allowing interest rates to fall and producing the housing boom that led the recovery from the depression.
Keynes attacked the policy of balanced budgets in a depression. However, he accepted that 'conservative finance' might be psychologically necessary as a temporary measure once the pound had been floated, in order to secure the lower long-term interest rates to which he attached supreme importance, even though by itself it was a 'depressing influence'.
The other difference between 'then and now' which your correspondents ignore is that in 1931 retail prices fell by 7 per cent, whereas now they are rising by 4 per cent per annum. This makes the inflationary risk of expansion much greater now than then.
University of Warwick
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