December 3, 2021

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Economics is an imprecise science

In 1917, this practice was instituted in the United States, not to reduce government spending as many believe, but to give flexibility to the executive arm in the context of its involvement in World War I. Before the debt story, Congress decided how to finance the spending, by issuing 30-year bonds or imposing new taxes. The US Debt Ceiling Act of 1917 was actually a breath of fresh air for the government, which had almost complete freedom to manage battlefield expenses.

This outdated practice continues, as the US Congress must periodically raise this ceiling for the US government to comply with its bills, and not without positions from conservative lawmakers who bemoan the condemned spending.

Is “economics” a difficult science?

However, avant-garde minds point to circumventing the executive branch’s obligation to appear before a necessarily politicized Congress by melting trillions of dollars in platinum coins. Thus, the Treasury will be able to finance the country’s lifestyle, not by issuing new bonds or raising the debt ceiling, but by injecting the necessary funds from the Federal Reserve through the money creation transfer belt. Initiatives such as these — conveyed by prominent voices in the United States such as Nobel laureate in economics Paul Krugman or journalist Joe Weisenthal — are powerful educational messages to citizens.

In fact, groups like the United States or the European Union do not need to worry about the size of their fiscal deficits because they have complete control over their currency creation chain. These sovereign states – from which cash will never run out – can use this enormous power to fight the climate crisis by creating as much currency as possible to transform their economies. In short, a paradigm shift is absolutely necessary, and this will only happen if citizens understand how money works.

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Post-mortem system.

Because “economics” does not contain much science: it owes almost everything to subjectivity. As their jargon invades our lives, it is imperative that we realize that economics is within our grasp. The impotence of our rulers in the face of the world of money, like our frustration and helplessness before the language and rules of deliberate obscurantism, has the effect of civil abandonment. An interpretation of the text can be useful, because an understanding of economics can be reduced to a generalization of some basic criteria. Since economics is a “post-mortem” system (which only notices facts after they happen), how can it pretend to adapt the women and politicians who most often appeal to its convictions?

Austerity, orthodoxy, and economic conservatism really aim to reduce deficits or are they just excuses to put the state back, dismantling the rest of the social programs in the process, leading to anorexia in the state that automatically produces state bulimia. The private sector, especially finance? It is time to speak again of Keynes who (in 1936) ended the “general theory” by supporting the “socialization” of investments, a question too serious to be left to the financial markets alone. That is why it is so important to understand how the monopoly of money creation works, which must be put at the service of the public interest. In the absence of such determination, state action is or is ineffective for the minority. This turns into ‘poverty amid plenty’, in the words of Keynes, who made his point perfectly clear by describing a context where ‘there are many homes, but in which no one can find a place for lack of means’.

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