September 25, 2018 Tuesday
Bedtime Story
The Economic Consequences of the Peace - 2
Tonight we shall see the masterly economic
analysis of the financial situation in the nations of Europe following the
World War I of Keynes.
One of the striking things about Keynes
approach to the Treaty of Versailles was that it was total economic and
clinical examination devoid of any spiteful vengeance and feelings of
retribution which to his understanding would only worsen the existing
situation.
“In Germany the total expenditure of the
Empire, the Federal States, and the Communes in 1919-20 is estimated at 25
milliards of marks, of which not above 10 milliards are covered by previously
existing taxation.
This is without allowing anything for the
payment of the indemnity.
In Russia, Poland, Hungary, or Austria such
a thing as a budget cannot be seriously considered existing at all…
Thus the menace of inflationism described
above is not merely a product of war, of which peace begins the cure.
It is a continuing phenomenon of which the
end is not yet in sight.
The inflationism of the currency systems of
Europe has proceeded to extraordinary length.
The various belligerent Governments,
unable, or too timid or too short-sighted to secure from loans or taxes the
resources they required, have printed notes for balance.”
Keynes believed that demand in the market
should be the key to setting up of the prices of products.
He was totally against government
controlling or setting prices for manufactured products which on first
impression seems to be a just and fair idea (who doesn’t enjoy cheaper
fruits/gasoline/electricity/water/medical bills) but on the long run it
backfires simply because it disincentives the producers of good and of
services.
At the heart of any economic system are
human apes who are both the consumers and producers and the driving force
behind any human activity is reward stimulation which in modern economies most
often is sought in terms of fiat currency (which can be converted into anything
needful varying from a place to live to medical treatment from a physician) no
matter what Mon Ami may claim.
“The presumption of a spurious value for
the currency, by the force of law expressed in the regulation of prices,
contains in itself, however, the seeds of final economic decay, and soon dries
up the sources of ultimate supply.
If a man is compelled to exchange the
fruits of his labors for paper which, as experience soon teaches him, he cannot
use to purchase what he requires at a price comparable to that which he has
received his own products, he will keep his produce for himself, dispose of it
to his friends and neighbors as a favor, or relax his efforts in producing it.
A system of compelling the exchange of
commodities at what is not their real relative value not only relaxes
production, but leads finally to the waste and inefficiency of barter.”
Keynes understood currency the way
Ramanujan had an intuitive feeling for numbers.
Stay tuned to the voice of an average story storytelling
chimpanzee or login at http://panarrans.blogspot.com
Good night Mon Ami and my fellow cousin ape.
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Another great educator and a teacher that I am aware of is Professor
Subhashish Chattopadhyay in Bangalore, India.
While I narrate stories, Professor Subhashish an electronic
engineer and a former professor at BARC, does and teaches real mathematics and
physics.
He started the participation of Indian students at the
International Physics Olympiad.
Do visit him here:
All his books can be downloaded for free through this link:
For edutainment and English education of your children, I
recommend this large collection of Halloween Songs for Kids:
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