was known to damage health.
A money motive can often push us in a bad direction.
Indeed….
Well, first up has to be because quite simply we been relying on ex-private sector financiers to run the public finances appointed by too many politicians (Tory politicians in particular) who are themselves from the same background.
I have always maintained that this fact is something of an under appreciated coup to be honest.
If you think about it, such people are going look after their mates aren’t they – especially if money production gets shifted more into interest bearing credit? The wisdom of Keynes has been simply crowded out, but also these people behave as if sovereignty over the currency is a private concern – not one of the State.
This ignores the facts of history and democracy and has gone on for far too long.
But facts – I mean – what are they to the followers of the Chicago School, Ayn Rand, Friedman and von Hayek?
The old saying, ‘those who forget their history, are condemned to repeat it,’ seems to apply here.
No – not forgotten. Chosen to ignore in pursuit of a particular ideology.
When everyone finds that the deficit spending to deal with the current crisis does NOT bring the sky crashing down on our heads we need to re-write the agenda. “If we can do it for the virus why not for xxxx?”
Pick any (or all) – Green revolution, health etc……
The Bank of England has no recall…
There are many battles ahead