There are two things you have to know, first, that the value of a country’s currency is a reflection of that country’s economy. That is, if a country’s economy is strong, its currency will be strong. If your economy is stable, the value of your currency will be stable. Second, the amount of currency must be equivalent (more or less) to the amount of goods and services. If dollar bills are suddenly abolished, the price of goods will fall. Conversely, if working capital increases, the price of goods will rise. This is every dollar bill should be backed up.
It is this assumption of equivalence between the quantity of goods and services of an economy and the quantity of currency issued that makes it possible to have a greater or lesser degree of confidence in it. And it is also this assumption that makes sustainable the idea that the monetary issue that is not backed by gold does not necessarily have to be a disaster. Now, things get interesting when you can buy a good or a service without having the money to do it, i. e. when you take note of the «unsupported broadcast», which has many and several faces.
The government may, eventually, issue currency to cover such and such expenses at some point in its management, and then suppress that currency issued. For example, if in a given period of time VAT revenues are reduced due to a downturn in business sales, the government may issue currency to continue paying salaries in the public health sector. Then, when the situation normalizes, perhaps with the collection of taxes on profits, then it would be time to reverse the currency issue with the reverse process. Monetary issue is a tool, nothing more.
Let us remember that the payment of salaries to public sector officials, for example, to the person responsible for making photocopies of the court, does not, per se, generate wealth. In other words, the state apparatus does not normally generate wealth, but it does have a cost, which is covered by taxes. So, when the taxes collected are not enough to pay for this cost and, to cover it, the monetary issue is used, period after period, government after government, it generates a price increase that does not usually appear in the «consumer price index», but that anyone feels in their pockets.
Public deficit is not necessarily harmful either. If the public deficit translates into investments in infrastructure, such as roads, bridges, renewable energy plants (wind, maritime, or similar) that lead to the generation of greater wealth through increased trade and savings in production costs, this will have to be recovered by simply maintaining the level of taxes on profits, from now on. It is when this public deficit rather than collaborating to generate wealth presses on generating poverty that the economy suffers. The typical one: raise taxes and, at the same time, increase the number of public ministries.
The credit card can be an example of a coin printer. When you buy a good, or pay for a service, the bank is advancing you money, which is a debt for you. If at the end of the billing period you pay the full amount of your purchase, that’s it, it was just an advance. But if you only pay the «minimum payment», the story already involves an installment payment plan in which you will repay principal plus interest. This example clearly illustrates the difference between a ‘temporary advance’ and a ‘term debt’.
The important thing, then, will always be what the debt generated by the monetary issue is used for – or what the public expenditure whose funds originate from tax collection is used for. If we use the credit card to pay for the cost of the gasoline we have in the budget, then nothing happens. Now, when we use the card to withdraw cash from the ATM and be able to pay the fees on other loans with that cash, that’s when it becomes clear that we’re spending more than we earn and it becomes urgent to review why.
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