6 - 1926: FURTHER ECONOMIC CONSEQUENCES, THE FRANC AND THE RUPEE
from PART II
Published online by Cambridge University Press: 05 November 2012
Summary
With the new year Keynes turned his attention to the French financial situation. The first result was an article ‘An Open Letter to the French Minister of Finance (whoever he is or may be)’ which appeared on 9 January. A week later he replied to press comment on the article.
From The Nation and Athenaeum, 16 January 1926
THE FRENCH FRANC: A REPLY TO COMMENTS ON ‘AN OPEN LETTER’
In last week's Nation I wrote an open letter to the French Minister of Finance. My argument ran:—
(1) Is not a rise of franc prices inevitable in any case, and will not this rise, when it occurs, materially ease the problem of the Budget?
(2) Would not a material increase in the rates of taxation over-burden the French taxpayer beyond endurance? Is it not better to depend on improved collection of the existing taxes?
(3) Meanwhile the important and practical measure is to prevent the franc exchange from running away and to use the Bank of France's gold for this purpose if necessary.
Thus I made one prophecy: prices will rise; and three counsels: collect the taxes, peg the exchange, and trust to time. The reaction of the financial editors of London and Paris to these observations, throws light on the psychological difficulties of the French situation. Let me take six samples in order.
The Times
The Times argues that, because M. Poincaré's policy of improving the exchange down to a parity with prices failed, the policy of bringing prices up to a parity with the exchange would also fail.
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- Information
- The Collected Writings of John Maynard Keynes , pp. 455 - 577Publisher: Royal Economic SocietyPrint publication year: 1978