Reading with some attention the latest article by Paolo Becchi and Giovanni Zibordi on these pages, I must admit that I have not been able to fully understand what their thesis is. The general impression is the same as that already received from other commentators who express a similar economic approach; that is, the idea that it is precisely in economics that the famous Max Planck principle on perpetual motion can be violated. This in the sense of being able to generate growth and development through some financial alchemy developed at the table.
In this case, alchemy, which less than frugal systems like ours have been using for a long time, is nothing more than a casual – if we want to define it that way – use of public debt to balance the state’s accounts. Substantially the same article contains a rather agreeable element, relating to the positive effect that, especially afterwards the madness of self-defeating health restrictions for a low lethality pandemic, the explosion of the same debt had on the growth level.
I believe that we cannot dispute the fact that the combined provisions of the avalanche of new debts and frenzied liquidity injections made by the ECB have, as Becchi and Zibordi claim, moved the economy. Indeed, basically all this can be easily experienced even at the level of a small business with few employees. In fact, even without having increased its overall productivity by one euro, by deciding to debt finance the purchase of a helicopter for the owner and to improve the income of its employees with a suitable Christmas bonus, it could be able to obtain a large loan from the bank, further increasing the company’s already high debt.
However, which is impossible for a private entity, the Italian State has managed to keep the debt/GDP ratio relatively under controlwhich exploded in the first phase of the pandemic, because the same continuous liquidity injections made in our favor by the ECB led to a worrying surge in inflation which, however, allowed a strong nominal growth in GDP – growth which in my opinion is not being never adequately corrected by the deflator – effectively unloading onto the overall system the real costs of growth excessively drugged by public debt.
Now, if it were true that it is enough to circulate money, which according to the aforementioned authors is never scarce, it is not clear why all the main central banks in the world, after the drunkenness of helicopter money in recent yearshave in unison made the cost of money much more expensive.
Perhaps, but it is only the theory of some visionary liberal, they must have done it because in the relationship between economics and finance everything comes down to the end. In the sense that if you reverse the order of factors between the goods and services produced by the economy, always scarce by definition, and the quantity of money in circulation, increasing its level through the effective monetization of new debts, for a period it is possible to grow the economy itself, only that in the end inflation and the increased cost of public debt cause everyone to pay a very high bill.
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