The Scourge of Monetarism

Kaldor first became interested in economics through his personal experience of a major monetary event. In 1923, aged 15, he was on a family holiday in the Bavarian Alps during the great German hyperinflation. The young tourist watched with fascination as prices were increased several times each day, at an accelerating pace: At the same time I noted that translated into dollars, or other stable currencies, the prices of things, despite their constant revision, were extraordinarily low. There was a yawning and widening gap between the prices of goods in terms of local currency and their prices in foreign currency, which were very much lower. These extraordinary phenomena aroused all my curiosity. (Kaldor 1988a, p. 11) There is no reason to doubt his memories of this youthful adventure, but Kaldor’s theoretical recollections have proved to be more contentious. At the end of his life he claimed to have anticipated, in the 1930s, the post-1970 literature on endogenous money to which he made such an important contribution (Kaldor 1982a, p. 22). I shall return to this claim later in this chapter; it has proved to be highly contentious.1