Читать книгу Financial Cold War. A View of Sino-US Relations from the Financial Markets онлайн

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Citing his famous remark that ‘In the long run, we are all dead’,ssss1 critics of Keynesian economic theory have often accused him of advocating policy short-termism and irresponsible government spending that would lead to ever rising deficits. This is inaccurate, as Keynes actually believed strongly in balanced budgets over an economic cycle. However, governments have tended to lack the political will or discipline to rein in their budgets in the good times.

There is no doubt that Keynes’ theories were founded on Britain's particular economic circumstances at the time. Nevertheless, it became clear that the rigidity of the gold standard was a major underlying contributor to the worldwide breakdown in trade and economic hardship of the 1930s. The need to maintain fixed exchange rates forced central banks to raise interest rates to prevent outflows of gold just as economic demand was already shrinking. Due to the nature of fractional reserve banking systems,ssss1 the impact of withdrawals of gold was magnified through the reduction in banks’ capacity to lend. In turn, this caused asset prices to tumble, which led to loan defaults that further compounded economic weakness. As panic set in, scenes of depositors queued up outside banks to withdraw their savings became commonplace. Some 9,000 banks in the US failed during the 1930s.ssss1