Connect with us


Macroeconomic Policy and Democracy



Simon God, Associate Professor IP Unikamp. Senior Research Fellow at CEBRI and Chairman of the Board of IFFD

Rogerio StudartSenior Fellow at CEBRI and Former Director of the World Bank Group and IsDB

At its last meeting, the Monetary Policy Committee (Copom) of the Central Bank of Brazil (BC) decided to keep the base interest rate at 13.75% per annum. reported that the decision was based on projections that inflation should slow down — from 5.8% in 2022 to 4.8% in 2023 and 2.9% in 2024 — and move closer to the target. However, this signaled that it is monitoring a range of risks that may be associated with the relevant horizon (18 months) and assesses that a permanent increase in public spending, as well as uncertainty about its future trajectory, could dampen expectations, which could demand a further increase in interest rates.

In a recent event in which he commented on the decision, British Columbia’s director of monetary policy, Bruno Serra Fernandez, was asked about the amount of the tax exemption the monetary authority would accept. Fernandez did not answer, preferring to recount an incident that happened in England with the government of Liz Truss, who lasted only 44 days in power. For the director, the Truss government was punished for not adopting an economic policy that he believed would worsen the country’s financial situation. The punishment took the form of financial instability: the devaluation of the pound sterling, the fall in share prices and a sharp devaluation – by 23%, which became the epicenter of the crisis – British government debt securities (gilts) traded on the market. While Brazil’s president-elect is negotiating with Congress on the best way to align the fiscal year 2023 budget with the commitments made during his campaign, what happened in the UK actually calls for a deeper discussion.

See also  CDS-PP claims government broke public and political consensus in tackling pandemic - Notícias de Coimbra

More like a disclaimer. We are not here defending the economic policies introduced by the former prime minister, based on the idea that tax cuts, especially for the richest, should boost growth. On the contrary, for reasons which one of the authors has already discussed in another articleIn view of the growing, “self-reinforcing” and immoral inequality of income and wealth that is observed in the world, regressive tax measures are undesirable and cause deterioration of the social fabric. In addition, there is ample evidence of the ineffectiveness of the so-called supply side to accelerate growth.

But back to the version that the Liz Truss government fell because it was punished by the market. Apparently, this is not the only interpretation of events that are already being investigated. AT recent article entitled “It wasn’t the markets that brought down the track. It was the Central Bank of England (BOE).”, economist Narayana Kocherlakota, professor at the University of Rochester and former president of the Minneapolis Fed, who has a deep knowledge of the subject, says that the crisis in England is associated with two huge failures of its central bank.

For Kocherlakota, the Bank of England was an ineffective regulator of the markets, simply watching, without doing anything, the rapid growth of speculative activities of British pension funds, which in the short term became indebted to buy long-term government debt securities. As their price began to fall, a mismatch in fund balances forced a massive sale of securities in the portfolio to meet margin requirements, which made the situation worse. The second and decisive failure of the Central Bank of England was to deal with this instability. Having made the necessary intervention in the market, buying securities and maintaining prices, he announced that his intervention would be for a limited period, fixing the day when it would end. The overlap of these two errors led to a major crisis with a political weakening of the cabinet, making a newly sworn government impossible. Having asked Stumbling into the press about the Bank of England’s role in the downfall of Liz Truss, its chairman, Andrew Bailey, defended himself. But the case is far from closed.

See also  Political scientist: photo of Bolsonaro in hospital "is a call" against polls falling - News

As concerns are often raised in Brazil that fiscal imbalances could worsen inflationary expectations and lead to an unsustainable debt trajectory, and parallels are drawn with what happened in England, its basis needs to be discussed. International debates on macroeconomics have unfolded both in scientific circles and in the specialized press. There is far from being a consensus on the existence of a causal relationship between the growth of debt and the acceleration of inflation. Their uncritical acceptance in the country is due to the fact that they have become set of beliefs– without empirical support – which dominates the national economic debate and prevents substantive issues from being discussed.

The first, perhaps most important, of these beliefs is that the main obstacle to growth is the size of the state. The second is “expansionary economics,” that is, the belief that cutting government spending, in addition to being a guarantee of low and stable inflation, is the way out for renewed investment, growth, and the reduction of unemployment and inequality. It is also believed that in order to finally guarantee austerity measures, it is necessary to imprison “Leviathan”, an argument that served as the basis for the constitutional cap on spending.

