The Keynesian Kaleidoscope

"We're All Keynesians Now"

New to the series? Start with our foundational posts on Hyperreality and the Financial Matrix for essential context, or explore the full Table Of Contents.

A profound transformation in economic thought swept across the Western world in the wake of World War II and the dissolution of the gold standard. Keynesian economics emerged as the dominant idealogy, offering a scientific approach to managing the new monetary system. This sea change in economic thought culminated in Nixon’s now-infamous declaration: “We’re all Keynesians now”.

Keynes’ theories didn’t just influence policy—they acted as a powerful lens, refracting and magnifying the kaleidoscopic monetary system that had emerged from the metamorphosis of money. The Keynesian intellectual revolution fundamentally altered our perception of and interaction with reality and accelerated our descent into the hyperreal Financial Matrix—a world where economic symbols and models increasingly shape the very reality they purport to represent.

Part of the Sorcerer’s Apprentice series, originally published privately on January 13, 2021. Updated, revised and expanded for public release on July 10, 2024, with previously omitted content restored for completeness, edits to improve readability, and enhanced graphics.

Ten Milestones On The Road To Hyperreality

1.	The Metamorphosis Of Money
2.	Keynes' Kaleidoscope <== YOU ARE HERE
3.	Central Banks’ Money Printer Go BRRRR
4.	Silicon Shadows: The Digital Detachment Of Economics & Finance 5.	The Institutionalization Of Finance
6.	The Rise of Skynet: The Algorithmization Of Finance
7.	The Symbolic Alchemy Of Risk
8.	“We’re All Quants Now”
9.	Social Media & “The Ecstasy Of Communication” 
10.	The Consumerification of Finance

Economic Memes As Historical Forces

Ideas about economics and money, and the roles they play—or should play—in society have been among the most potent catalysts for change in our world over the past 150 years. These memes have ignited revolutions, fueled wars, triggered depressions, sparked inflations, and propelled other phenomena that have—for better or worse—profoundly shaped the course of global history.

Max Weber illuminated how our memetic worldviews act as invisible forces that steer the course of history. He likened these “world images” formed by our ideas to “railway switchmen”: they determine the tracks along which human action proceeds and society is consequently molded. Once a particular track is chosen by our railway switchmen, it inherently excludes all other tracks; it narrows our perspective—creating a kind of tunnel vision that obscures other potential paths.

This insight is particularly apt when applied to economic thought: certain theories or worldviews—once entrenched—act as powerful memes that radically redirect the entire trajectory of economies and societies. An economic theory that begins as an ostensible map of the economic landscape can—once established—end up drastically altering the very territory it was meant to depict.

Moreover, these memetic economic worldviews act as cognitive filters, shaping our perception of reality and constraining the range of possibilities we can envision. Weber’s “iron cage” metaphor vividly captures this self-imposed confinement within socioeconomic structures born from our dominant worldviews.

For example, when we adopt a Keynesian or fiat money worldview, we aren’t merely implementing specific economic policies—such as managing interest rates lower or using government-issued money for transactions. Rather, our chosen economic “track” fundamentally alters how we conceive of ourselves, how we interpret and interact with the world around us, and even what we perceive as real or possible. Adopting one memetic worldview can make alternatives—like laissez-faire capitalism or other forms of money—appear invisible or inconceivable, effectively sidelining them from consideration.

The Keynesian Revolution

Like fish unaware of the water enveloping them, we often fail to recognize the economic “world images” that dictate our reality—creating an invisible “iron cage” that profoundly governs our daily lives through the societal structures they shape. In the ocean of economic thought through which we swim, Keynesianism—used herein as a convenient, albeit not entirely accurate shorthand for “modern” economics more broadly—has become the dominant current.

It silently orchestrates much of our existence, from the ebb and flow of job markets, to the fluctuations in our mortgage payments, home values, and the stock market as the Fed adjusts interest rates. It’s present in the government and central bank responses to events like the 2008 Crisis and the COVID-19 pandemic, and even in the skyrocketing prices we now pay at the supermarket. Keynesianism ripples through the fabric of our economic lives—often unnoticed yet ever-present.

The Keynesian worldview emerged partially as response to a fundamental shift in the nature of money itself. Money’s metamorphosis into pure abstraction—explored earlier—necessitated a broader revolution in economic thought. A new monetary system—one built on symbols detached from any physical anchor—necessitated a “new economics” to rationalize and manage an economy no longer fettered by the “barbarous relic” of a gold standard.

Keynesian economics emerged to fill this void, offering a bespoke theoretical framework practically tailored for the era of fiat money. Keynesianism provided its proponents with new intellectual frameworks to explain the chaotic economic conditions of the time, while simultaneously offering rhetorical rationalizations for abandoning centuries old economic practices and prescriptions. This doctrine was music to the ears of interventionist governments. It sanctioned their natural inclinations, legitimizing actions they would have pursued even without such academic backing.

We’re All Keynesians Now

Keynes’ General Theory unleashed a memetic tsunami upon the economics profession, birthing the field of macroeconomics in its wake and reshaping how entire generations of economists conceptualize their discipline. This Keynesian tidal wave didn’t stop at academic shores, however—it inundated the entire Western economic landscape.

The 1944 Bretton Woods Conference became the staging ground for Keynesianism’s memetic conquest of Western civilization. While neither the Conference nor the newly formed International Monetary Fund (IMF) explicitly endorsed Keynesianism, the conference inexorably set in motion the machinery to Keynesianize the West, effectively establishing its doctrine as the dominant monetary—and ultimately economic—policy among all IMF member nations.

