Monetary reform and the international economic order were topics of enduring interest to John Maynard Keynes (JMK). He rarely overlooked an opportunity to criticise the classical gold standard. The main point of his criticism changed, however, in parallel with the development of his ideas. The mature Keynes, as in the quotation above, gave two main reasons why the gold standard is not a welfare-maximising arrangement. First, countries cannot reduce unemployment by expanding domestic demand. They must compete for exports to acquire gold and increase money. Their gain is at the expense of another country (or other countries) that loses gold and must contract. Second, the classical gold standard prevents a country from independently lowering its interest rate. Keynes often wanted a zero rate of interest, and certainly a permanently lower rate of interest, to increase investment, the capital stock and per capita income.
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- Keynes on Monetary Reform and International Economic Order
Allan H. Meltzer
- Palgrave Macmillan UK
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