As our world continues to sink into debt, what is there to fear about our economic system? How big is this financial drift? What are the main vulnerabilities? This book gives food for thought to get out of the trap of financialization.
At 93, Jacques de Larosière, former Managing Director of the International Monetary Fund (IMF) and former Governor of the Banque de France, takes a critical look at the excesses of finance and the policies of central banks. In his most recent book, he denounces the financial illusion, which consists in believing that the creation of money is equivalent to the creation of resources. This increase in the money supply “results in a distortion between the value of financial assets and that of the goods created, and favors the privileged at the expense of wage earners,” he writes. In the interest of the future of our society, he pleads to revive productive investment and release the forces of savings.
Beyond the high inflation and the seriousness of the situation in Ukraine, there is this structural drift which is all the more worrying. “Above all, it is necessary to understand how our world has surreptitiously changed its pattern. […] Most of the economic activity is now reflected in the rise in the valuation of financial assets to the detriment of the growth in wage income and productive investment. Result: for two decades, the evolution of the economic system has led to a loss of competitiveness and productivity, as well as an increase in social inequalities, believes the author. Surfing on a massive investment, the decision makers act like an engineer who, responsible for monitoring a dam, would not worry about the rising waters or the risks!
“We’ve reached a point where what should be an add-on – that is, borrowing beyond self-financing – has become the norm, and where financial fiction dominates reality. economic,” observes the author. Instead of relying on the true springs of economic growth, the reflex is to go into debt and resort more and more to credit and monetary subterfuge.
According to the Institute of International Finance, $300 trillion is the historic record figure for our global debt, which is equivalent to 360% of global GDP. It is urgent to realize that the continuation of public indebtedness leads the economy into a dead end, without tackling the problems head-on. To opt for lucidity is to accept that debt stimulation has limits. “In principle, one should only go into debt if the new activity made possible by the loan is likely to generate additional resources which, in turn, make it possible to repay the loans in question. But if the debt has only been used to finance deficits – and not investments – no new activity generating future income will have been created. »
