“Hundreds of thousands of rouble notes are being issued daily by our treasury. This is done, not in order to fill the coffers of the State with practically worthless paper, but with the deliberate intention of destroying the value of money as a means of payment. There is no justification for the existence of money in the Bolshevik state, where the necessities of life shall be paid for by work alone. Experience has taught us it is impossible to root out the evils of capitalism merely by confiscation and expropriation, for however ruthlessly such measures may be applied, astute speculators and obstinate survivors of the capitalist classes will always manage to evade them and continue to corrupt the life of the community. The simplest way to exterminate the very spirit of capitalism is therefore to flood the country with notes of a high face-value without financial guarantees of any sort. Already even a hundred-rouble note is almost worthless in Russia. Soon even the simplest peasant will realize that it is only a scrap of paper, not worth more than the rags from which it is manufactured. Men will cease to covet and hoard it so soon as they discover it will not buy anything, and the great illusion of the value and power of money, on which the capitalist state is based will have been definitely destroyed. This is the real reason why our presses are printing rouble bills day and night, without rest.” Vladimir Ilvich Ulianoff Lenin, ‘Interview’, Daily Chronicle (London) and New York Times, April 23, 1919.
“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they can not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers’, who are the object of hatred by the bourgeoisie, whom the inflation has impoverished, not less than of the proletariat. As the inflation proceeds and the value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does so in a manner which not one man in a million is able to diagnose.” John Maynard Keynes, The Economic Consequences of the Peace, London: Macmillan, 1919.
“President Barack Obama plans to nominate Janet Yellen as vice chairman of the Federal Reserve Board, a person familiar with the matter said. Ms. Yellen, president of the Federal Reserve Bank of San Francisco since 2004, has been a strong supporter of Fed Chairman Ben Bernanke’s policies to fight the deep economic downturn. One of the more dovish policy makers among the fed’s 12 regional bank presidents, Ms. Yellen has been a key advocate of the Fed’s policy of near-zero interest rates and a massive expansion of the central bank’s balance sheet, even as some regional Fed officials advocate for pulling back the monetary stimulus more quickly….Ms. Yellen has been especially concerned about high unemployment and sees little risk of inflation.” D. Paletta, S. Reddy and J. Hilsenrath, ‘Obama to Tap Yellen for Fed Vice Chair’, The Wall Street Journal, March 12, 2010.
These quotations speak pretty much for themselves. As readers of this column are aware, President Obama has the opportunity to fill two additional vacancies on the Fed’s Board of Governors. A judicious choice of nominees will provide him with a clear majority on the Board. Janet Yellen is a progressive socialist, Ben Bernanke has sold out to that cause in return for a coveted second term in the Chair. President Obama is a progressive socialist, Speaker Nancy Pelosi is a progressive socialist, and Senate Majority Leader, Harry Reid is a progressive socialist. A large majority of Democratic members of both the House and the Senate vote as progressive socialists. A majority of the electorate is not progressive socialist, at this time.
However, once their hard-earned wealth has been wiped out by high and volatile rates of price inflation, where do you think that an electoral majority may stand in November 2012, Dear Readers? More important, where do you think that Obama, Pelosi and Reid (if he is still in office) think that such a financially ruined electoral majority will stand?
Whatever else they may have been, Lenin and Keynes were not fools. Like Professor Moriarty and Sherlock Holmes, they were endowed with intellectual genius, just like those characters in the novels by Conan Doyle, plotting on opposite sides of the spectrum. The Republican Party minorities in the House and the Senate, unfortunately, score much closer to Lenin’s evaluation of the brain-power of the Russian peasant, than to the genius of Lenin and Keynes. So, we must continue to enjoy life in dangerous times.
Tags: corruption of monetary policy, currency debauchment, Keynes's response, Lenin's judgment, progressive socialism, the end of capitalism, the Fed as an agent of high inflation
March 12, 2010 at 5:42 pm |
Thank you very much. It’s easy to forget the Economic consequences when talking about Keynes. I wish more people would read it, instead of General Theory, I’d say some of the quotes could be considered Austrian in some respects.
What’s really interesting is how accurate Keynes was when he says, “it does so in a manner which not one man in a million is able to diagnose.” We can see how often pundits, intellectuals and layman talk about how Capitalism is what is wrong and how we need Government to save us from those evil capitalists. They are the millions that aren’t able to diagnose the real problem, Government.
Thankfully we have more than just 1 in a million that are able to see it, thanks to most of the professors at GMU and men like Hayek and Mises.
A question for you Prof. Rowley, how often is the Economic Consequences taught? In my Macro class it got zero mentions, same in intermediate…do they even talk about it in doctorate level classes? Do you think the economic profession would be fundamentally different if the emphasis was on it instead of General Theory?
March 12, 2010 at 6:01 pm |
[...] great quote from Charles Rowley that we need to remember. Whatever else they may have been, Lenin and Keynes were not fools. Like [...]
March 12, 2010 at 7:18 pm |
Zombiehero:
Keynes’s Economic Consequences of the Peace, in my experience, is rarely taught nowadays, except perhaps in some history of economic thought class. But such classes are a dying breed. Keynes himself in The General Theory contributed to the attitude that classical political economy was profoundly incorrect and should be ignored. In general, modern economists are impatient about the past and believe that all ideas are encapsulated in the latest articles in the top cited journals. This is a profound error. Even Keynes’s General Theory is rarely read. rather his ideas as packaged by such disciples as Hansen, Hicks, Kaldor etc are relied upon. Friedman once mentioned, in criticizing these interpretations of Keynes, that ‘no one should rely on disciples to relay the words of a master.’
Because Keynes proved to be so correct in his indictment of the Treaty of Versailles no leading politician wanted to be reminded of his arguments. My own judgment is that the world would have been much better had Keynes lived sufficiently long to confront the post World War II problem of inflation. Unlike his disciples, he would have fundamentally reworked The General Theory to reflect the changed economic circumstances.
March 13, 2010 at 1:39 am |
Prof Rowley,
I think that you and Zombiehero have hit the nail on the head. Keynes is not actually taught. Even in the 1970s the General Theory was taught bu the Economic Consequences was not taught, which is a pity because I would like to have had a better and deeper understanding of actual Keynesian thought.
The disciples of Keynes are not in fact teaching or advocating his ideas, but like you said, their own interpretation. This explains why what they advocate does not gel with me. It is not “pure” Keynes!!!!
I actually regret that Keynes did not live long enough to confront the stagflation of the1970s. I feel certain that if he had encountered the stagflation that it would have made him rethink some of his theory. So yes, I believe that if he had lived longer that he would have indeed reworked his General theory to take inflation and other factors into account.
However people like Obama, (an economics dunce) and the economists who salivate at his feet, they do not follow Keynesian theory. They in fact follow Lenin. They are Marxist-Leninists and their purpose is to destroy Capitalism. The other name for Progressive Socialist is Communist. All of them were members of the CPUSA, and that includes Obama and his family. His mother, and his grandparents were members of the CPUSA. I think that this is something that the MSM refuse to touch, yet it is fact. It is also fact that his relationship with Bill Ayers was a lot closer than he was willing to disclose during the elections. In fact Bernadine Dohrn supervised MO at that law firm. The air is thick with Communists.