by Paolo Becchi and Giovanni Zibordi on Libero, 27/12/2018
The purpose of this article is to compare the much ado about nothing of current economic maneuvers, with those of the past, when the Italian government allowed the economy to really function, thanks to the fact that he kept taxes low and made public investments.
The current financial maneuver is perplexing from an economic point of view because in the end the result from that point of view is practically irrelevant. That is to say, it is not built with the growth of the country in mind. Over the last ten years, the Italian economy has lost 9% of GDP, with the recession of 2008/9 and then that of 2012, a loss that he only recovered in a small part. And the new maneuver, in its latest formulation, it does not indicate a concrete change of direction. In short, it was supposed to be an expansive maneuver and instead it isn't.
The deficit foreseen by the budget is almost the same as that foreseen last year, in the end it just consists of 8-9 billions or so that are taken from some parts of the budget (fewer tax deductions, divestments, fiscal peace…) to move them up (Perhaps) a million people who will receive around 700 euros from April, more (and this is more likely) 400thousand early retirements.
DIET PROGRAMS
During the election campaign, the programs of the League and 5 Stars included, considering all the different proposals, circa 130 billions of maneuver, which have now been reduced to 8 o 9 billion (lo 0,5% of GDP). Regardless of how these billions are used, they are still irrelevant to economic growth.
Suffice it to say that in recent years the banks have cut back 200 billions of credit to all Italian companies and this year too they are cutting tens of billions again. GDP growth will therefore probably be zero in 2019 if it goes well, that is, if the rest of the world doesn't go into recession.
In the past, despite corruption, waste and inefficiencies, baby pensions and Cassa del Mezzogiorno, the Italian economy was growing a lot. We don't remember it anymore, but for example, in the 1970s per capita income increased by 24% in real terms, that is, net of inflation (which at the time was above the 10% half). And in the 1980s real income growth was 28%, with the lira devaluing. The main difference with those times in terms of economic policy is that there were not many “budget constraints”, less than ever did the “external constraint” exist. The state kept taxes lower and deficits higher and also spent on investments, that sometimes, it has to be said, resulted in waste in the South, but “it all held together”. The debt
public was not a constraint because until the 1980s, there was a system to finance the deficit through Bank of Italy, which has been in existence for more than a century, system for which at least half of the deficit was financed with money and not with debt. For more than a century the 53% of the deficit was financed with money.
The difference with the current system financed at 100% with debt is that if you have for example a deficit of 50 billion in 1980 and you finance it with money the following year there are no consequences, will finance i 50 billions with debt the following year you pay 2 o 3 billions in interest, which will accumulate in the decades to come and i 50 billions of debt 1980 they can become today 150 billion. Arithmetic says that at an interest rate of 3% the initial figure doubles every 24 years.
PARALLEL COIN
Well, the Italian state has paid an interest rate since the 1980s (real, net of inflation) average around 3% hence a debt of 50 In the 1980 today in 2018 indeed it has become 150 (rounding). This is essentially how the current public debt was created 2.300 billion, because the secret that is never mentioned is that the cumulative interest paid by the 1980 onwards they were of 3.500 billion. A crazy amount. Nobody ever says it, but without interest the public debt today would be zero.
For an entire century the Italian state had largely avoided the problem of infinite interest accumulation by periodically issuing money, which did not have to be repaid with interest. This system worked well and should be restored in some way. We cannot do this with the euro, because the ECB has stopped doing what it has
done until the other day, i.e. buy BTPs, and stopped because Germany said "enough is enough". And this says a lot about how things work in the EU. Ora, because apparently there is no longer any desire to escape from the cage of the euro, because "it's not in the contract", then we need to think at least of a parallel form of money. Fiscal money goes in this direction, as well as the minibots that are even present in the government contract. If we want to avoid an unfortunate degrowth we must focus on at least this. Everything else is boring.
source – https://paolobecchi.wordpress.com/2018/12/28/il-problema-dellitalia-non-e-il-debito-ma-gli-interessi/
