A recently published paper by David Chambers, Elroy Dimson and Justin Foo of Cambridge University examines the investment record of eminent economist John Maynard Keynes. Keynes is usually depicted as a clever investor who made a packet for himself and his college by the shrewdness of his stock market gambling.
The authors pour a certain amount of cold water over this received view by pointing out that his performance in the 1920s was in fact rather poor, while saying that his investing improved in the 1930s.
Perhaps the authors felt that it would be unwise to pour too much cold water on Keynes – the iconic figure of left-wing economics. But they could in my view have gone much further.
They note that Keynes was a Director of the Bank of England and thus one of those responsible for setting interest rates. However, they say that there is “no evidence” he indulged in insider trading – rather like saying there is no evidence that The Boston Strangler gave delivery men a bad name.
Certainly Keynes’s legendary grasp of money matters failed him in the 1920s. Until 1928 he “lagged behind” the UK stock market. At the time of the Wall Street crash in Autumn 1929, he had 83 per cent of his investments in the stock market and thus lost his shirt.
After this chastening experience he then switched to investing in gold. (No shit Sherlock). Later, he returned to the stockmarket, gambling on high risk shares – with Other People’s Money, of course.
Overall, his economics theories were a spectacular failure. A series of books, starting notably with Sutton’s “Wall Street and FDR” have concluded that supply-side economic theories in the 1930s failed and the US economy was rescued by Word War II.
Far from being an imaginative and misunderstood genius, Keynes (a committed eugenicist, by the way) was an egocentric fantasist who gambled away other people’s money.