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Not that it likely matters much to those tuned in to Boris’ blustering on 5 LIVE, but the owls over at Moody’s Investor Services, the very same ones that famously air-shotted the GFC, have dimmed their outlook on China. They took their rating down from a somewhat fruity ‘stable’, what with all the high profile defaulting that has been going on amongst the country’s bloated property groups; to a more ominous sounding ‘negative’. The WSJ carry the news alongside a piece that highlights the colossal amount of ‘off-balance-sheet’ debt that is hiding somewhere in the attic. They have a stab at the amount, saying it could be $7 trillion, or it could be $11 trillion, but pick a number, nobody knows. Either way, it’s quite a lot and Moody’s and indeed, the Chinese government are increasingly worried. So too, perhaps, anyone with a vested interest in global financial stability. Pan Gongsheng, the top dog at the People’s Bank of China, whispered to reporters that he’s ready to provide emergency funding if needed. So that’s good. When asked about Moody’s downshift in view, his general tone was one of ‘disappointment’. And it’s not just local governments in China who are suddenly finding themselves in the sticky toffee pudding. Apparently one in five councils in the UK are going to declare bankruptcy. There’s not enough money. As one Chief Executive admitted, “the link between funding and need is completely broken.” Cripes. Albeit not new news. Not since that nasty man George Osbourne introduced the nation to austerity. Or living within one’s means. Charts flying round X show that the interest payment on US debt is now north of $1 trillion, and it’s only going up. The Congressional Budget Office are forecasting that gross federal debt in the US is going to hit $50 trillion by 2033. That’s another $20 trillion on today’s already steaming pile. In ten years. The numbers are obscene. It can appear then, to the layman, that all this borrowing is not going to end well. Debts, after all, must be repaid. In 1935 the American historian, Frederick Lewis Allen, in describing the Great Depression, wrote about waves breaking, about the tops seemingly about to topple, but then not; and then finally breaking into a “a thundering welter of foam.” It is a description that could be used to describe any one of the credit bubbles before, and since. There are two options to reduce debt: inflate it away, or default. Unless, that is, there is a third option somewhere up in there in the attic. Fingers crossed the wave keeps cresting.

It’s hard to keep focused on the tightly sequined festive run in to Strictly Come Dancing what with everything going on. Or off. With geopolitical tensions seemingly flaring up everywhere the fud-fud of rockets offers a sober backdrop to weekend dinner-time TV. Financial asset prices, as a result, swing about like Layton Williams and Nikita Kuzmin’s 40-point paso doble. All while the movers and shakers move and shake their way to the great climate jamboree in the desert. Or not. It was reported that many of the private jets en-route to COP28 in Dubai were grounded in Munich this weekend due to some of the coldest weather to hit Northern Europe in decades. Hmm. Apart from the news that this summit will be attended by nigh on 100,000 lanyard-clad people, there was also the game changing announcement this weekend that more than 20 countries had gone all in on nuclear energy, with heads of state shuffling together for the sweaty photo-op that came with launching the ‘Declaration to Triple Nuclear Energy’. With everything capitalised just to make sure the assembled press corps knew they meant it. Tripling nuclear energy capacity is apparently now seen as a necessity if the ambitious net-zero goals are to be achieved. That said the announcement comes just as the uranium market slips into a structural deficit; and a deficit that is based off current demand. Not future. Current. Watch the share prices of the producers to see what’s priced in. Those involved in prospecting and developing will likely see even higher torque. The announcement perhaps explains why the US government appears to have moved the goalposts on how they see the military junta out in Niger. Less ‘no speaks’, more ‘constructive engagement’. Niger holds substantial low-cost, high-grade uranium deposits. With many producing mines globally seeing lower and lower grades and no new supply coming through for several years, such deposits are clearly sharpening the eyes of governments. The question is whether they go West, or East. Either way, given the slew of recent announcements, prices through the uranium complex are likely marching higher.

