The purpose of money

The German Finance Minister, Lindner, a great strategist in the eyes of the Almighty, announces the implementation of an austerity plan consisting of reducing public spending by 30 billion in 2025… thus condemning his country and the rest of Europe to assured recession.

A recession occurs when a state is suddenly gripped by the desire to save, to spend less, inevitably leading to an exacerbation of unemployment, which inevitably leads to further decreases in consumption… This vicious circle leaves no doubt, suffers no debate, and can only be exorcised if the state in question neutralizes the fall in private spending and investment by increasing its own, even if it means borrowing more.

At the dawn of this century, a new orthodoxy has emerged according to which states should primarily rely on the monetary policy of their central bank – that is, on interest rates – which would encourage spending and investment by lowering them, and which would withdraw liquidity from the economy by raising them in order to slow it down. In any case, states were instructed to meticulously monitor public spending so as not to incur the wrath of financial markets, which would make their borrowing more expensive.

In the interest of our middle classes on the brink, in order to protect the most vulnerable among our citizens, our system urgently needs a thorough overhaul. We must collectively rethink public action and spending, the role of taxes and duties, in short, the purpose of money.

Austerity is a deliberate act conscientiously decreed by our leaders. It is always and only for – dare I say ulterior motives? – political reasons that our leaders choose to tax, spend, favor one group or class over others. I see indeed no other motivation except politics, for which a government would arbitrate in favor of or against one expense or another, because the money is there, available! Let us stop announcing alleged difficult decisions to make, because we do indeed have the means to both significantly reduce unemployment, reinvest in the economy and in citizens, instead of deliberately worsening an already depressed situation by hiding behind the worn-out screen of an austerity we know is deadly.

Raising taxes and duties (on the rich and the less rich) withdraws precious sums from the economy and worsens the crisis. Raising interest rates sets in motion a harmful spiral as it drains precious liquidity out of the system. The rise in energy prices erodes our purchasing power and consolidates the perverse effects of austerity. Finally, the reduction of public spending affects first and foremost those who most need protection, and jeopardizes the future and comfort of a nation.

No, states do not need to save money, because the budget of a sovereign state is not managed like that of a household. Let us understand that our national debt is not so much a “debt” as a “deficit.” This deficit of our state is the money I have in my pocket, it is the investments my country makes in my country and which as such do not need to be repaid. Sovereign states – that is, those that issue their own currency without any indexing – should learn to tame their deficit, a term I intentionally use in the singular because there is no need to dramatize its significance by using plural. A nation that controls its currency is able to boost its growth and support its employment through the lever of public spending without risking default.

It is therefore impossible – and absolutely undesirable – to reduce the deficit because that would mean confiscating our savings and disinvesting in the state since the deficit of our state is precisely our wealth. Are our policies amateurs or ignorant?