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INDEPENDENCE DAY: DEDICATED TO JOHN MAYNARD KEYNES

INDEPENDENCE DAY: DEDICATED TO JOHN MAYNARD KEYNES

Today, the day of the independence of the United States of America, in consideration of the changes affecting the global economica landscape, we would remind the General Theory of Employment, Interest and Money of British economist John Maynard Keynes .....   

John Maynard Keynes was one of the most famous British economists. He has drawn all his economic knowledge from other economists like Bentham, Says, Walras, Marshall, Russell, Mill, Sraffa. 

Furthermore, others, of course, but what is it that made him special? Indeed his tact towards social ethics, for this reason as an economist, deepens in exceptional work, general theory on employment, interest and written money, the relevant questions of the economy and still current today: the risk, uncertainty, marginal efficiency, and preference for liquidity of individuals and market and economic policy mechanisms.

In 1923 he wrote the very famous article entitled: Poverty and abundance: is the financial system able to balance itself on its own? 

In the historical context in which the United States of America faced its financial crisis of 1929 and the great depression, this article became a pillar for "how to get out of the crisis."

Concepts of the Keynesian cross as a postulate of the need for public spending to activate demand.

But also other important concepts, like the idea of involuntary unemployment found in work on the General Theory of employment, interest, and money, J.M. Keynes highlighted his belief that unemployment does not depend on workers' resistance to refuse jobs for possible reductions in real wages.

He exploreed the problem of the deflation of money wages since his general theory has as a fundamental postulate on the fact that firms are always on their demand curve for labor and the demand for work is an inverse function of the real wage (real wage is for economists the net wage - or money wage - concerning the current price level).

Without delving into the whole general theory of J.M. Keynes, we only report the economist's writing within the work, to make it clear what he had understood and not discovered yet, and therefore what still made him uncertain:

"Our economic world is cyclical, avoiding the most serious extremes of fluctuations, between unemployment and inflation in both directions around an intermediate position, significantly below full employment and significantly above the minimum level of employment, below which would endanger people's lives."

 

Even more interesting when he writes:

 

"State intervention has the task of improving modern capitalism and making capitalism more efficient. And therefore, if natural economic events such as inflation alter the distribution of wealth that allows for the accumulation of capital, and destroy the atmosphere of trust which is the necessary condition for saving and investing, the State must intervene !!"

 

In this brief conclusion, to say that his economic theories have made the US dollar a leading currency in the capital market with a strong and incisive international monetary policy since the end of the Second World War onwards.

 

Since the entry of the People's Republic of China into the World Trade Organization (WTO) and opening up to the capitalist economic world and international trade in 2000, things have gradually changed.

 

It still remains that the great British economist was of fundamental importance for the modern economic society in which we still live today, obviously together with many other economists and monetarists such as Milton Friedman who have continued and deepened the theories still very current today of the economist J.M. Keynes as "the state of trust", the unavoidable uncertainty of investment activities, the risk that has given rise to asset management, risk management and financial risk management over time. In short, we can say that he was an excellent doctor of the twentieth century who prescribed a cure by giving the right medicine to heal the problem, without knowing the side effects.

Today, in light of the numerous side effects that occurred with the global financial crisis of 2007 and first with the financial and currency crises, it seems that the decade 2020-2030 is marked by the redesign of the digital monetary economy and environmental sustainability.  

 


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