The iShares MSCI ACWI ETF is some $18bn, and change. It’s big. One of the biggest ETFs out there and one that has hoovered in allocations as money men go for the skinny fee – albeit a not so skinny 32bps – and comfort in knowing that they are going long global equity. Long the world. Or as the official marketing puff puts it “access to the global stock market in a single fund”. Job done. Only that when the hood is popped, it doesn’t seem much like a means to “diversify internationally” at all. Of the top twenty positions, it is only TMSC and Novo Nordisk that are not listed in the US. Indeed, more than 60% of the 2,348 holdings are stateside. So less ‘world’ more ‘US’ and, a US that is arguably, in some areas, over the skis expensive. As money has flooded into such products over recent years, it is only a small number of mega-cap stocks that have been able to absorb such flow, and so the share prices go up. Up and up, irrespective of whether the price may whisper ‘overvalued’. Perversely, the more overvalued a company becomes, the bigger the market capitalization, and the more bloated the weight in the index. More buying. Holders sleep safely at night, as the performance of the index is what it is, it is the benchmark, it is what global equities do. The index though is grossly distorted, and it is not just the iShares MSCI ACWI ETF where such top-heaviness and concentration risk lies, relative that is, to what the sticker on the tin says. The question is, what happens in the event of something breaking, if the machines that have been relentlessly buying, relentlessly riding the ZIRP wave and B-ing-TDs, turns around. Stops. Goes on sale. Where, then, are the buyers? Active managers are not likely going to stand in the way. One of the more interesting approaches of some active investors of late, has been to ensure that portfolios are, in part, ‘off index’. Or invested in companies which will not be exposed to indiscriminate selling, should the taste for passives go sour. It may yet prove to be a savvy move.

With a subdued Thanksgiving air offering little opportunity for shrill, market related comment, the management of the gazette have suggested further exploration of previous subject matter; like some sketchy background to the great Adam Smith. By all accounts, such offers, generate fewer complaints and keep the legal team happy.

Adam Smith, not to be confused with Steve Smith the itchy albeit prolific Australian cricketer, is widely regarded to be the ‘Father of Economics’ which, given all that have dipped a toe into the dismal science over the years, is quite some accolade. Smith, Adam not Steve, was a Scottish economist and philosopher and relevant to all given the extent to which his classic works, The Theory of Moral Sentiments and An inquiry into the Nature of Causes of the Wealth of Nations shaped high-brow pow-wows at the top table of economic theory. The latter, given it is something of a mouthful, was abbreviated to The Wealth of Nations and is seen as his big one. It was the first real attempt to explain economics as a comprehensive system. For Smith, the distribution of power was not due to the whim of God but came about as a complex and dynamic interplay between natural, political, social, economic, legal, and technological factors. Even the local po-faced Vicar had to admit that the young man was on to something.   

It is through his work, that the foundations of free market economic theory were laid. Whilst The Wealth of Nations really shaped the study of economics, it was through his other endeavours that he developed the concept of the division of labour, which is as you might guess a division of labour; a concept embraced by all those who want to be more productive. The use of specialist capabilities enhances the product and ensures it all happens a lot faster. The whole shebang is more productive and then everyone moves on to the next job. Smith also expounded on how rational self-interest and competition can lead to prosperity to all. The famed ‘invisible hand’.

Smith was born in Kirkcaldy of all places, in 1723, so before central heating. Little is known of his childhood other than he got pinched by Romani travellers at some point, but by all account he was bright. He later entered Glasgow University at the age of 14, which before you quaff and mutter about the standards of Scottish Universities was, at the time, very normal. It was at Glasgow that Smith studied under the great Francis Hutcheson, the Irish-born philosopher who was one of the founding fathers of the Scottish Enlightenment, and one imagines, good for a few Guiness and a chat about life. His personality was described as ‘magnetic’. According to Hutcheson, man – or indeed woman – has a variety of senses, both internal as well as external, reflex as well as direct. Senses included the obvious ones, but also consciousness, beauty, sennus communis or public sense, honour, a sense of morality and a sense of the ridiculous. He did admit that the list was not exhaustive and there could be no limit to the number of senses. Of them all, the moral sense, for Hutchenson, was the most important part of any ethical system.

