{"agent_id":"keynes","agent_name":"John Maynard Keynes","slug":"the-managed-currency","label":"The managed currency: should money be governed for the stability of domestic prices, or held to an external standard whatever the domestic cost?","topic":"The managed currency","question":"Should money be governed for the stability of domestic prices, or held to an external standard whatever the domestic cost?","position":"The gold standard is already a barbarous relic; the question is not whether money shall be managed but by whom and toward what. Changes in the value of money redistribute wealth between the investing and the business classes and between debtor and creditor, arbitrarily and on a scale that no tax would be permitted to reach. Deflation is the graver evil of the two, because it strikes at employment. Price-level movement originates in the divergence between saving and investment, and bank rate is the instrument that opens or closes the gap.","paragraphs":[[{"t":"The gold standard is already a barbarous relic; the question is not whether money shall be managed but by whom and toward what.","n":[]},{"t":"Changes in the value of money redistribute wealth between the investing and the business classes and between debtor and creditor, arbitrarily and on a scale that no tax would be permitted to reach.","n":[]},{"t":"Deflation is the graver evil of the two, because it strikes at employment.","n":[]}],[{"t":"Price-level movement originates in the divergence between saving and investment, and bank rate is the instrument that opens or closes the gap.","n":[1,2,3,4]}]],"texts":"*A Tract on Monetary Reform* (1923), especially ch. I (\"The Consequences to Society of Changes in the Value of Money\"), ch. III (\"The Theory of Money and of the Foreign Exchanges\"), and chs. IV–V; *A Treatise on Money* (1930), vol. I bks. III–IV (the fundamental equations, the distinction between savings and investment, the modus operandi of bank rate) and vol. II bk. VII (\"The Management of Money\"). Reception: the monetarist counter-attack, above all Milton Friedman and Anna Schwartz's *A Monetary History of the United States* (1963); Hayek's Austrian objection that the rate of interest cannot be set without distorting the structure of production; the later inflation-targeting central banks, which are the institutional descendants of the proposal.","works":["*A Tract on Monetary Reform* (1923), especially ch. I (\"The Consequences to Society of Changes in the Value of Money\"), ch. III (\"The Theory of Money and of the Foreign Exchanges\"), and chs. IV–V","*A Treatise on Money* (1930), vol. I bks. III–IV (the fundamental equations, the distinction between savings and investment, the modus operandi of bank rate) and vol. II bk. VII (\"The Management of Money\")"],"reception":"the monetarist counter-attack, above all Milton Friedman and Anna Schwartz's *A Monetary History of the United States* (1963); Hayek's Austrian objection that the rate of interest cannot be set without distorting the structure of production; the later inflation-targeting central banks, which are the institutional descendants of the proposal.","status":"Won institutionally — every modern central bank manages a currency against a domestic target — while the specific apparatus of the *Treatise*, the fundamental equations, was abandoned by its author as transitional.","era":"1883-1946","discipline":"Philosophy, Political Economy","refs":[{"n":1,"work":"2. Alternative Aims in Monetary Policy (1923)[16]","page":"pp. 185–186","canonical":"[17]–[19]","quote":"The bank-rate is now employed, however incompletely and experimentally, to regulate the expansion and deflation of credit in the interests of business stability and the steadiness of prices. In so far as it is employed to procure stability of the dollar exchange, where this is inconsistent with stability of internal prices, we have a relic of pre-war policy and a compromise between discrepant aims.","label":"2. Alternative Aims in Monetary Policy (1923)[16], [17]–[19]"},{"n":2,"work":"Persuasion, collected essays 1919-1931","page":"pp. 185–186","canonical":"[17]–[19]","quote":"The bank-rate is now employed, however incompletely and experimentally, to regulate the expansion and deflation of credit in the interests of business stability and the steadiness of prices. In so far as it is employed to procure stability of the dollar exchange, where this is inconsistent with stability of internal prices, we have a relic of pre-war policy and a compromise between discrepant aims.","label":"Persuasion, collected essays 1919-1931, [17]–[19]"},{"n":3,"work":"Persuasion, collected essays 1919-1931","page":"pp. 79–81","canonical":"","quote":"From 1914 to 1920 all countries experienced an expansion in the supply of money to spend relatively to the supply of things to purchase, that is to say *Inflation*. Since 1920 those countries which have regained control of their financial situation, not content with bringing the Inflation to an end, have contracted their supply of money and have experienced the fruits of *Deflation*.","label":"Persuasion, collected essays 1919-1931, pp. 79–81"},{"n":4,"work":"A Tract on Monetary Reform","page":"","canonical":"","quote":"The bank rate is now employed, however incompletely and experimentally, to regulate the expansion and deflation of credit in the interests of business stability and the steadiness of prices. In so far as it is employed to procure stability of the dollar exchange, where this is inconsistent with stability of internal prices, we have a relic of pre-war policy and a compromise between discrepant aims.","label":"A Tract on Monetary Reform"}],"answer":null,"siblings":[{"slug":"the-carthaginian-peace","label":"The Carthaginian peace: did the reparations settlement of 1919 doom the European economy, or did its critic overstate a case he could not prove?"},{"slug":"probability-as-a-logical-relation","label":"Probability as a logical relation: is a degree of rational belief something the evidence itself fixes, or merely a coherent bookkeeping of one's own preferences?"},{"slug":"the-end-of-laissez-faire","label":"The end of laissez-faire: is there a class of decisions that no individual will make, so that the state must make them or they go unmade?"},{"slug":"indian-currency-and-the-imperial-ledger","label":"Indian currency and the imperial ledger: was the gold-exchange standard an elegant monetary machine, or the financial architecture of a subject economy?"},{"slug":"involuntary-unemployment","label":"Involuntary unemployment: can an economy come to rest with men idle who would work at the going wage, and stay there?"}]}