Where Keynes went wrong

This chapter examines the development of Keynes's monetary thought in the context of Britain's return to the gold standard (opposed by Keynes) in 1925 and his unsuccessful attempt to develop a theory of macroeconomic fluctuations in his Treatise on Money. Keynes, who had predicted that rejoining the gold standard at the prewar parity would lead to economic stagnation and high unemployment may have had his belief in a monetary explanation for the Great Depression shaken by the failure of Britain's departure from the gold standard to cause a rapid recovery and reduce unemployment. This disappointment led him to undertake a more radical revision of his views in the Treatise than he initially contemplated. By doing so, he departed from the views of Ralph Hawtrey to whose monetary theory of the Great Depression he had been sympathetic.