We digress.

After Glasgow, Smith won a scholarship to Balliol College, Oxford, but it was an experience he did not enjoy. He found the whole place intellectually stifling and thought the professors were too interested in punting on the Isis with hampers of pink gin and pork pies. He thought they had basically given up on teaching. Biographers have pointed out that his time at Oxford contributed very little to his lifework, which is something to watch out for should the social media people at Balliol try spinning a different line. He eventually left Oxford before his scholarship ended suffering from the shakes, in what is thought to have been some sort of nervous breakdown.

Part of Smith’s troubles at Oxford are thought to have been due to the fact he missed his man Hutchenson so much. Smith would later refer to Hutchenson in his letters as ‘the never to be forgotten Hutchenson’ a term that he used for only one other person, that person being David Hume; the equally up-there philosopher who wrote A Treatise of Human Nature and who suggested humans have no sense of self, and instead experience only a bundle of sensations. Hume, by all accounts, also had very little time for his professors at Edinburgh University, lamenting to a friend one evening that “there is nothing to be learnt from a professor, which is not to be met with in books”. Hume did not graduate, which gives those who labour to a 2.2 and graduate with £40k debt something to think about. Maybe the self would have been better off learning a trade and doing something of real economic value. Hmm.

Smith would later, ironically perhaps given his low opinion of his lot at Oxford, end up as a professor at Glasgow University teaching logic. The point of difference being that Glasgow was a Scottish University. Indeed, in Wealth of Nations Smith comments on how poor English Universities were, where the intellectual activity rivalled a stagnant pond, and where the endowments had made the teachers lazy and too comfortable with all the port and smutty jokes of high table. He suggested that they could make an even more comfortable living that ministers of the Church of England. Which was saying something.

Anyway, when the head of moral philosophy at Glasgow ceased being a being, Smith took on the top job and would thrive. It was the happiest period of his life. Indeed, his lectures became so popular that wealthy students from many other countries would arrive at the admissions office wanting to sign up to study under Smith. He would go on to publish The Theory of Moral Sentiments in 1759 which was something of a ‘Little Chef buffet’ of all his lectures, in which he elaborated on the sticky subject of how human morality depends on the sympathy between agent and spectator, or the individual and other members of society. Mutual sympathy, for Smith, was the basis of moral sentiments. This was different from Hutchenson’s moral sense, and indeed different from Hume’s notion of utility, but more on mutual sympathy; a notion that is perhaps best encapsulated in today’s bewildering world of TikTok, processed food and slippery politicians, as empathy: the capacity to recognise feelings that are being experienced by another being.  

In his later years Smith would tutor and travel and mix with many of the intellectuals of the day. He met Volatire in Geneva, and bumped into Benjamin Franklin in a tabac in Paris, where he also discovered physiocracy, an economic theory that proposed the wealth of nations derived solely from the value of land or land development. As such, agricultural products should be highly valued. Smith would later suggest that the theory “with all its imperfections is perhaps the nearest approximation to the truth that has yet been published upon the subject of political economy”.

So, there you have it.

Adam Smith died in 1790.

In a lesson to all of today’s red-cheeked youth, the father of economics apparently whispered on his death bed that he was disappointed he had not achieved more.

Aim high.

