2. John Maynard Keynes was born on June 5, 1883
He was born in Cambridge, England into an upper
class family of intellectuals
Keynes did very well at Eton as well as Cambridge
University, where his focus was mathematics
At Cambridge University, he became friends with
members of the Bloomsbury group of intellectuals and
artists
3. Upon graduating, Keynes went to work in the India Office
While at the India Office, he earned a fellowship at King's
College
In 1908, he quit the
civil service and returned
to Cambridge
4. After World War One started, Keynes joined the
treasury
After the British were victorious, they imposed huge
reparations on Germany at the Versailles peace treaty.
This did not sit well with Keynes
5. Keynes published the very successful book, 'The
Economic Consequences of the Peace'. In this book, he
criticized the excessive war reparations demanded
from a defeated Germany
He also predicted that it would foster a desire for
revenge among Germans…
6. In 1926, he married Lydia Lopokova, a Russian
ballerina
7. In 1931, at the invitation of the University of Chicago,
Keynes travels to America to give a lecture on the Harris
foundation.
His chief desire is to study America's economic conditions
at first hand
He has interviews with senior people in the Federal Reserve
and with President Hoover. He is pleased with the Federal
Reserve's attitude that it should promote economic
expansion
8. Keynes continues to
advocate that the
government should
borrow money and
undertake large-scale
public works to stimulate
the economy
This helps to foster the
“New Deal”
9. While in America, he studies its economy and its
stocks and bonds for personal investment purposes
He decides that share prices of public utilities are
priced for exceptional value and he invests a large part
of his own funds
The risk pays off big time
10. In 1936, Keynes published his best-known work, 'The
General Theory of Employment, Interest and Money‘
Heavily anticipated, cheaply priced and favorably
timed for a world caught in the grips of the Great
Depression, the General Theory made a splash in both
academic and political circles
11. With the ‘General Theory’, as it became known, Keynes
sought to develop a theory that could explain the
determination of aggregate output, and as a
consequence- employment
He stated that the critical determining factor
regarding this issue was aggregate demand
12. Keynes wanted to show Classic economists that the current
system would not just “fix itself” out of the Great
Depression. He sought to mathematically prove that the
United States was in a state of equilibrium, even with
widespread unemployment
GDP= C + I + G + X, where C= Consumers I = Investment
(business) G= Government Spending and X= Exports-
Imports. The current “X” factor in the United States is
approximately -2% currently
13. The best seller discussed the possibility of using
government fiscal and monetary policy to help eliminate
recessions and control economic booms
By writing 'The General Theory of Employment, Interest and
Money', Keynes almost single-handedly laid the framework
and ideas behind what became known as
"macroeconomics".
14. In 1942, he was made a member of the House of Lords
in England
During the war years, Keynes played a critical role in
the negotiations that would shape the post-war
economic order on a global scale
15. In 1944, Keynes led the British delegation to the Briton
Woods conference in the United States
At the conference he played a significant part in the
planning of the World Bank and the International
Monetary Fund
17. Keynesian economics is a dynamic system that would
take hundreds, if not thousands, of hours to describe
and analyze in detail. The following is my attempt to
capture some of Keynes’ central economic concepts
and explain them to the audience in a nutshell.
18. Keynesian economics is a theory of total spending in
the economy, called aggregate demand, and its effects
on output and inflation
19. Keynes stated that if Investment exceeds Saving, there
will be inflation. If Saving exceeds Investment there
will be recession. One implication of this is that, in the
midst of an economic depression, the correct course of
action should be to encourage spending and
discourage saving (the current state we find ourselves
in).
20. Keynes took issue with Say's Law - one of the
economic "givens" of his era. Say's Law states that
supply creates demand. Keynes believed the opposite
to be true - output is determined by demand.
21. Keynes argued that full employment could not always
be reached by making wages sufficiently low.
Economies are made up of aggregate quantities of
output resulting from aggregate streams of
expenditure - unemployment is caused if people don't
spend enough money.
22. In recessions the aggregate demand of economies falls. In other
words, businesses and people tighten their belts and spend less
money.
Lower spending results in demand falling further and a vicious
circle ensues of job losses and further falls in spending.
Keynes's solution to the problem was that governments should
borrow money and boost demand by pushing the money into
the economy. Once the economy recovered, and was expanding
again, governments should pay back the loans.
23. Keynes's view that governments should play a major
role in economic management marked a break with
the laissez-faire economics of Adam Smith, which held
that economies function best when markets are left
free of state intervention.
24. During the 1970’s, stagflation was plaguing America
Stagflation is a condition of slow economic growth and relatively
high unemployment - a time of stagnation - accompanied by a
rise in prices, or inflation
Stagflation occurs when the economy isn't growing, but prices
are; which is not a good situation for a country to be in
25. During the 1970s, world oil prices rose dramatically,
fueling sharp inflation in developed countries
including America.
26. This economic system called for widespread tax cuts,
decreased social spending, increased military
spending, and the deregulation of domestic markets
27. Reaganomics was partially based on the principles of
supply-side economics and the trickle-down theory
These theories hold the view that decreases in
taxes, especially for corporations, is the best way
to stimulate economic growth: the idea is that if
the expenses of corporations are reduced, the savings will
"trickle down" to the rest of the economy, spurring growth.
28. America is slowly readopting some Keynesian
principles.
The recession is declared over, but we are clearly not
out of the woods
GDP must be rising at 3% or more to get us out of the
current funk we are in
