Robert Skidelsky on John Maynard Keynes
Good interview and interesting analysis of the personal history of Lord Keynes. Skidelsky does a good job of describing Keynesianism in 15 minutes.
My main criticism is that I feel he failed to adequately address the malinvestment issue i.e. the concept that ‘waste’ could be too large for stimulus to be long-term effective. He did a good job however of arguing the malinvestment trade-off is less consequential when the unemployment rate is high, leading to lost potential output. Listen to this bit just before the 14 minute mark.
If you want a quick and dirty primer on Keynes, this is it.
How did economic students get sucked into Keynesianism? Keynes had most concepts wrong. But the most obtrusive error is that in almost every instance in which Keynes wrote the term bank (commercial), in the General Theory it is necessary to substitute the term financial intermediary in order to make the statement correct, i.e., the Gurley-Shaw thesis, etc.
John Maynard Keynes gives the impression that a commercial bank is an intermediary type of financial institution serving to join the saver with the borrower when he states that it is an “optical illusion” to assume that “a depositor and his bank can somehow contrive between them to perform an operation by which savings can disappear into the banking system so that they are lost to investment, or, contrariwise, that the banking system can make it possible for investment to occur, to which no savings corresponds.”
But most money & banking students today are aware that “LOANS CREATE DEPOSITS”.
In the day that Keynes was writing, when a gold standard was operative, the money multiplier was a valid concept. The “loans create deposits” is a modern truth of our floating exchange rate fiat system.
You have not made a valid criticism of Keynes
How did economic students get sucked into Keynesianism? Keynes had most concepts wrong. But the most obtrusive error is that in almost every instance in which Keynes wrote the term bank (commercial), in the General Theory it is necessary to substitute the term financial intermediary in order to make the statement correct, i.e., the Gurley-Shaw thesis, etc.
John Maynard Keynes gives the impression that a commercial bank is an intermediary type of financial institution serving to join the saver with the borrower when he states that it is an “optical illusion” to assume that “a depositor and his bank can somehow contrive between them to perform an operation by which savings can disappear into the banking system so that they are lost to investment, or, contrariwise, that the banking system can make it possible for investment to occur, to which no savings corresponds.”
But most money & banking students today are aware that “LOANS CREATE DEPOSITS”.
In the day that Keynes was writing, when a gold standard was operative, the money multiplier was a valid concept. The “loans create deposits” is a modern truth of our floating exchange rate fiat system.
You have not made a valid criticism of Keynes