ABSTRACT
The Treasury View which Keynes confronted between the wars was first developed as a defence of the nineteenth-century tradition of British government finance against the 'abnormal' expedients of war finance and the clamour for state intervention that came out of the First World War. The language Keynes developed was the language of savings and investment. Unemployment was due to over-saving in relation to existing investment opportunities. With unemployment mounting towards 3 million, the contention that all savings would be 'taken up soon' became increasingly implausible. In these circumstances, the Treasury fell back on two practical arguments. The Treasury and the Bank of England hoped that reductions in domestic wage costs would enable Britain to improve its external balance sufficiently to go back to gold at the old parity. Britain must manage its currency in its own national interest, as America was already doing.