Given positioning that can only be described as ‘heavy’, there is a fair bit of thigh rubbing in anticipation of Nvidia’s earnings this week. As they have been in recent quarters, the numbers could well usher in trumpets, ‘blow out’ adjectives, and another pop in the shares. Valuation no longer matters, not in the context of AI. As, though, these chips get thinner, and faster with ever more byte, so the super computers they power consume more and more energy. Colossal amounts of energy. And where is this energy going to come from? The recent woes of Orsted and Siemens Gamesa portend the suggestion that it won’t be from wind, absent eye-popping subsidies from increasingly cash strapped governments. Against this backdrop the recent, rapid move of the spot uranium price through $80, a 16-year high, adds flavour to the soup. It’s really the long-term contract pricing that matters, but what is playing out in the spot market is something that several analysts have been warning about for some time: a ‘chaotic’ move to the upside. The reason is that demand is going up. And up a lot. Last week Sweden unveiled a road map which envisages the construction of massive new nuclear capacity, India has 20 new reactors due by 2031, with ambitions for 50. And ahead of the big-ticket COP 28 pow-wow the US announced that it is pledging to triple its nuclear power generating capacity by 2050. And asking other nations to do the same; and they will. Such a build out is even more aggressive than China, and will involve geeing up the World Bank and other financial institutions to include nuclear in their lending policies. Even John Kerry is on board, “Nuclear is 100% part of the solution” he whispered to a reporter over whisky sours aboard some private jet, en route to some far-flung conference. Uranium is relatively abundant in the ground, just not in commercial quantities. Those that have got it out of the ground are sold out, and those still digging, can’t dig it up quick enough to meet said demand. The NVIDIA story is well known, the uber-taut fundamentals in uranium, remain less so.

CCTV footage may have caught the Fed Chair moonwalking out of the reception this week after inflation data came in softer than expected. Down it comes ushering in the much hoped for ‘no landing’, a threading of the needle. Success. Job done. The cat calls from the cheap seats drowned out by a euphoric surge across markets as the read out was that the Fed is done hiking. The pause is real. Game on. That Walmart have followed it up with comments highlighting a consumer in belt tightening mode, and belt tightening two-buttons-a-time, is lost in the soup of risk-on. WMT management, who see the consumer in real time across a sprawling network of stores, are talking it tight. Inflation may be falling, but that just means already high prices are going up more slowly. The accumulated inflation of recent years has left the sticker prices for many household staples at eye-popping levels. Even the budget range offers slim pickings. Inflation, analysts point out, comes in waves, and whilst the trumpets went off this week, there are still some sticky issues. Debt for one. Specifically, the colossal amount of debt that needs to be rolled over the next 24 months, both sovereign and corporate. And this debt is going to be rolled at significantly higher rates. The current average rate on the Federal debt is just 2.4%. The only certainty is that it’s not going to be rolled at 2.4%. With the fiscal hose still on a high setting, the prospects for getting all that paper filled is a big ask of wide-eyed market participants. Many of whom are now sellers. The other sticky issue is the likely incoming inflation from commodities. The US has never faced shortages before. Even in the oil embargo of 1979, whilst there were shortages, the actual physical capacity was there. Looming today, across many key commodities, there is little to no spare capacity courtesy of more than a decade+ of underinvestment; underinvestment that can not be rectified for many years. Throw in record numbers of striking workers demanding higher wages from corporates whose bloated margins suggest there’s a little bit more to go round the factory floor, and some mega-trends like de-globalisation, and it appears that whilst inflation might be less than what it was, it’s a brave call to say it’s back in the proverbial bottle.

There has been a heavy air across the energy complex through the tail of the summer, selling all round. Net long speculative positioning is reportedly closing in on the lowest level since the data came into being. Yikes. Hedge funds, who else, have been on the offer for weeks on end. As ever with the smoky goings on in the crude hut, it’s not exactly clear as to the reasons why. It’s not like wider macroeconomic worries are new, indeed, prices appear to have flared off any war premium. Perhaps one explanation is a pick-up in exports out of OPEC+, but then, that could be explained because they overshot to the downside through August. Perhaps inventories, which printed builds in September and October contrary to expectations, are to blame. Or maybe China. If all else fails stick the blame on China, perhaps due to some widespread ‘destocking’. Either way, weakness begets weakness. Futures selling puts off any physical buying and before you know it, sentiment is battered, and the hedge funds are fighting over the last taxi in the rank. Prices have picked up of late, but observers suggest that for a sustained rally, watch inventories and signs of a chunky drawdown. Near term there clearly appears to be a few loose barrels around but given the recent corporate activity in the space, coupled with the shuffling shoes of many governments as they step away from their go-getting net-zero targets, long term demand is, if anything, likely to continue going up. The near term economic data may attract the meaty breath of short term traders, but for those who play a longer game, see the statistics on developing world consumption for details. Position accordingly.