Redefining Money

From the outset, Keynes explicitly aimed at overturning the classical worldview that saw money as the product of a natural evolution. Specifically, he challenged the idea that money must be anchored to a precious metal, dismissing such notions as “mere superstition”.  He even more emphatically rejected the idea that gold or silver were themselves money, deriding what he called “the primitive passion for solid metal”:

 [If] gold is at last deposed from its despotic control over us …a new chapter of history will have opened. Man will have made another step forward in the attainment of self-government.

In their crusade against the gold standard, Keynes and his followers recognized that the stakes far exceeded a simple policy change affecting commodity prices or foreign-exchange rates. Gold stood as a powerful meme—a totemic symbol of the entire classical liberal worldview. By dethroning gold, Keynes and company were launching a memetic revolution aimed at dismantling the very foundations of classical liberalism and fundamentally transforming the entire economic and social order.

At the heart of this revolution lay a radical reconception of money itself. Keynesian theory asserts that money is entirely a government-conjured phenomenon. Government—as supreme sorcerer—wields exclusive power over this monetary spell, starting with inscribing its very definition in the sovereign spellbook. This currency is born not of free exchange, but rather forcibly enchanted and imposed.

Keynes wholeheartedly embraced this concept of “government money” from Friedrich Knapp, a Prussian academic who declared money a creature of law—purely a manifestation of government power or fiat. According to this memetic worldview, money is whatever the government is willing to accept as payment for its taxes, deriving its value wholly and exclusively from government authority. So enthralled was Keynes by Knapp’s State Theory of Money that he sponsored its first translation into English and later explicitly enshrined it in his own Treatise on Money.

Redefining Money’s Role & Ushering In The Symbolic Economy

Equally radical was Keynes’ view of money’s role in the economy. Under the classical worldview, the “real economy” had held center stage, casting money as its mere symbolic “shadow”—a passive reflection and transmitter of tangible economic activity. Keynes radically inverted this worldview, elevating money and credit from passive shadows to the prime movers of economic forces.

This conceptual revolution ushered in the age of the symbol economy—and with it the inception of our modern Financial Matrix—allowing Keynes to rationalize replacing the gold standard with a “more scientific standard”. Central banking, Keynes believed, should now “be regarded as a kind of beneficent technique of scientific control such as electricity and other branches of science are.”

The Era Of Enlightened Economic Engineering

This new symbol economy of money and credit laid the foundation for Keynes’ vision of the “economist-king”. Echoing Plato’s philosopher-king, Keynes’ technocratic economists would wield profound influence over our economic destiny: “The economist is not king; quite true. But he ought to be!”

With gold safely shunted to a siding, our economic masterminds could take their rightful place heading the locomotive’s cab and steering the economic engine with scientific precision. Armed with sophisticated mathematical models and vast datasets, they could fine-tune the economy like a complex machine. By precisely calibrating a few critical monetary variables—government spending, interest rates, credit volume, and money supply—the technocrats could engineer societal well-being—minimizing boom-bust cycles, maintaining full employment, and ushering in an era of perpetual economic prosperity and stability.

To Keynesians, this power was a magic wand to achieve both social justice and economic progress while simultaneously balancing economic stability and fiscal responsibility. These modern-day alchemists believed they had discovered the philosopher’s stone of endless prosperity: money and credit expansion as the panacea for all economic woes.

Governments, intoxicated by Keynes’ promise of scientific control, began to seize or severely regulate the “commanding heights” of their economies—those strategic sectors and resources from which they could dominate and control the rest of the economy. The institutions and policy tools that were fashioned to conform to the Keynesian vision have ever since formed an integral part of our society’s “iron cage”.

Keynes’ Five-Fold Contribution To The Financial Matrix

The denial of objective values ultimately leads to the dissolution of society.

The Abolition Of Man, C.S. Lewis

The pervasive memetic adoption of Keynesianism illustrates Weber’s “railway switchmen” in action: our societal train diverted sharply from classical liberal ideals, steering instead toward our current hyperreal financial landscape. Where classical economics sought to uncover an immutable “ultimate truth” through non-mathematical reasoning from first principles, Keynes essentially rejected this approach—famously declaring, “I am afraid of ‘principle’” and remarking, “What a very odd, and sometimes terrible, thing are strict principles!”.

This rejection of universal economic “reality” laid the fertile intellectual ground for our hyperreal Financial Matrix—a system where simulations and models precede and shape economic reality, rather than vice versa. Keynesian policy—purportedly aimed at stabilizing the economy—instead “Keynesianizes” it. It causes the economy to—for a time, at least—behave in exactly the manner implied by Keynesian assumptions, creating a reflexive, hyperreal feedback loop between theory, policy, and economic outcomes.

The metamorphosis of money and Keynesian theory cast a transformative spell, seemingly untethering money and finance from physical constraints. As governments and central banks gained unprecedented control over monetary policy and the economic “commanding heights”, our economy has increasingly come to resemble a manipulable simulation—a video game in which rules can be reprogrammed on the fly. Keynesianism’s role in this grand transmutation was pivotal, exerting its influence through five key channels, which we will cover in greater detail in the next installments:

1. the rationalization of inflationary policies 

2. the detachment of theory from reality

3. the inversion of means and ends

4. the misapplication of scientific methods to social sciences, and

5. the digital hard-coding of fallacious theories into our Matrix, transmuting them into reality.

#multiflation