This chapter returns to the effects of World War I and this postwar agreement on life in Europe at large. This analysis is in line with his repeated assertion that economic, social, and cultural life on the continent was quite interconnected and that harming its industrial heart, Germany, would harm other countries. The Treaty of Versailles compounded the many problems brought on by the devastation of the first global conflict of the 20th century. The paradox for Europe is its dense population and high standard of living as compared to the lack of self-sufficiency of its individual nations. Keynes’s tone in this chapter is “one of pessimism” (95).

One of the most important ways European economies were damaged was through inflation: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency” (99). Keynes provides several examples, including France, in which the exchange rate of the franc was approximately two-thirds of its prewar value. The German mark was “worth less than four cents on the exchange” (100). Compared to gold, the value of the German mark was approximately one-eighth of its prewar value.