With management absent, indeed last seen in a chaotic Instagram post chanting ‘Tommy, Tommy…Tommy, Tommy’, the editorial team remains rudderless. Despite the smouldering US government bond market offering a rich seam of potential hysterical comment, this week continues with a 3-iron off the tee.

If Paul Volker was destined to give the Federal Reserve a good dusting, he showed early form. As you might expect from a man who went on to crunch professional life in the manner of Giant Haystacks, he stretched the hamstrings off at Princetown. In his senior thesis, appropriately titled, ‘The problems of Federal Reserve Policy since World War II’ he charged the cannon and lit the fuse. He basically let them have it. The ‘swollen money supply’, he wrote, posed a ‘grave inflationary threat to the economy’. If the money supply was not brought under control, prices would rise, and it would be an almighty ‘zut alors’. Disaster. It is no wonder then, when President Carter was on the back foot and the ball whizzing past his chops, that Volcker got the call.

His name, though, was well known. As you might imagine. He had worked for the NY Fed in 1952 as an economist before sliding into the soup and stew of corporate life at what was then Chase Manhattan Bank. By the late 1960s his talent had been spotted by those in the Nixon administration who thought they needed some intellectual heft, and Volker came on board playing a key role in the decision to suspend the convertibility of the US dollar into gold, which ultimately saw the collapse of the Bretton Woods system.

As context, for those still searching eBay for Gary Mabbutt stickers, Bretton Woods was a post WWII pow-wow held at, umm, Bretton Woods, deep in the White Mountain National Forest. The idea was to create a new international monetary system that would help steady the ship, straighten out ties, and promote global economic growth. Trade was settled in dollars, which could be converted into gold at $35/ oz. Basically, the US government said they were good for it, and would back every overseas dollar with gold. Currencies were pegged. Happy days. Initially it worked well, given the catastrophic damage of WWII and everyone from the US to Europe to Japan was in rebuilding mode. And those doing the rebuilding wanted stuff made in America. As a result, they needed dollars to pay for all the stuff.

It all started to pop at the seams in the 1950s as the economies of the likes of Germany and Japan came roaring back. Debt in the US ballooned. In France, there was more mutterings than usual, with finger pointing and whistling, and accusations of ‘America’s exorbitant privilege’ as the rest of the world funded the lavish lifestyles of popcorn and fizz, and subsidised profit hungry all-conquering American corporations. The economic historian Barry Eichengreen summed it up nicely, “it only costs a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one.” Money supply went up. More printing. Germany left. Then other countries started queuing up wanting to swap their dollars for gold. Switzerland, France, the queue started to snake out into the car park. Switzerland then upped and left too. Pressure grew and by the long hot summer of 1971 Nixon had a BBQ at Camp David and invited a who’s-who of officials and advisers, including our man Volker. Sometime over the pork ribs and beer Nixon whispered to the Treasury Secretary John Connally to pull the rug. To suspend the convertibility of the dollar into gold. Down came the shutters. No more Bretton Woods.

As with many moves in stock markets, the first move was misleading. The Dow rallied. Politically it was seen as a success but in time when the stagflation of the 70s was in full go-mode, the reality bit. The dollar plunged a third and volatility across foreign exchange markets required regular intervention. Much like today, with the Japanese 10 year yield going vertical, the authorities are forced to step in before something breaks. Which it will, inevitably. Even our man Volker would later regret the collapse of Bretton Woods: “Nobody’s in charge” he muttered one evening, staring into the fire.

Anyway, back to Volker. He took office in August 1979 when, as even the Panini readers will now know, inflation was raging. The short version is that once he had settled in, found his coffee run and peg in the locker room, he took interest rates to 20%. Not in a straight line, but by June 1981, interest rates were 20% giving anyone who whistles through the teeth at today’s mortgage rates something to think about. As you might imagine with 20% interest rates, a recession followed, and unemployment pushed through 10% providing a boon to snooker halls and arcades. The mood among the electorate, though, was not good. Seething, even. Farmers drove their tractors down C Street in Wahington DC and surrounded the Eccles Building in scenes that are, today, being played out in countries like The Netherlands. Eventually people have enough. They take to the streets. In tractors. That said, by 1982 Volker had given the nod to let the sails out and a period of economic growth followed.