Brazil is in a deep social crisis with 33 million people suffering from hunger and 61 million Brazilians facing food insecurity FAO data🇧🇷 And we cannot forget that our democracy is under threat. It is critical to overcome these two crises through an inclusive and sustainable growth recovery. There is an urgent need to structure projects – in infrastructure, logistics, agriculture and green reindustrialization – that could be the seeds for a new wave of public and private investment. Here are the challenges and questions to guide the debate. Possible financial problems can be perfectly resolved by the Central Bank, which is responsible for ensuring the proper functioning of the financial markets in the country.

See also  Special commission discusses party unions on Wednesday - News

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


The dollar continues to reflect the political scenario



The dollar continues to reflect the political scenario

Yesterday, financial agents evaluated the opposite decision of the Federal Supreme Court (STF) regarding the so-called secret budget. In addition, a decision was made by STF Minister Gilmar Méndez to issue an injunction that would exclude the Bolsa Família from the spending cap rule, with investors trying to understand how this measure would affect the processing of the transitional PEC in the Chamber of Deputies. Oh this PEC!!!!

Since he is an exchange investor, any reading that the budget will be exceeded or become more flexible will negatively affect the exchange market, whether through the PEC or in any other way. We will continue with volatility today.

Looking beyond, the US Central Bank (Fed), although slowing down the pace of monetary tightening at its December meeting, issued a tougher-than-expected statement warning that its fight against inflation was not yet over, raising fears that rising US interest rates will push the world’s largest economy into recession.

The currency market continues to react to political news. The voting on the PEC is saved for today. It is expected that it will indeed be reviewed to open the way tomorrow for discussions on the 2023 budget.

Yesterday, the spot price closed the selling day at R$5.3103.

For today on the calendar we will have an index of consumer confidence in the eurozone. Good luck and good luck in business!!

Continue Reading


Andrés Sánchez consults with the Ministry of Sports, but refuses a political post.



The former president of the Corinthians dreams of working for the CBF as a national team coordinator. He was consulted shortly after Lula’s election.

Former Corinthians president Andrés Sánchez was advised to take a position in the Ministry of Sports under the administration of Lula (PT). However, he ruled out a return to politics. dreams of taking over the coordination of CBF selectionHow do you know PURPOSE.

No formal invitation was made to the former Corinthian representative, only a consultation on a portfolio opportunity with the new federal government, which will be sworn in on January 1, 2023.

Andrés was the Federal MP for São Paulo from 2015 to 2019. At that time he was elected by the Workers’ Party. However, the football manager begs to stay in the sport, ruling out the possibility of getting involved in politics again.

Andrés Sanchez’s desire is to fill the position of CBF tackle coordinator, which should become vacant after the 2022 World Cup. Juninho Paulista fulfills this function in Brazil’s top football institution.

The former president of Corinthians was in Qatar to follow the World Cup along with other figures in Brazilian football. During his time in the country, he strengthened his ties with the top leadership of the CBF.

See also  Brussels threatens legal action for violation of UK Brexit treaty
Continue Reading


The EU has reached a political agreement on limiting gas prices – 19.12.2022



Germany sentenced Russian to life imprisonment for political murder by order of Moscow - 12/15/2021
BRUSSELS, DECEMBER 19 (ANSA). European Union countries reached a political agreement on Monday (19) to impose a natural gas price ceiling of 180 euros per megawatt hour (MWh). The main sources of income for Russia and the minimization of the use of energy as a weapon by the regime of Vladimir Putin.

The agreement was approved by a supermajority at a ministerial meeting of member states in Brussels, Belgium, after months of discussions about the best way to contain the rise in natural gas prices in the bloc caused by Russia’s invasion of Ukraine. .

The value set by the countries is well below the proposal made by the European Commission, the EU’s executive body, in November: 275 EUR/MWh. However, the countries leading the cap campaign were in favor of an even lower limit, around 100 EUR/MWh.

Germany, always wary of price controls, voted in favor of 180 euros, while Austria and the Netherlands, also skeptical of the cap, abstained. Hungary, the most pro-Russian country in the EU, voted against.

The instrument will enter into force on 15 February, but only if natural gas prices on the Amsterdam Stock Exchange exceed 180 euros/MWh for three consecutive days. In addition, the difference compared to a number of global benchmarks should be more than 35 euros.

Italy, the EU’s biggest supporter of the ceiling, has claimed responsibility for the measure. “This is a victory for Italy, which believed and worked for us to reach this agreement,” Environment and Energy Minister Gilberto Picetto tweeted.

See also  Third Rome

“This is a victory for Italian and European citizens who demand energy security,” he added.

Currently, the gas price in Amsterdam is around 110 EUR/MWh, which is already a reflection of the agreement in Brussels – in August the figure even broke the barrier of 340 EUR/MWh.

However, Russia has already threatened to stop exports to countries that adhere to the ceiling. (ANSA).

See more news, photos and videos at

Continue Reading