Re: Keynes' quote

["John Gelles" <johng@xxxxxxxxxx>]

    It is all well and good to wonder at a sentence that
    appears to equate the hardness of a currency with
    the power of an economy to end want and waste.

    Of course currencies have been a usesul tool for
    economic growth. But the tool is not the same as
    its products.  We want real wealth in the form of
    producing systems for food, fiber, water, clothing,
    care and education, etc., etc..  Money often helps
    to motivate work -- some of which can be directed
    toward growth -- while most is related to current
    exchange and consumption.

    But an economy of today's habits, more often
    than not, is starved for more money rather than
    robbed of motivation for having too much of it..

    Fiat money alone can save us from depression
    and political extremism -- but its use must be
    guarded to prevent loss of its power to motivate
    work and invention. That is the simple truth --
    in this era that has not as yet solved the paradox
    of price and profit (see www.1944.org  ) as the
    source of their own dynamic stabilities.

        John Gelles

----- Original Message -----
From: Alan G Isaac <aisaac@xxxxxxxxxxxx>
To: Post Keynesian Theory <pkt@xxxxxxxxxxxxxxxx>
Sent: Wednesday, July 10, 2002 8:10 AM
Subject: Re: Keynes quote

On Tue, 09 Jul 2002 22:32:46 -0400 Stephen Block wrote:

>All in all, this quote, and his interest in it, shows Keynes' pragmatism:
>any means necessary to get put the economy aright, to get it refloated.
>If the rich get in the way of that project, make them pay for their
>obstinence (through low interest rates). That is the way I read it.

But Keynes is clearly condeming the practice, which concerns not
interest rates but the inflation tax (and specifically, seignorage).
http://www.socsci.mcmaster.ca/~econ/ugcm/3ll3/keynes/peace.htm
What is more, there is a clear strand of quantity theory reasoning.
That is the surprise and therefore the interest.

And indeed, Keynes proved quite prescient.

Also of interest it turns out is the clear purchasing power
parity reasoning in this text, which is much earlier than
Keynes's famous 1925 discussion and indeed ties with the
oft cited 1918 discussion by Cassel.  There is also a very
 nice discussion of the hazards of taking on debt in a
 foreign currency denomination, which deserved reading
 in advance of the debt and currency crises of the last two
 decades.  The text follows.

Alan Isaac

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