By the time Ronald Reagan was in the yoke of high office though, the mood was very different. The administration cut taxes and started to spend. Spend, spend, spend. Sweaty deficits followed. Indeed by 1987 Volker was out, fired; fired for not being on the same page as the fiscally up for it Administration.

The Congressman Ron Paul who whizzed about in the right circles reckoned Volker was “the most personable” of all the Fed Chairs he met. He was also “smarter than all the others”. And he met them all, Greenspan and Bernanke included. Volker was also taller, tipping the tape at something like 6ft 7 inches. By way of reference, our man Milton Friedman, was just 5ft in his slippers.

So, there you go.

Volcker died in 2019 at the ripe old age of 92.

Some wish he was running the Federal Reserve today.

With management away on a strategy ‘off site’ outside of Rome, the editorial team – in the absence of any further instruction – continue with last week’s theme. Up next, Milton Friedman.

Whilst Keynes could clip a crisp 1-iron off a tight lie with cheroot in chops, he was not immune to doubt. Not one to think that he had it nailed. Shortly before his death, whilst sitting on the patio sipping pink gin with Henry Clay, the esteemed social economist and whisperer of good things to the Bank of England, he sighed and muttered: “I find myself more and more relying for solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago“. The context was the economic swamp that the country found itself in post WWII. The invisible hand was in reference to the metaphor used by the bearded Scottish moral philosopher Adam Smith, to explain the unintended benefits to the greater good brought about by those acting in their own self-interests. Or something along those lines. And yet, it was the stagflationary hoolie of the 1970s that did for Keynes’ theories, and ‘shift the narrative’ amongst those doing the policymaking.

Whilst the British Government officially jettisoned Keynesian economics in 1979, the currents of high-brow economic thinking had been shifting for some time. And it was the old stoat Friedrich Hayek who was ringmaster. Fed up with the way politicians had embraced the wet-lipped largesse expounded by Keynes, he founded the Mont Pelerin Society in 1947. This was essentially a society, or club, for economists, philosophers, historians, and neo-liberal intellectuals of every flavour. In smoky pubs they’d lean in close and talk about markets, freedom of expression, and an open society and finish huddled around the piano singing songs. ‘She’ll be coming round the mountain she comes…” And so on.

Whilst the society had little immediate impact on the wider world, it was a young, fresh-faced Milton Friedman whose eyes shined brightest and by the time flares were in and economies were lurching towards stagflation – a sticky set up of low growth and high inflation – his ideas started to feel the meaty breath of politicians and policy makers who didn’t know what to do. Given that he had written a paper in 1968 forecasting that such a situation would ensue, he got the sails tight and went for it, with regular appearances on TV and the ever popular wireless.

Friedman was born in Brooklyn in 1912. Given the trend for parents to christen their children the district in which they were conceived had yet to sweep society, Friedman was christened Milton, not Brooklyn. Born to hard working Jewish immigrants young Milton cut his own path and was the first in his family to go to university, ending up with a scholarship to do graduate work at the University of Chicago where he was exposed to the work of Jacob Viner, Frank Knight and Henry Simons, names that will be familiar to all. Or names that will, perhaps, mean nothing at all to the wide-eyed Panini collector. Viner, Knight and Simons were heavyweights in the Chicago School of Economics, a body of thought that also hummed and hawed at Keynesism policies, muttering under its breath, preferring a tighter line off the tee, a line that would be embraced by Friedman, a line that became known as monetarism.

Monetarism basically emphasises the role of governments in controlling the amount of money that whizzes around the economy. Money in the tills of local grocery stores, money in purses and wallets and piggy banks. Money in bank accounts. Money in all forms. The theory, so say said monetarists like Friedman, was that the variations in money supply will have an impact on what a country can produce, as in its output, in the short term; and influence prices – what you pay for a ham roll and sticky bun per say – in the long run. So, what the policy makers need to do, is focus on the supply of money. Easy peasy.

