Quotes by John Maynard Keynes

These habits and practices are a reflection of changes in economic and social organisation. But the Theory has often been expounded on the further assumption that a _mere_ change in the quantity of the currency cannot affect _k_, _r_, and _k´_,--that is to say, in mathematical parlance, that _n_ is an _independent variable_ in relation to these quantities. It would follow from this that an arbitrary doubling of _n_, since this in itself is assumed not to affect _k_, _r_, and _k´_, must have the effect of raising _p_ to double what it would have been otherwise. The Quantity Theory is often stated in this, or a similar, form. Now “in the long run” this is probably true. If, after the American Civil War, the American dollar had been stabilised and defined by law at 10 per cent below its present value, it would be safe to assume that _n_ and _p_ would now be just 10 per cent greater than they actually are and that the present values of _k_, _r_, and _k´_ would be entirely unaffected. But this _long run_ is a misleading guide to current affairs. _In the long run_ we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again. In actual experience, a change of n is liable to have a reaction both on _k_ and _k´_ and on _r_. It will be enough to give a few typical instances. Before the war (and indeed since) there was a considerable element of what was conventional and arbitrary in the reserve policy of the banks, but especially in the policy of the State Banks towards their gold reserves. These reserves were kept for show rather than for use, and their amount was not the result of close reasoning. There was a decided tendency on the part of these banks between 1900 and 1914 to bottle up gold when it flowed towards them and to part with it reluctantly when the tide was flowing the other way. Consequently, when gold became relatively abundant they tended to hoard what came their way and to raise the proportion of the reserves, with the result that the increased output of South African gold was absorbed with less effect on the price level than would have been the case if an increase of _n_ had been totally without reaction on the value of _r_.

A country population able to support life on the fruits of its own agricultural production but without the accustomed surplus for the towns, and also (as a result of the lack of imported materials and so of variety and amount in the saleable manufactures of the towns) without the usual incentives to market food in return for other wares; an industrial population unable to keep its strength for lack of food, unable to earn a livelihood for lack of materials, and so unable to make good by imports from abroad the failure of productivity at home. Yet, according to Mr. Hoover, "a rough estimate would indicate that the population of Europe is at least 100,000,000 greater than can be supported without imports, and must live by the production and distribution of exports." The problem of the re-inauguration of the perpetual circle of production and exchange in foreign trade leads me to a necessary digression on the currency situation of Europe. Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate _arbitrarily_; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers,", who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency.

These habits and practices are a reflection of changes in economic and social organisation. But the Theory has often been expounded on the further assumption that a _mere_ change in the quantity of the currency cannot affect _k_, _r_, and _k´_,--that is to say, in mathematical parlance, that _n_ is an _independent variable_ in relation to these quantities. It would follow from this that an arbitrary doubling of _n_, since this in itself is assumed not to affect _k_, _r_, and _k´_, must have the effect of raising _p_ to double what it would have been otherwise. The Quantity Theory is often stated in this, or a similar, form. Now “in the long run” this is probably true. If, after the American Civil War, the American dollar had been stabilised and defined by law at 10 per cent below its present value, it would be safe to assume that _n_ and _p_ would now be just 10 per cent greater than they actually are and that the present values of _k_, _r_, and _k´_ would be entirely unaffected. But this _long run_ is a misleading guide to current affairs. _In the long run_ we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again. In actual experience, a change of n is liable to have a reaction both on _k_ and _k´_ and on _r_. It will be enough to give a few typical instances. Before the war (and indeed since) there was a considerable element of what was conventional and arbitrary in the reserve policy of the banks, but especially in the policy of the State Banks towards their gold reserves. These reserves were kept for show rather than for use, and their amount was not the result of close reasoning. There was a decided tendency on the part of these banks between 1900 and 1914 to bottle up gold when it flowed towards them and to part with it reluctantly when the tide was flowing the other way. Consequently, when gold became relatively abundant they tended to hoard what came their way and to raise the proportion of the reserves, with the result that the increased output of South African gold was absorbed with less effect on the price level than would have been the case if an increase of _n_ had been totally without reaction on the value of _r_.

These habits and practices are a reflection of changes in economic and social organisation. But the Theory has often been expounded on the further assumption that a _mere_ change in the quantity of the currency cannot affect _k_, _r_, and _k´_,--that is to say, in mathematical parlance, that _n_ is an _independent variable_ in relation to these quantities. It would follow from this that an arbitrary doubling of _n_, since this in itself is assumed not to affect _k_, _r_, and _k´_, must have the effect of raising _p_ to double what it would have been otherwise. The Quantity Theory is often stated in this, or a similar, form. Now “in the long run” this is probably true. If, after the American Civil War, the American dollar had been stabilised and defined by law at 10 per cent below its present value, it would be safe to assume that _n_ and _p_ would now be just 10 per cent greater than they actually are and that the present values of _k_, _r_, and _k´_ would be entirely unaffected. But this _long run_ is a misleading guide to current affairs. _In the long run_ we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again. In actual experience, a change of n is liable to have a reaction both on _k_ and _k´_ and on _r_. It will be enough to give a few typical instances. Before the war (and indeed since) there was a considerable element of what was conventional and arbitrary in the reserve policy of the banks, but especially in the policy of the State Banks towards their gold reserves. These reserves were kept for show rather than for use, and their amount was not the result of close reasoning. There was a decided tendency on the part of these banks between 1900 and 1914 to bottle up gold when it flowed towards them and to part with it reluctantly when the tide was flowing the other way. Consequently, when gold became relatively abundant they tended to hoard what came their way and to raise the proportion of the reserves, with the result that the increased output of South African gold was absorbed with less effect on the price level than would have been the case if an increase of _n_ had been totally without reaction on the value of _r_.

These habits and practices are a reflection of changes in economic and social organisation. But the Theory has often been expounded on the further assumption that a _mere_ change in the quantity of the currency cannot affect _k_, _r_, and _k´_,--that is to say, in mathematical parlance, that _n_ is an _independent variable_ in relation to these quantities. It would follow from this that an arbitrary doubling of _n_, since this in itself is assumed not to affect _k_, _r_, and _k´_, must have the effect of raising _p_ to double what it would have been otherwise. The Quantity Theory is often stated in this, or a similar, form. Now “in the long run” this is probably true. If, after the American Civil War, the American dollar had been stabilised and defined by law at 10 per cent below its present value, it would be safe to assume that _n_ and _p_ would now be just 10 per cent greater than they actually are and that the present values of _k_, _r_, and _k´_ would be entirely unaffected. But this _long run_ is a misleading guide to current affairs. _In the long run_ we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again. In actual experience, a change of n is liable to have a reaction both on _k_ and _k´_ and on _r_. It will be enough to give a few typical instances. Before the war (and indeed since) there was a considerable element of what was conventional and arbitrary in the reserve policy of the banks, but especially in the policy of the State Banks towards their gold reserves. These reserves were kept for show rather than for use, and their amount was not the result of close reasoning. There was a decided tendency on the part of these banks between 1900 and 1914 to bottle up gold when it flowed towards them and to part with it reluctantly when the tide was flowing the other way. Consequently, when gold became relatively abundant they tended to hoard what came their way and to raise the proportion of the reserves, with the result that the increased output of South African gold was absorbed with less effect on the price level than would have been the case if an increase of _n_ had been totally without reaction on the value of _r_.