ABSTRACT
The analysis up to this point has followed the “closed economy” approach of The General Theory and largely abstracted from international considerations. In this chapter we will extend the analysis to the global context, focusing on Keynes’ ideas and global vision as laid down in his plan of the early 1940s for an “International Clearing Union.” This extension will not only illustrate the application of liquidity preference theory when international interdependencies are taken into account, but also the ways in which Keynes thought his ideas could be best mastered for policy purposes through design of adequate international institutions. We will then discuss the evolution of the international monetary order as actually set up at Bretton Woods and the emergence of “global imbalances” in the light of Keynes’ monetary thought and Clearing Union proposals in Chapter 8.