Come the 1970s the pie was ready to come out of the oven. Stagflation had set in, courtesy of a host of factors such as the Nixon Shock in 1971- a series of measures that the rubbery President Richard Nixon put in play – and the oil brouhaha of 1973. On the one hand the rising unemployment seem to argue for policies that would stimulate the economy, put some zizz into things; and yet the hot inflation would suggest that policies needed to tighten up. To cool everyone off. It was the perfect storm for those looking to stick a pitchfork into the post-war economic status quo. As with bubble gum and pop music, it was America that moved first.

In 1979 an ashen faced President Carter got the number off a friend of a man called Paul Volcker and rang him up and asked him if he would like to get a grip of the Federal Reserve. The line crackled, Carter clenched his buttocks and held his breath, before Volcker said yes, he would. What Volcker did was go for inflation. And go like a greyhound after a Wimbledon hare. What happened was interest rates went up. And went up a lot. And not just in the US, but all over the world. In the UK, Maggie Thatcher had just rolled Labour’s James Callaghan and after putting up new curtains in No.10 and banning slip on shoes, she too took it to inflation with teeth bared. A few sticky years later, and inflation was seemingly tamed.

Viewed through the lens of monetarism, the Great Depression of the 1930s was caused not by a lack of investment, but by a massive contraction of the money supply. Similarly, the post-war inflation was caused by the taps being too loose, there was simply too much moula sloshing around the casino. In a sober whisper – perhaps relevant today given the all-in approach of the money men – monetarists argue that Central Banks are often to blame, and their actions can have negative consequences. Given all the money printing of recent years, the trillions and trillions of debt that is now sweating under ever rising rates, the cat calls from the cheap seats could well get louder.

Friedman lived to the ripe old age of 94. He worked his whole life. Indeed, his last article for the Wall Street Journal was published the day after his death. He should have won a Nobel Prize you mutter. Well, he did. In 1976. JK Galbraith the Canadian-American economist and all round intellectual and a man not without some sharp words for Friedman’s approach to economic life, observed that “the age of John Maynard Keynes, gave way to the age of Milton Friedman”.

It turns out that Milton Friedman could also clip a crisp 1-iron off a tight lie. One imagines an afternoon foursomes partner, par excellence.

Straying from the usual line of middle and off, post a terse email from the management of the Gazette asking for the content to be less ‘hysterical’ and more ‘informative’, the editorial team tentatively offer a brief introduction to a man we all ought to know a lot more about.

For many, the name Keynes is likely to be associated more with Milton, rather than John. Whilst Milton Keynes has given great joy to those who are into roundabouts and concrete cows, indeed great joy to those too, who celebrate any success story for the po-faced central bureaucrat, it is John Maynard Keynes who has arguably done more to shape modern history. The economist and philosopher’s late-night brainstorming would go on to fundamentally change the theory and practice of macroeconomics. He is, in certain circles, a very big deal. And today, with all the talk of deficit spending, highly relevant to all: from money mandarins to politicians, to those who stare bug-eyed at the TV news wondering what it all means. Relevant to all.

And yet for those whose youth was spent with nose in a Panini sticker album rather than contorting one’s mojo through the higher rounds of academia, the question of what the great man thought, is liable to draw a long face and some weak comments alluding to being one Gary Mabbutt short of completing a rare 1993 full house.

Keynes hailed from Cambridge, where his father was an economist and lecturer of moral sciences. Scholarships flowed, at Eton and King’s College, off the back of some flair shown – as you might imagine – in the maths department. He flourished, excelling at pretty much everything, was President of the Union Society, and joined the Apostles. On graduation he worked in the Civil Service but given the vast fertile expanses of his mind, it is no surprise that he soon got bored and went back to King’s to sweat out some probability theory with some equally up for it fellow, fellows.

