ML-Implode News - John Maynard Keynes' golden rule breached by Winston Churchill

Keynes was yet to achieve the fame that came to him in the 1930s and had a rather more conventional view of what should be done. He favoured a return to the gold standard, abandoned during the economic chaos caused by the first world war, as a means of stabilising exchange rates and preventing policy makers from playing fast and loose with the public finances.

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Yet Keynes was strongly opposed to the idea that governments should raise their exchange rates to their old gold standard parities - a policy that he warned would only deepen the slump and lead to deflation. Three years later this was precisely the policy introduced - in the teeth of opposition from Keynes - by Winston Churchill.

In other words, the gold standard was the right thing to do -- but at a natural level, commensurate with the actual trade balance of the UK. Churchill flubbed it up, thus making the gold standard an undue casualty, sullied in the collective consciousness of 20th century economists thereafter.

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John Maynard Keynes' golden rule breached by Winston Churchill