Economic Policy and Political Power in European Crises
Gerson P. Lima
Doctor in Economic Theory by the University of Paris (1992).
Professor Emeritus of Macroeconomics at the Federal University of Paraná, Brazil, retired.
Please cite the paper as:
Gerson P. Lima, (2015), Economic Policy and Political Power in European Crises, World Economics Association (WEA) Conferences, No. 2 2015, The European Crisis, 1st October to 1st December, 2015
This paper has been included in the publication
“The European Crisis”
This paper analyses the European Union crisis assuming that the economy is commanded by a veiled political power linked to the financial market. This connection is important for a financial crisis is consequence of financial capital supply excess, especially money supply excess, leading to risky operations and financial capital losses internally and abroad. A critical appreciation of the monetary policy reveals that it cannot deliver the promised price stability for the interest rent on public debt is mainly paid with new money printed by the central banks when buying Treasury bonds in open market operations. Inverse operations do not withdraw this liquidity for bond sales comprise interests. An experiment with US data is quoted to support the idea that the origin of the past and future American financial crises is the money printed to pay interest on the US public debt. Next it is demonstrated that the stock of money issued by government to make fiscal policy converges to a theoretical point of equilibrium. It is also observed that fiscal policy does not cause inflation for it is not always expansive and higher prices in this case are indication that people’s wealth increased; so, they are climbing the Maslow’s Pyramid and buying dearer stuffs. The European union are said to have two crises, the general one touching almost all countries where monetary policy prevails and its particular crisis, the risk of dismantling due to potential state members bankrupts. Collecting arguments, the conclusion is that there are evidences to support the Hellinger’s proposal of a parallel currency emission by state-members to make local fiscal policy. It is finally stated that even if this proposal is attractive to decision makers it must be, as any other economic policy, interesting to the political power and preserve democracy.