Keynes’ Prior Concern with the Promotion and Maintenance of Domestic Equilibrium as Evidenced by his Opposition to Great Britain’s Return to the Gold Standard at the Pre-War Parity of Exchange.

John Maynard Keynes' concern for the national welfare is further exhibited by his opposition to the restoration of the gold standard in Great Britain at the pre-war parity of exchange. Keynes was against returning to the gold standard on such terms, because he felt that this could be accomplished only by fostering a widespread deflation - a prospect he faced with disquiet. Keynes argues that, whereas rising prices constitute an injustice to rentiers and therefore discourage saving, falling prices inhibit production and therefore lead to unemployment. Keynes was opposed to a policy of deflation because of the existence at that time of large internal debts in most European capitals. Keynes was averse to a restoration of the gold standard at the pre-war parity of exchange because of the havoc which the required policy of deflation would visit on the domestic economy.