The True Gold Standard (Second Edition)
On May 23, 1944, John Maynard Keynes, newly ennobled, spoke in the British House of Lords in defense of a plan to establish order in the international monetary system. In particular, Lord Keynes defended himself against suggestions that he was reestablishing a gold standard:
"...was it not I, when many of to-day's iconoclasts were still worshippers of the Calf, who wrote that 'Gold is a barbarous relic'? Am I so faithless, so forgetful, so senile that, at the very moment of the triumph of these ideas when, with gathering momentum, Governments, parliaments, banks, the Press, the public, and even economists, have at last accepted the new doctrines, I go off to help forge new chains to hold us fast in the old dungeon? I trust, my Lords, that you will not believe it."
Keynes, who once called gold a "barbarous relic," had no such intention. Both Keynes and American Harry Dexter White had developed post-war monetary plans, which were published in 1943, but the U.S. rejected the British plan. Keynes wanted to eliminate gold’s monetary role by establishing a new international currency – the “bancor.” Instead, a negotiated Anglo-American plan – called the "Joint Statement by Experts on the Establishment of an International Monetary Fund" – was agreed upon and published in April 1944.
Keynes himself was in ill health and insisted that the Bretton Woods conference that would approve the monetary plan be held far from humid Washington, D.C. He warned White that holding the conference in D.C. would be “a most unfriendly act.” Shortly after Keynes’ General Theory was published in 1936, he had suffered a major heart attack and never fully recovered.
After Bretton Woods, White went on to become the first U.S. director of the IMF. Keynes went on negotiate a loan with the U.S. to sustain post-war England. He called those negotiations "absolute hell."
Some might use that phrase to describe the results of Bretton Woods.
Oct 20, 2014
Lawrence H. White is an economics professor at George Mason University who teaches graduate level monetary theory and policy. Lawrence White As described by the Wikipedia, "White earned his BA at Harvard University (1977) and PhD at the University of California at Los Angeles (1982). Before his current role at George Mason...
The Federal Reserve System's James Narron and David Skeie, career officials with the Federal Reserve System, are two eminent historically erudite figures. Writing in the New York Federal Reserve Bank's online publication, Liberty Street Economics, they recently provided a continuation of their valuable historical "revue," Crisis Chronicles: The Collapse of the...
Jul 23, 2014
An article headline in Saturday’s Wall Street Journalread “Rate Talk Heats Up Within The Fed.” As Journalreporters Jon Hilsenrath and Michael Derby...
Apr 15, 2014
Key Monetary Writings
I’m grateful for the invitation to take part at the 2014 annual Association for Private Enterprise Economics (APEE) conference in...
Why the Gold Standard?