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Sends his article on deflation (‘Deflation and Prices after the War’). Nothing in the report of Lord Cunliffe’s committee upsets any of the views he has put forward.

Deplores the behaviour of the English, French, and German premiers at the indemnity negotiations. Suggests issuing a pamphlet on the present financial situation as a postscript to Keynes’s book (The Economic Consequences of the War).

His visit to Germany has suggested to him the idea of paying the fixed charges of railways out of taxation, leaving running costs to be borne out of the traffic. Asks whether this idea has been developed by economists. Alludes to French activities in Germany. Refers to Charles Trevelyan’s speech at the Political Economy Club propounding the capital levy.

Clarifies his ideas about the provision of free public services, and discusses Pell’s book The Riddle of Unemployment.

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Transcript

20th. February, 1923.

Dear Keynes,

Thank you very much for your letter of the 14th inst. {1} in reply to mine.

I quite understand your point of caution with regard to offering public services to people below cost. This would of course not occur if the public relief was confined to payment of interest on capital already expended. In the case of the road it actually goes beyond this and covers current capital expenditure. I think probably I shall attack the problem in a very general way and consider simply the question of “Prices under National Ownership”. Assuming there is going to be no move in the direction of Socialism this is certainly a very important question.

If I put anything together suitable for “The Economic Journal” I will let you see it in case you care to use it. In the meanwhile if you happen to have in mind the name of any special book on Municipal Finance and Municipal Trading which bears on the subject, you might put it on a postcard and let me have it.

I have just been reading Pell’s book on “The Riddle of Unemployment” {2} which all boils down to his proposal that prices should be kept stabilised through manipulation of the bank rate with an inconvertible paper currency. If you are reviewing it yourself in “The Economic Journal” I shall be interested to see your views about it; if not I should like to know some time what you think of it. It is somewhat arrogantly written but it seemed to me offhand a very valuable suggestion. The two points of criticism that occur to me are, firstly, that there would be considerable opposition among business men to raising the bank rate just at the very time trade began to revive and prices show their first upward tendency, and secondly, whether even this proposal would in fact keep prices stationary or only make the oscillations in prices less intensive than at present. In the metaphor which I used in my little book on prices published by the Oxford Press {3}, would Pell’s machinery produce a completely sensitive governor?

Don’t trouble to reply to this if you are too busy.

Yours sincerely,
[blank]

J. Maynard Keynes Esq.,
46, Gordon Square,
W.C.1.

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{1} PETH 2/198.

{2} The Riddle of Unemployment and its Solution (1922), by Charles Edward Pell.

{3} Why Prices Rise and Fall (1920). A revised edition was issued in 1923.

Thanks him for his ‘important’ letter (2/201). Refers to his own comments on the subject (in the Commons?) the day before and to Keynes’s public statement in today’s Times.

Points out some omissions in Professor Procopovitch’s recent article in the Economic Journal (on the distribution of national income), and offers to provide addenda.

Offers to write an article for the Economic Journal on the economics of war, a hitherto neglected subject.

Is writing a paper on the finances of Europe for the Royal Statistical Society. Asks who to contact for national budget figures. The Treaty of Versailles is gradually being recognised as a foolish thing.

Congratulates him on his forthcoming marriage. Commends his articles on the gold standard. Will raise a question on the subject in the Commons in connection with the Appropriation Bill. Asks why the price of bread has not fallen with the rate of exchange.

Has sent a letter to Henderson for publication (in The Nation; see 2/243), which is likely to provoke controversy. Asks Keynes to maintain his side of the argument in the paper, as he is going to India next week.

Has returned from India. Encloses a letter summarising his views of the situation in that country (see 6/135), and two others describing the Indian National Congress (wanting) and his meeting with Gandhi, Tagore, and Bose (see 6/133). His wife is recovering from the illness she suffered on board ship. Refers to adverse reactions to his recent pronouncements on the subject of free trade.

The proofs of Pethick-Lawrence’s book (This Gold Crisis) must be returned to the publisher (Gollancz) by Monday.

Queries certain points in Keynes’s article for The Times (see 2/214-15).

Is sorry that he has not yet been able to arrange Keynes’s visit to the House of Commons (to discuss compulsory saving). Will try to do it in the New Year.

Asks for copies of his article ‘War Economics’. Has been attending Keynes’s lectures at University College.

Was sorry to miss this afternoon’s meeting on the stabilisation of prices. Is writing a book on the national debt. Asks whether American bankers oppose the repayment of the English debt to America, and for details of the German indemnity.

Apologises for missing a meeting of the Royal Economic Society. Comments on Keynes’s evidence (about the capital levy) before the Colwyn Committee (on the National Debt). Asks for his opinion of an annual tax on capital.

Commends Keynes’s article in the Standard and sends a copy of Hansard containing the text of his speech at the end of the debate. Asks him to read over the proofs of his book (This Gold Crisis).

Sends the script of his recent broadcast to the United States. Asks whether he knows anything of the Monetary Reform League.

(Keynes’s reply is 2/212, dated 12 Dec. 1931.)

Thanks him for his letter (2/54). The presence of Churchill drew attention to the contest from all over the country. Reflects on the uncertainty of the current situation.

Thanks him for his compliments on his speech (on post-war international currency; see 2/219), and comments on the debates in both Houses.

Returns some papers (on Canada’s attitude towards Britain; see 2/224), which he has shown to friends.

Is pleased that he has adopted many of his suggestions (about the White Paper Cmd. 6438; see 2/221), and looks forward to this year’s White Paper.

Congratulates him on his ministerial appointment (as Lord Privy Seal).

Praises Cecil’s address to his constituents, and recalls their association in the suffrage campaign.

Commends her radio broadcast.

Invites her to a Commons debate, and compliments her on her performance at Her Majesty’s Theatre (probably on the 15th, when she danced in Carnaval and Pulcinella).

Thanks him for his letter (2/307). Wishes him well in Canada (as High Commissioner).

Is writing his report now. Would prefer to write his own synopsis when he has made further progress with the report.

Has consulted colleagues in the Commons about the subject of her letter (1/300), but is unsure how to proceed. Suggests contacting a newspaper.