ABSTRACT
This chapter provides an overview of John Maynard Keynes’s thinking about US financial markets in particular and global financial markets in general in the early 1930s. It presents a few of Keynes’s observations about the early onset of stagnation in the US economy and the deepening global depression during this period. The chapter examines the stark transformation that took place in Keynes’s understanding of the nature and condition of US financial markets. A massive deflation of goods and financial market prices spread rapidly around the world, threatening to destroy national economies. Keynes’s views in the early 1930s might be summarized as follows: the UK and perhaps the USA and much of the world economy had entered an era of long-term or secular economic stagnation. The global economy had entered a disastrous downward disequilibrium process that demonstrated that Keynes’s fear of the impact of deflation in a fragile “regime of money contract” was well-founded.
