Originally posted on Monday, February 13th, 2012
“Whilst economists dozed, the academic dream of a hundred years, doffing its cap and gown, clad in paper rags, has crept into the real world by means of the bad fairies–always so much more potent than the good–the wicked ministers of finance.”
The compellingly eloquent John Maynard Keynes, in his Tract on Monetary Reform, 1923, memorably referred to the gold standard as “a barbarous relic.”
But what was the full context of that observation?
‘In truth, the gold standard is already a barbarous relic. All of us, from the Governor of the Bank of England downwards, are now primarily interested in preserving the stability of business, prices, and employment, and are not likely, when the choice is forced upon us, deliberately to sacrifice these to the outworn dogma, which had its value once, of £3.17s. 10.5 per ounce. Advocates of the ancient standard do not observe how remote it is from the spirit and requirements of the age. A regulated non-metallic standard has slipped in unnoted. It exists. Whilst economists dozed, the academic dream of a hundred years, doffing its cap and gown, clad in paper rags, has crept into the real world by means of the bad fairies–always so much more potent than the good–the wicked ministers of finance.
Clearly, attributing a “nonregulated non-metallic standard” to “the bad fairies…the wicked ministers of finance” is less than unalloyed, so to speak, praise.
For Keynes to have made this observation so shortly after writing in the Commercial Manchester Guardian, April 20, 1922, that “If the gold standard could be reintroduced…we all believe the reform would promote trade and production like nothing else.” (Used as epigram in The True Gold Standard by Lewis E. Lehrman.) He was attacking an atavistic monetary policy — the pitiful “managed gold standard” formalized in Genoa — an era of such ignorance that Winston Churchill, as Chancellor of the Exchequer, would complain — about monetary affairs — “Here I am lost and reduced to groping….” And Keynes would, just two years hence, partially exonerate and partially indict Churchill for his blunder of restoring the gold standard at the pre-war parity by writing “partly, perhaps, because he has no instinctive judgment to prevent him from making mistakes; partly, because, lacking this instinctive judgment, he was defeated by the clamorous voice of conventional finance; and most of all, because he was gravely misled by the experts.”
It is not so very clear that Keynes considered the classical gold standard a “barbarous relic.” It is far more probable that in the Tract Keynes was referencing the managed gold, or gold-exchange, standard then extant.
This, the interwar standard, was attacked even more savagely than by Keynes by Jacques Rueff — the monetary statesman and savant who The Gold Standard Now considers the greatest economist of the 20th century — as a “grotesque caricature” of the gold standard.
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