Keynes did not quite foresee the current endless supply of money at zero interest, although he did write about the liquidity trap.
The liquidity trap is a situation whereby there is so much investment uncertainty such as deflation that even if the interest is zero, the general public still hangs onto cash (Cash is king!) - in order to preserve capital value as well as to wait for asset prices to stop falling.
The point that Keynes was making with the liquidity trap argument is that no amount of interest rate reduction would induce investors to put money into the future under conditions of deflation and therefore the government must step in to create jobs.
The point that I have been trying to make in this little series of snippets is to argue that we have gone beyond the liquidity trap argument; we are now in this new world phenomenon of cheap and endless money.
The zero-interest infinite-money supply is an extreme case - the money supply curve is infinite and therefore indefinite. Everything is now defined by the demand for money function alone - which therefore brings us back to square one - what do we do with money?
The demand for money must be for the purpose of investment which is derived by the need for people to consume. But the world has come to a stage of overproduction (due to economies of scale and extraordinary human efforts at efficiency) and the oversupply of money (thanks to irresponsibly ideological central banks) that what the world needs now is a break from these excesses.
But the adjustment costs are high - to only way to trigger a downward adjustment in prices is the destruction of excess money which implies the bankruptcy of banks and factories and the resultant unemployment. The next step is really the redeployment of the labour force to activities that increases human welfare beyong the basic needs of food and shelter. The answer could be the slowdown of the global economy so that people can enjoy their work and their lives - rather than forcing the unfortunate - the migrant workers - to work themselves to death under abject conditions.
While I understand the clever arguments for globalisation, I am increasingly disturbed by the senseless drive for profits and wealth by the elite, with the rise in income inequality and the greed of the financial and construction sectors and the decadence and arrogance of the nouveau riche.
I am increasingly being drawn to the idea of the steady development of a proper community and society whereby the family unit (the Malay concept of "keluarga") is wholesome and intact and that there is a steady drive for greater animal comfort as well as a better grasp of the meaning of human life and the sense of being.
We are now literally drowning in money and liquidity and we are trying to stay afloat.
The real economy must be refocused on the market, the financial system on prudence and risk taking and the government on providing a social safety net for the people.
If we, in the midst of prosperity, cannot take care of our poor, then we are suffering from a poverty of value despite our immense material wealth.