I was commenting at Lars Christensen's Market Monetarist on a post he wrote trying to salvage Sumner's never ending attempt to justify the Efficient Market Hypothesis. (EMH).
Not that this was the main point but I did include this comment:
"By the way as you as usual knock Keynes I cant resist pointing out that he was a pretty successful investor. I know Scott tried to to claim this is exaggerated but is record is certainly more impressive than anything he’s done."
Lars responded this way:
"Mike, Keynes was not a great investor: http://gregmankiw.blogspot.com/2009/06/was-keynes-really-savvy-investor.html."
I answered him with the observation that his dislike of Keynes goes so deep he refuses to believe anything good about the man even personally. I probably would deny that Keynes would brake for cats. I notice that this comment was not published yet. I wonder if he's going to censure this feeling that I have "gone too far."
In any case I decided to check out Manikiw's "proof" that Keynes was not a great investor. As it turns out Greg rested his case on a Scott Sumner post.
"I got to thinking about this issue last night while reading The Lords of Finance (which by the way is a fine book so far, despite one little point I will nit pick.) See what you make of this:
“In early 1920, he [Keynes] set up a syndicate, with his brother, some of the Bloomsbury circle, and a financier friend from the City of London. By the end of April 1920, they had made a further $80,000. Then suddenly, in the space of 4 weeks, a spasm of optimism about Germany briefly drove the declining currencies back up, wiping out their entire capital. Keynes found himself on the verge of bankruptcy and had to be bailed out by his tolerant father. Nevertheless, propped up by his indulgent family and by a loan from the coolly acute financier Sir Ernest Cassel, he persevered in his speculation”
Mankiw on the basis of this short paragraph declares:
"Translation, without help from his rich daddy and rich friends, this cocky, arrogant, smart-aleck would have fallen on his face, ended up digging ditches somewhere and we would never have heard of him. But he did have a rich daddy, who bailed him out....
"Don’t anyone write in and tell me that Keynes made lots of other good investments, because if you’ve got a rich backstop, none of that matters."
So because he had a rich benefactor he wasn't a great investor, he was assured investment success? What about the history of great artists? You know that most of them lived off of rich benefactors. The idea that having a backstop means you deserve no credit actually means that virtually no one on Wall St can be called great.
After all they got bailed out by Uncle Sam. It would also mean Mitt Romney deserves no credit for Bain Capital as he was a trust fund baby.
Mankiw goes on with this strange logic:
"What’s the point? If you have a rich backstop it’s relatively easy to come up with investment strategies that will usually (not always) make you look like a genius. From now on I will never believe anyone who tells me that Keynes was a great investor.
"Does this matter? It shouldn’t, but unfortunately it does. If his investment reputation was like Fisher’s (calling stocks fairly priced in 1929) nobody would take seriously his Chapter 12 in the General Theory where he tries to shoot down the efficient market hypothesis."
Ok. So this proves the EMH. Admire the intellectual casuistry of Sumner and Mankiw-the alleged "New Keynesian; isn't a Republican Keynesian a contradiction in terms? Keynes wasn't a good investor as he lost money in 1920 and his father gave him money. Since he wasn't a good investor and he criticized the Efficient Market Hypothesis he must be wrong and markets are efficient.