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Keynes's General Theory, the Rate of Interest and 'Keynesian' Economics

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Tily has written a very good book examining the policies laid down by Keynes to help prevent the occurrences of recessions and depressions in the first place.Keynes relies on his generalized quantity theory of money as laid out in chapter 21 of the General Theory,although this is overlooked by Tily.Keynes's generalized general theory is expressed by the condition w/p=mpl/e,where e=Mdp/pdM as defined by Keynes on p.305 of the GT.If e=1,then w/p=mpl and you have a full employment equilibrium in the aggregate labor market,where w is the money wage ,p is the expected price level,and mpl is the marginal product of labor derived from an aggregated neoclassical production function(see p.283 and p.285 of the GT).If e<1,then you have a set of multiple unemployment equilibriums.Keynes's monetary policy prescription is to require that the interest rate be fixed at a low rate.This prescription goes back to the policies of the Thomistic scholastic philosophers and Adam Smith in the Wealth of Nations(see WN,1776,pp.338-340).In fact,Smith's and Keynes's policy prescriptions are identical(GT,p.352).They require that the unsatisfied fringe of borrowers must consist of currency speculators,leveraged buyout artists,and stock market speculators(projectors) using margin account loans to leverage their stock holdings.Credit would have to be skewed away from these individuals by policy actions of the central bank.Keynes's policy is thus one of permanent easy money where all bank loans are made to individuals who intend to use it to attain or rent productive capital goods,build houses, construct factories,etc.Tily does not emphasize sufficiently Keynes's warning that the forces of banking and finance will oppose such a policy,making it practically impossible to implement.The policy is correct in theory,but is not practical to actually implement.This is where the promulgation of Bismarck's social welfare state or a negative income tax system comes into play.The deleterious impacts of a speculator-casino " crony capitalism " can be mitigated by such policies.