Falling back onto real currency

Keith Hudson

The cleverest man in England in the last century — at least the man who thought himself to be the cleverest — was John Maynard Keynes.  He was the man who said that the gold standard of a currency was a ‘barbarous relic’.

Keynes wasn’t the cleverest because at least two others were cleverer.  One was Otto Niemeyer who came top in the British Civil Service Entrance Exam while Keynes came second even though he swotted enormously for months beforehand.  The other was Bertrand Russell who wrote the greatest mathematical work in the English language in the last century, Principia Mathematica  — though there was  very little English in it! — even though Keynes’ attempt at a major mathematical opus, A Treatise on Probability — his first attempt at intellectual stardom before he decided to be a full-time economist, sank without trace within a few months.

Bertrand Russell misguidedly thought that Keynes was cleverer, and said so, but this was only because Keynes was much more articulate than Russell and could always win arguments by sheer force of personality and verbal gymnastics — as he could win with everybody else.  Otto Niemeyer who, after entering the civil service rose to be the head of the Treasury — one of the most demanding intellectual jobs in the country, if not the most demanding — always kept himself at arm’s distance from Keynes, thinking he was little more than a sham when he spoke as an economist.

Keynes was intellectually arrogant, a common fault in England the 1900s era when the country ran the British Empire and especially a fault of those who’d been to Oxford or Cambridge Universities — indeed, it’s a fault that still lingers in the ‘establishment’ today, the senior civil service or those at the top of the Conservative and Labour Parties.  It also still lingers in the two newspapers that consider themselves intellectually a cut above all the rest, and stuffed with Oxbridge types — the Economist and the Financial Times.  They both like to come up with contrarian points of view every now and again even though most of their material is reliable.

The Financial Times has been trying it on most recently by coming out with an editorial calling on the government and the central bank to phase out the use of cash.  After all, we don’t need kit any more.  Do we?  All except the poor or mentally backward who either can’t get a bank account of don’t know how to use an internet account to receive their welfare payments.  However, most of us don’t use cash very often these days, therefore we can abolish it.  This worthy newspaper is now referring to banknotes as a ‘barbarous relic’.

Well, we needn’t spend any more time on this nonsense, any more than we can continue to be impressed by anything that Keynes said about gold (or indeed a bout economics at all).  All the central  banks of the world still keep gold as a currency even though they tell us, the punters, that gold doesn’t mean anything except as a bauble.  Of course it does.  Even the Bank of England which, on instructions from Gordon Brown in 1999 and much against its will, auctioned off its gold at ridiculous  knock-down prices, is doing its best at the present time to re-stock with a respectable amount.

The American government is hanging onto its gold fiercely even though it is deeply in debt in dollar terms.  Other central banks such as in Germany and in China are steadily building up their stocks of gold against the day when there’s the next monetary crisis — a real humdinger far beyond the 2008 crisis and inevitable according to the currently most reputable central bank governor of them all, Raghuram Rajam, of the Reserve Bank of India.

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