Business Daily Media

Would Keynes have bought Bitcoin?

  • Written by John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, University of Canberra
Would Keynes have bought Bitcoin?

John Maynard Keynes[1] (1883-1946) was the greatest economist of the twentieth century. Less well known is that he had a parallel career as a successful investor[2]: fairly successful early in his career, and spectacularly successful later on when he changed his strategy.

After the first world war, his income depended more on his investments than his academic work.

In addition to his personal investments, he managed the investments of King’s College, Cambridge, of which he was a member.

Under his stewardship the value of the King’s College fund increased twelve-fold[3] over a period in which broader markets failed to even double.

It was said Keynes achieved these high returns while only devoting half an hour[4] every morning to the task, before he got out of bed.

Keynes quoted[5] approvingly to his friends a line from Volpone[6], a classic poem:

I glory more in the cunning purchase of my wealth than in the glad possession

He most certainly did seem to more highly value the cleverness with which he made money than the money itself. He saw strategy as an alternative to art[7] for someone without the requisite talent.

The younger Keynes

Keynes as a young man was very confident about his own abilities, and less so about those of the general investing public.

In his early investments he tried to benefit from market timing, staying just ahead of the crowd.

Compared to the crowd at this time, the young Keynes invested more in equities (shares) than in bonds (debt).

He also speculated on exchange rates and commodities. And he was far more willing than the crowd at the time to invest outside his country, being fond of Australian government bonds.

Read more: What is Bitcoin's fundamental value? That's a good question[8]

Among his portfolio were modern artworks[9]. Some were by his friends but – judging by the records he kept of their prices – some also served as investments.

He spent ₤13,000 amassing art that was valued at ₤76 million in 2019.

Paul Cézanne’s 1877 Still-life with apples, bought by Keynes in 1918. Fitzwilliam Museum[10]

Keynes’s artistic judgements produced an annual real rate of return of 6%[11], which is similar to what he might have earned from shares. But it provided him with what shares could not – what the artistic and literary Bloomsbury Group, of which he was a part, called “the enjoyment of beautiful objects[12]”.

This younger Keynes might certainly have thought about Bitcoin, believing he could buy into something before it got big, and then sell out in time.

But the formula didn’t always work, even for him.

The older, wiser Keynes

The older Keynes switched to value investing, carefully selecting and holding stocks offering prospects of good long-term returns. This proved more successful[13].

He now regarded trying to get the timing of cyclical investments right as “impracticable”, saying most who attempt it “sell too late and buy too late”.

He wrote that most who try it concentrate too much on capital appreciation and too little either on “immediate yield or on future prospects and intrinsic worth”.

Read more: What is an ETF? And why is it driving Bitcoin back to record high prices?[14]

One of today’s most successful investors, Warren Buffett[15], has written of his admiration for Keynes’ brilliance[16] and emulated his style[17].

Shortly before his death, Keynes warned of the dangers for investors of joining bandwagons. As he put it

if everyone is agreed about its merits, the investment is inevitably too dear and therefore unattractive

During this most successful period Keynes avoided bets on products with no fundamental value.

And he was worried about them for broader reasons. As he put it in his 1936 General Theory[18]

when the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done

The latter-day Keynes would not have bought Bitcoin and might have even preached against it.

This was the Keynes whose investments were the most successful.

References

  1. ^ John Maynard Keynes (www.bing.com)
  2. ^ investor (www.cambridge.org)
  3. ^ twelve-fold (www.blackincbooks.com.au)
  4. ^ half an hour (www.maynardkeynes.org)
  5. ^ quoted (www.kings.cam.ac.uk)
  6. ^ Volpone (www.poetrynook.com)
  7. ^ art (www.researchgate.net)
  8. ^ What is Bitcoin's fundamental value? That's a good question (theconversation.com)
  9. ^ modern artworks (www.artsy.net)
  10. ^ Fitzwilliam Museum (french-impressionists.fitzmuseum.cam.ac.uk)
  11. ^ 6% (academic.oup.com)
  12. ^ the enjoyment of beautiful objects (ejb39.medium.com)
  13. ^ more successful (pubs.aeaweb.org)
  14. ^ What is an ETF? And why is it driving Bitcoin back to record high prices? (theconversation.com)
  15. ^ Warren Buffett (www.forbes.com)
  16. ^ brilliance (www.berkshirehathaway.com)
  17. ^ style (www.theatlantic.com)
  18. ^ General Theory (www.hetwebsite.net)

Authors: John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, University of Canberra

Read more https://theconversation.com/would-keynes-have-bought-bitcoin-172065

Business Reports

Advantages of Vacation Rental Management Software

The first vacation rental management software systems were launched in the early 1980s. At the time, they were majorly used by hotel owners to manage their properties online. The main functions included hotel reservations and ...

TIP Group grows; appoints new senior executives

Teaminvest Private Group Limited (ASX:TIP) has appointed two new senior executives to further accelerate the company’s growth. Timothy Wong has been appointed Head of TIP Equity (the company’s private equity division) and...

What to Look for in a Point of Sale System

When you're looking for a point of sale system for your business, there are a lot of things to consider. What type of business do you have? How many employees do you have? What features are important to you? In this blog post...

Why Roe v. Wade's demise – unlike gay rights or Ukraine – isn't getting corporate America to speak up

Many Americans reacted with outrage to the Supreme Court's decision to dismantle the constitutional right to abortion.AP Photo/Rick BowmerCorporate America – once known for carefully avoiding public stances on hot button iss...

Donating to help women get abortions is a First Amendment right – protected by Supreme Court precedents

An abortion provider in San Antonio had to turn patients away after the June 24, 2022, Supreme Court ruling. Gina Ferazzi/Los Angeles Times via Getty ImagesSeveral Texas abortion funds – which are charities that help people...

Feeling down and unmotivated at work? Insights show that it’s the space you’re in

It may come as a surprise, but over your lifetime you will spend an average of 90,000 hours on the job, according to data in the study, Happiness at Work1. This will likely equate to a whopping one-third of your life, between ...



NewsServices.com

Content & Technology Connecting Global Audiences

More Information - Less Opinion