Treatise on Money and the
General Theory of Employment, Interest and Money
1927 to 1939

Date Event
1927 Keynes continues working in his academic and bursarial duties at King's College, a variety of business roles and his editorial and journalistic activities. He takes a less prominent role in public life as he develops ideas and drafts his next major work - A Treatise on Money.
Summer 1929 Keynes is made Fellow of the British Academy.
October 1929 Led by Wall Street, the world's stock markets crash, heralding an economic depression.
4 November 1929 Keynes joins the government's Macmillan Committee of Enquiry into Finance and Industry.
30 January 1930 Keynes joins the Economic Advisory Council, set up to report to the government on economic policy.
10 May 1930 Keynes writes in the Nation:

"The fact is - a fact not yet recognized by the great public - that we are now in the depths of a very severe international slump, a slump which will take its place in history amongst the most acute ever experienced. It will require not merely passive movements of bank rates to lift us out of a depression of this order, but a very active and determined policy."
September 1930 A large, long-lasting, world-wide cut in interest-rates is required, Keynes writes in Svenska Handelsbanken Index.
December 1930 A Treatise on Money is published in two volumes. The central thrust of the treatise is the distinction between Investment and Saving. If Investment exceeds Saving, there will be inflation Keynes says. 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. This runs contrary to the prevailing wisdom, which says that thrift is required in hard times. In Keynes' words:

"For the engine which drives Enterprise is not Thrift, but Profit."
May/June 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 his happy with the Federal Reserve's attitude that it should promote economic expansion.
September 1931 The British Government, reeling from the depression, abandons the Gold Standard and devalues sterling by twenty percent. In doing so, it finally acts as Keynes has been advocating since the mid-1920s.
September 1931 Keynes attacks Ramsay MacDonald's National Government's budget - in particular the wage cut for school-teachers and the reduction in the road building and house building programmes. He warns the budget will cause both deflation and unemployment to worsen.
1932 / 1933 Keynes continues to advocate that the government should borrow money and undertake large-scale public works to stimulate the economy.
June 1933 The BBC broadcasts a transatlantic conversation between Keynes and Walter Lippmann - the first ever broadcast of a transatlantic conversation.
17 April 1934 Walter Lippman writes to Keynes from America about the effect a letter from Keynes to the New York Times has had:

"...I do not know whether you realize how great an effect that letter [viz. that in the New York Times] had, but I am told that it was chiefly responsible for the policy which the Treasury is now quietly but effectively pursuing... reducing the long-term rate of interest."
June 1934 Keynes visits America again. He studies its economy and its stocks and bonds for personal investment purposes. He concludes that share prices - particularly of public utilities - are priced for exceptional value and he invests a large part of his own funds - with great success.

He meets President Roosevelt who writes to Felix Frankfurter, "I had a grand talk with K and liked him immensely..."

Keynes wins the enmity of American advocates of laissez-faire economics who believe Roosevelt is allowing American economic policy - The New Deal - to be influenced by a foreign economist.
Late 1934 Keynes finishes writing his first draft of The General Theory of Employment, Interest and Money - an analysis of the causes of unemployment. Keynes argues against the classical economic theory that full employment could always be reached by making wages sufficiently low.
January 1935 In a letter to George Bernard Shaw, Keynes writes:

"... you have to know that I believe myself to be writing a book on economic theory which will largely revolutionize - not, I suppose, at once but in the course of the next ten years - the way the world thinks about economic problems."
Early 1935 Keynes sends copies of the first draft of The General Theory of Employment, Interest and Money to a variety of figures whose views he respects and engages in a significant amount of detailed correspondence with these people as he works to perfect the book. In a letter to George Bernard Shaw, Keynes writes:

"The city of Cambridge has always lacked a first class theatre. Keynes, as First Bursar of King's College, releases land for the construction of a theatre and funds much of the construction personally."
June 1935 Copies of the second draft are sent out, again resulting in vigorous correspondence.
February 1936 The General Theory of Employment, Interest and Money is published. Keynes proposes that 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.
1936 As Hitler's Germany grows ever more menacing Keynes who, in the 1920s, had favoured disarmament, speaks and writes in favour of a militarily strong Britain.

He travels to Russia and to Europe and continues with his normal duties.
Summer 1937 Keynes suffers life-threatening illness, with thrombosis of the coronary artery. He moves to Ruthin Castle in Wales for rest and reduces his workload dramatically.
February 1938 Keynes makes his first public appearance since he fell ill, at the Annual General Meeting of the National Mutual Life Assurance Society.
October 1938 In an article in the New Statesman, Keynes writes of the Munich agreement between Neville Chamberlain and Adolf Hitler:

"Neither the Prime Minister nor Herr Hitler ever intended for one moment that the play-acting should devolve into reality."

Next: Keynes 1939 to 1945 - The War Years, America, Lend-Lease, the IMF, and a Peerage


R.F. Harrod, The Life of John Maynard Keynes, 1951

Robert Skidelsky, John Maynard Keynes 1883 - 1946, 2003