Success followed and by the break of WWI his name was in the mix when the hollow-cheeked politicians wanted to speak to someone who might be good in a fiscal fix. Which they obviously, very much, were. Keynes took up a position at the Treasury. After the war he pow-wowed it out at Versailles, whispered high-brow advice in smoky clubs to those who needed it, became a peer, and served in the Court of Directors at the Bank of England. Job done.

It was, though, his work on trying to grapple with the sticky relationship between unemployment, money and prices that really flavoured the casserole of economic theory. Central to his thinking was that governments needed to spend their way out of trouble. Leave people to their own devices and when times are tough, they’ll stuff their money into a suitcase under the bed and stay at home drinking tea and playing bridge. This would mean companies wouldn’t sell anything, slump into a loss, and fire everyone.

For politicians, this is no good. Unemployment would soar. In reference to the Great Depression – a global economic shock that was triggered by the Wall Street crash of 1929 and walloped the chops of pretty much everyone in the 1930s – Keynes wrote “For government borrowing of one kind or another is nature’s remedy, so to speak, for preventing business losses from being, in so severe a slump as the present one, so great as to bring production altogether to a standstill”. His book The Means to Prosperity published in 1933 at the height of the depression set out what governments should do. Basically, they should spend, spend, spend.

It was only after the publication The General Theory of Employment, Interest and Money, a weighty tome that was published in 1936, that his ideas really started to crack the staid, orthodox thinking around fiscal intervention being a bad idea; and it was in the US where his ideas initially got the most traction round about the outbreak of WWII. Keynes stuck it to the prevailing neoclassical approach by suggesting that demand, and not supply, was key to getting the arms around unemployment. If unemployment is too high, do something about it.

The General Theory poked the hornets’ nest and triggered a lot of reviews and comment in journals and newspapers around the world. Even those who didn’t like change, acknowledged it raised a few good points. As with all big ideas, it was the youth that really went after it with shiny eyes and flared nostrils. The ideas were so profound though, so sharp, that Murray Rothbard, an American economist who was a lively proponent of the Austrian School – a view that economic theory should be exclusively derived from basic principles of human action – and deep in the opposite camp to Keynes, wrote: ‘the General Theory was, at least in the short run, one of the most dazzlingly successful books of all time”. By the end of the 1930s, Keynes had pretty much swept the board in academic circles and many of those who had been hardcore supporters of Friedrich Hayek, a major contributor to the Austrian School, had turned tail. ‘Spend it all’ they quietly cooed.

Although his ideas hit the mainstream, Keyne’s didn’t get too involved in the heated debates that followed as he suffered a heart attack in 1937 and had to spend long periods, resting up, drinking tea, and playing bridge. As a result, his revolutionary ideas got diluted a bit by those who wanted to weld his ideas into classical economics when it came to actual policy.

Those doing the welding were the likes of John Hicks, Franco Modigliani and Paul Samuelson who bossed the field of post-war economics much like Suarez, Neymar and Messi once bossed the Nou Camp; should any Panini collectors still be reading. The subsequent movement became known as neoclassical synthesis and was the go-to approach for most policy makers until the stagflation of the 1970s, and the work of monetarists like Milton Friedman started picking at the seams of neo-Keynesian conceptions of monetary theory.

Indeed, Friedman was not alone, and Keynes’ theories are not without critics. The cat calling mainly comes from those who think it imprudent to give the state a blank cheque. A problem that is currently being played out in real time, as many elected officials around the world try to gee up economic activity and keep themselves in chauffeured cars.

After a life dedicated to making things work better for everyone, a life that was prominent at Bretton Woods in helping set up mega institutions such as the World Bank and the IMF, Keynes died of a heart attack in 1946, aged just 62. His considerable achievements were only matched by his personal charm and sense of humanity. He was revered and universally respected. Hayek, his most prominent critic, and arch intellectual enemy, summed it up by writing after his death: ‘He was the only really great man I ever knew, and for whom I had unbounded admiration.’ High praise, indeed.

Next holiday – perhaps think less Jilly Cooper, more John Maynard Keynes.