John Keynes and the Barbaric Relic

One of the most important moments in the world monetary history had John Maynard Keynes as the most prominent actor.

The most remembered phrase of his life as an economist was, without doubt the term “barbaric relic”.

Keynes was the architect of the fiat system that was to be established after the Second World War, and previously the decoupling of the Gold Standard by the United Kingdom, which is considered as the solution to the economic problems that the country was having at that time.

That year of 1931, Keynes foresaw a great economic future for Great Britain as a result of abandoning gold as the basis of the British monetary system.

In his famous speech he left us some pearls like the following:

  • There is no danger of the exchange rate falling too much

  • There is no danger of the cost of living rising too much

  • They should not allow anyone to take them back in the gold cell

  • We must forget old ideas

It seems evident that Keynes was not very close to the gold standard, and on the contrary a good friend of the state management of money.

The latter sums everything up perfectly.

Keynes was a socialist at heart, and therefore could not trust that gold could put any kind of obstacle to state omnipotence.

First of all, I would like to comment on a detail that escapes those who defend the “success of Dr. Keynes” since Great Britain and the rest of the advanced world have supposedly lived many years of prosperity without the Gold Standard.

Well, the fact that the advanced world has experienced some years of peace and growth in trade in recent decades does not prove that the fiat system is better than a private monetary system with gold as a pillar.

That is, we cannot compare something that has happened with something that has not happened to begin with.

What we can compare are the statements of Keynes in his statements where he was so happy for the end of the Pattern in England.

  1. There is no danger of the exchange rate falling too much

Does it refer to the exchange rate of countries after the 1930s?

Does it refer to the Bolivar, to the Argentine peso, to the Turkish lira, to the Spanish peseta, to the same English pound years later with its devastating falls with respect to the same gold or other currencies?

This phrase demonstrates one of the following two questions:

  • His view was useless in economy in view of such a glaring failure, because just the opposite has happened with fiat currencies.
  • Or he was a pathological liar

Do I tell you the answer?

It is the second option.

He knew perfectly well that the Fiat system is not stable.

  1. There is no danger of the cost of living going too high

Where do you mean?

What has happened to the cost of living from the real estate point of view in the advanced world?

Will the cost of living in Venezuela have decreased with its FIAT system?

Will it have done it in Zimbabwe or Mexico?

Well, if what he was referring to is that the world was going to go to an exaggerated consumer model, prioritizing short-term consumption and penalizing savings and investment, then it would have been right.

Again, as in the previous case, we are talking about a conscious liar.

The Gold Standard in Britain after the First World War

After the First War, with the temporary abandonment of the Standard, the British economy was in serious trouble, obviously.

The return to gold made the exchange rate, supposedly, very high for what Britain could afford, which resulted in an increase in unemployment and a worsening in trade.

This sounds like quite logical.

Anyone who reads it will think that the problem then was the Standard of the Barbara Relic.

However, as I said before, the British economy “recovered” does not prove that the fiat model was better than gold.

Who knows if the British economy would have fared better in the future with this Standard?

This is the eternal defence of the interventionists, who when facing a problem in the economy, like an increase in unemployment, always blame gold, budget constraints, deflation, etc., and always propose to increase spending either through debt or through mere printing of money.

That once the gold or the budget restriction has been removed, the economy improves later: yes, but that does not prove at all that the economy would not have grown equally or more than having maintained this pattern.

Keynes was one of those who started the road to the complete collectivization of world societies.

His position against gold was logical.

Gold is the main economic obstacle in the construction of the socialist utopia.

 

Original article: John Keynes y la Reliquia Bárbara 

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