The financial crisis Part III

The last two lines of the original manuscript of my book John Maynard Keynes (Palgrave, 2007) was written in July 2006. In those lines I noted that: “when, not if, the next Great Depression hits the global economy, then perhaps economists will rediscover Keynes’s... analytical system that contributed the golden age of the post World War II. For Keynes, however, it will be a pyrrhic victory”. The winter of 2007-2008 will prove to be the winter of economic discontent and the beginning of the end of the classical theory of the efficiency of global financial markets. For more than three decades mainstream economists have preached, and politicians accepted, the myth of the efficiency of markets, while burying any thoughts of Keynes’s analysis of domestic financial markets and their connection via the international payments system. Those who do not study the lessons of history are bound to repeat its errors. Economists forgot the events of the world-wide Great Depression and the collapse of unfettered financial markets that followed the “Roaring Twenties ” prosperity. For history has repeated itself with the growth of deregulated financial markets and the prosperity of the 1990s and early 2ist century ending up in 2008 with the greatest financial market crisis sinc