Saturday, June 18, 2016

Keynes celebrates the End of the Gold Standard

In this rare film of him from October 1931 after the UK abandoned the interwar gold exchange standard (on September 19, 1931):

The Eurozone and EU are the new “gold standard” and “gold cage” of today. If he were here today, I’d like to think Keynes would have been pro-Brexit.

There is also an amusing footnote to this 1930s piece of history.

Ludwig von Mises, prize buffoon of the Austrian school, made a prediction about what would happen after the UK abandoned the gold shackle:
“In September 1931, Ursula Hicks (wife of John Hicks) was attending Mises’ seminar in Vienna when England suddenly announced it was going off the gold exchange standard. Mises predicted the British pound would be worthless within a week, which never happened. Thereafter, Mises always expressed deep skepticism about the ability of economists to forecast.” (Skousen 2009: 286, n. 2).
Mises’ prediction was falsified. By contrast, Keynes was vindicated in predicting that British trade would benefit from abandoning the gold exchange standard and from the currency depreciation that resulted.

Skousen, M. 2009. The Making of Modern Economics: The Lives and Ideas of the Great Thinkers (2nd edn.), M.E. Sharpe, Armonk, N.Y.


  1. Were it up to me, I would have made the euro work, by at least having some plan to have a Europe-wide fiscal policy or a commitment to make savings for a Europe-wide stimulus during a recession.


    1. Gracias! Esta película es un tesoro histórico.

  3. Another tidbit I can throw at the naysayers~! Thanks |m/

  4. I read somewhere that Mises DID do us one favor: He told Ayn Rand to shut up because she was about to say something stupid. Reportedly, she burst into tears. Oh, if camera phones existed back then!

  5. The question is what comes next. It's likely that Brexit would lead to an even worse int'l trade arrangement, and more subordination to American power.

    1. Even if true, such things can be reversed.

    2. A question: how do you do to include the video in the blog? I'l like to do it, if possible

    3. Miguel,

      When you are on YouTube here:

      (1) click on "share" (underneath the video)

      (2) then underneath click on "embed"

      (3) copy the code that appears underneath.

      E.g. the code begins with:

      <iframe width="560" height="315" src="" ... etc.

      But copy the whole thing.

      (4) its better to change the size appropriate for your blog: click on "show more" and at the bottom you can change the size on "video size" and "custom size" and change to 400 or 300.

      E.g. the code becomes:

      Just paste this into your blogger page and the video will appear on your blog.

  6. Yes, the Eurozone is like the gold standard and it's got to go. Either turn into a proper fiscal union, or remove all but Germany and a couple of small surrounding countries who know what it entails.

    However, if the euro is a gold standard, it means Britain is not on the gold standard. We're not in the euro, the fiscal rules do not apply to us, making Brexit a completely different issue.

    1. Evidently, you haven't considered the EU Fiscal Compact (otherwise known as the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union) of 2012 which effectively imposes a ban on effective stimulative Keynesian economic policy in many Eurozone countries.

      Also, the EU is a grotesque corporate tyranny:

      (1) the European Commission, despite being unelected, is the executive of the EU and has the sole right to propose legislation. This European Commission proposes and formulates legislation largely in secret with committees filled with big businesses and corporate interests.

      (2) even though the European Commission members are proposed by member EU governments, once the Commission members are appointed they become independent and not accountable to the people or capable of being removed by democratic election.

      (3) the European Parliament cannot even propose legislation.

      (4) once something becomes a European law, only the unelected European Commission has the sole right to repeal or change that legislation.

      (5) even though, technically, the EU parliament has the power to dismiss the Commission by a two thirds majority vote, the parliament still has no power at all to force a new Commission to change or adopt different policies.

    2. The Fiscal Compact indeed applies to Eurozone countries. In the original post you say Keynes's opposition to the gold standard would hopefully mean he'd vote Leave. We're not a member of the new "gold standard" so he could not have justified leaving the EU for that reason. For the other reasons, maybe.

      I agree with points 1-4. I was once pro-EU and believed the crap about Social Europe. Nice left-of-centre politicians in France and Germany would impose pinko policies on Thatcherite Britain. I realise I was wrong. But points 1-4 are about the EU and still not about the euro.

      I think the need to defuse the immigration issue and to remove 1-4 from our politics have to be weighed against the time-sensitive risk of causing a new recession by leaving. That is politically very dangerous, and it will even have a Tory majority govt in charge which is pro-austerity and will negotiate an anti-worker new relationship with the post-Brexit EU. But once again, these things have nothing to do with the euro.