Log in

PKSG Working Paper Series

Working Paper PKWP1502

Keynes, the Pope and the IMF

March 2015

Mark Hayes

This paper discusses Keynes’s surprisingly positive views on the medieval scholastic teaching on usury and draws upon his work to argue that the traditional view of usury (understood as the charging of rent for the use of money) as anti-social is well-founded. Keynes’s understanding of the nature of probability allows a clear distinction to be made between debt and equity finance which most economists dismiss. Rather than meriting remuneration, the demand for the security provided by money against an uncertain future imposes a social cost in one form or another. This proposition is illustrated with reference to the problems of the modern international financial and monetary system, specifically the role of deposit insurance and the obstacles to a renewed system of managed exchange rates, without which many regions appear doomed to enduring long-term austerity.

Keywords: Interest, monetary system, commodity standard, deposit insurance

JEL classification: E42: Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems E52: Monetary Policy G28: Financial Institutions and Services: Government Policy and Regulation

Download: Working Paper PKWP1502