Logo of Phnom Penh Post newspaper Phnom Penh Post - Would Keynes have bought Bitcoin?

Would Keynes have bought Bitcoin?

Content image - Phnom Penh Post
An employee works on her workstation on the backdrop of the cryptocurrency symbol of Bitcoin pasted on a glass door of a private office in Bangalore, India. Between 15 and 20 million people in Asia’s third-largest economy are estimated to own cryptocurrencies, according to industry body the Blockchain and Crypto Assets Council (BACC). AFP

Would Keynes have bought Bitcoin?

John Maynard Keynes (1883-1946) was the greatest economist of the 20th century. Less well known is that he had a parallel career as a successful investor: fairly successful early in his career, and spectacularly successful later on when he changed his strategy.

After World War I, 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 12-fold 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 every morning to the task, before he got out of bed. Keynes quoted approvingly to his friends a line from Volpone, 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 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 of his country, being fond of Australian government bonds.

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

Content image - Phnom Penh Post
This handout photo received 30 June 2004 shows the intellectual founding fathers of the International Monetary Fund (IMF) and the World Bank Assistant Secretary US Treasury, Harry Dexter White (left) and John Maynard Keynes, honorary adviser to the UK Treasury, as they are shown at the inaugural meeting of the International Monetary Fund’s Board of Governors in Savannah, Georgia, March 8, 1946. HO/INTERNATIONAL MONETARY FUND/AFP

He spent ₤13,000 amassing art that was valued at ₤76 million in 2019. Keynes’ artistic judgements produced an annual real rate of return of six per cent, 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”.

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.

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”.

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

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: “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.

John Hawkins is a senior lecturer at Canberra School of Politics, Economics and Society and NATSEM, University of Canberra. Selwyn Cornish is an adjunct associate professor, Research School of Economics, Australian National University. This article is republished from The Conversation under a Creative Commons licence.

THE JAKARTA POST/ASIA NEWS NETWORK

MOST VIEWED

  • Chinese group tours return to Cambodia starting Feb 6

    Cambodia is among 20 countries selected by Beijing for a pilot programme allowing travel agencies to provide international group tours as well as flight and hotel packages to Chinese citizens, following a three-year ban. As the days tick down until the programme kicks off on February 6,

  • Capital-Poipet express rail project making headway

    The preliminary results of a feasibility study to upgrade the Phnom Penh-Poipet railway into Cambodia’s first express railway indicate that the project would cost more than $4 billion and would take around four years to complete. The study was carried out by China Road and

  • Thai boxers to join SEA Games’ Kun Khmer event

    The Cambodian SEA Games Organising Committee (CAMSOC) – together with the Kun Khmer International Federation (KKIF) and Khmer Boxing Federation – have achieved a “great success” by including Kun Khmer in the upcoming biennial multi-sports event on its home soil for the first time, said a senior

  • Bullets to bracelets: Siem Reap man makes waste from war wearable

    Jewellery is often made from valuable gemstones like emeralds or diamonds and precious metals like gold or silver, or valueless things like animal horns. But a man in Siem Reap has approached the manufacture of delicate pieces from a different angle. His unique form of

  • 61% of 2022 imports came from just 3 markets

    The three largest exporters to Cambodia – mainland China, Vietnam and Thailand – accounted for 60.94 per cent of the Kingdom’s total merchandise imports last year, at $18.245 billion, which was up 11.99 per cent over 2021, according to the General Department of Customs and Excise. Cambodia’s total imports

  • CPP sets out five primary strategic goals for 2023-28

    The Cambodian People’s Party (CPP) on January 29 concluded its two-day extraordinary congress, setting the party’s priority goals for 2023-2028. The ruling party’s congress was attended by more than 3,000 members from across the Kingdom, including the members of the permanent and central committees,