## Keynes for Our Times

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### Keynes’s epistemology: uncertainty and probability
- Keynes rejected the neoclassical view that the future is predictable; he defined probability as “the degree of belief in a conclusion justified by evidence.”
- He distinguished between calculable risk (e.g., roulette) and true uncertainty: “the prospect of a European war is uncertain, or the price of copper and the rate of interest twenty years hence, or the obsolescence of a new invention...About these matters there is no scientific basis on which to form any calculable probability whatever.”
- Implication: in information-poor markets investors rationally adopt heuristics and conventional wisdom; when conventions break down, a “flight from commitment” can produce market seizures and systemic disruption.

### Evolution of Keynes’s theory of money and liquidity preference
- Keynes’s critique of the gold standard: gold’s scarcity created a deflationary bias that could collapse economies (example periods cited: the Long Depression of the 1880s and 1890s).
- Quantity Theory of Money: initially proposed to restore monetary “neutrality” via an elastic currency “to fit the ‘needs of trade,’” but Keynes concluded it did not act quickly enough.
- A Treatise on Money (1930): introduced the idea of different circulation speeds—one for the “real” economy and one for a “financial” circulation—to explain how asset prices and unemployment can rise simultaneously in the short run.
- Liquidity preference theory (consolidated after the Great Depression; cited 1932): explains how a collapse of investment can be simultaneously a flight to liquidity, giving money a “liquidity premium” that can cause interest rates to rise rather than fall.
- Contemporary manifestations named in the text: the global financial crisis of 2008, the early-COVID-era dash for cash, and “flash crashes.”

### Moral and psychological view of money
- Keynes saw the “love of money” as a psychological morbidity and moral flaw—“a disease of the mind” and “vampiric” in modern economies.
- He viewed saving driven by excessive love of money as a brake on enterprise: “[I]t is not thrift but enterprise which builds cities and drains fens.”
- Historical conflict framed as struggle between creditors and debtors; Keynes’s reforms aimed to reduce creditor power while harnessing the “inordinate desire for getting wealth” to drive productive investment.
- Symbolic reference: King Midas used to illustrate greed that can starve the economy.

### Policy implications and prescriptions for today
- Re-center the purpose of growth:
  - Ask “How much more growth, and what kinds of growth, are needed to secure the material conditions of the good life?”
  - Economic activity is a means to the good life and “should not be extended beyond what is needed for that purpose.”
  - This ethical perspective can inform debates about AI, distribution, and the ends of growth.
- Put money back into circulation; disgorge hoarded wealth:
  - Keynes’s historical aim was to counter surplus-country hoarding (the United States as Keynes’s “King Midas”).
  - Policy instruments proposed in the article:
    - Replace the reserve function of the dollar with a new international reserve currency, the “bancor.”
    - Achieve similar outcomes through a progressive increase in the special drawing rights of IMF members.
  - Historical notes: Zhou Xiaochuan revived the bancor idea in 2009; the US rejected Keynes’s proposed International Clearing Union, resulting in the dollar-centered Bretton Woods system established in 1944.
  - Contemporary critique: President Donald Trump’s tariffs are characterized as a crude attempt to secure currency realignment at the expense of “a huge disruption to trade and finance.”
- Face dangerous times boldly to preserve “efficiency and freedom”:
  - Questions highlighted: whether democratic institutions can tame financial oligarchy, address racial and cultural conflict, invest to counter inequality and global warming, and prevent retreat into violence.
  - Historical observation: full employment resulted from World War II, not directly from The General Theory of Employment, Interest, and Money; Keynes warned against relying on military spending as the sole mechanism to remove surplus capacity.
  - Central dilemma posed (echoing Keynes 1936): must an apocalypse jolt politicians out of their ruts, or can better analysis restore a “diseased civilization” in conditions of peace and freedom?

### Key references and dates cited in the essay
- A Treatise on Money (1930)
- Quotation on shattered lender confidence cited from 1932
- The Long Depression of the 1880s and 1890s
- The Great Depression (background to liquidity preference)
- Global financial crisis of 2008; early-COVID-era dash for cash
- Zhou Xiaochuan’s revival of the bancor idea in 2009
- Bretton Woods system set up in 1944
- Keynes’s question from 1936 about whether apocalypse is needed
- Keynes looked to war as a grand experiment in 1939
- Editor’s note: the author died on April 15, aged 86; final edits agreed with his assistant Attila Mesterházy

*Summarized from the IMF F&D feature “Keynes for Our Times” by Robert Skidelsky (June 2026).*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2026/06/skidelsky.pdf_