capital center

Wols (Alfred Otto Wolfgang Schulze), untitled (time_money), 1988.


The primitive defense of “vulgar economists” to the dogma of inflation targets and the independence of the Central Bank

The current debate in Brazil about interest rates and the role of the Central Bank seems colonial to us, and has several interpretations in the so-called "economic sciences", and a portion of them, especially those that are in line with the theories of the field of theoretical domain called “neoclassical”, are based on the linearity of the formal logic of the interaction between interest rates and the behavior of other prices in the economy, an aspect that explains the primitive defense of these “vulgar economists” to the dogma of inflation targets and the independence of the Central Bank.

In this text, I seek to address these issues from a very different theoretical framework, I will use Marxist theory to deal with the political meaning and the social dispute that is established in the credit system, to show the mistakes and the impossibility of an independent Central Bank and the serious social impacts of this fallacy, and first, we have to talk about the State and some of its institutions.

The State is the most modern way of managing human groups, socially organized on a large scale. Thus, societies of millions of individuals require a centralizing and planning organism, an intrinsic need in the face of the aggregating and urbanizing logic that drives capitalism, given that notions of non-State are primitive and non-rational.

The National Treasury Secretariat (STN), the Federal Revenue Service (RF) and the Central Bank (Bacen) correspond to the hard core of the State as an ideal collective capitalist. These three institutions form the most cohesive core of the modern State around the interests of the capitalist class, respectively responsible for managing the monetary credit system, the state debt system, tax revenue and tax collection.

The National Treasury Secretariat is the centralizing agent of the State's wealth, all tax payments to the State are made in the form of deposits to the Treasury, the same is true of expenses, only the STN can issue payment orders, we have here one of the central nexuses of the administrative power of the public fund.

The Federal Revenue makes up the administrative system of tax collection. A considerable portion of the net wealth produced by society is digested by the State, and in peripheral societies, such as Brazil, a considerable portion of taxes are part of the overexploitation of the workforce, the spoliation of wages and minimum earnings of workers, visible in the greater tax regression from the planet.

Brazil is not only the most unequal society on the planet, it is the most concentrated of wealth without any taxation, the Brazilian State is supported by the floor below, while the lords above spread out and earn like vultures.

Finally, all collections and “money” (monetary mass) collected by the Federal Revenue Service and received by the National Treasury is deposited in a special account at the Central Bank. Thus, there is no way to think of an independent Central Bank, only this would be possible if the National Treasury no longer deposited in the Central Bank and the nation's monetary capacity (currency of account) did not exist. The only way to do this would be to abdicate national sovereignty and the Brazilian State would become a total colony of the US empire, the potential monetary emitter and controller of the Brazilian credit system.

The neoclassical economic orthodoxy fails to observe the intimate and central connection between the Central Bank, the Federal Revenue and the National Treasury, not only in the interaction of institutions controlling the fiscal regime and the national credit system, but as organisms that only function interconnected and their separation creates schizophrenia in the relationship between monetary and fiscal policies, something very visible at the present time.

The intervention of the Central Bank and the functions of the National Treasury and the Federal Revenue Service, mainly the interaction between securities issues and their purchase and repurchase policies, are the main management and interaction mechanisms of organisms that cannot live separately. The Central Bank, so that it does not only serve the interests of the business community (capital), requires its social control and its interconnection with the other compartments of state power, that is, the logic of the state system in its entirety that integrates the three souls of the State capitalist: the Federal Revenue Service (RF), the Central Bank (BC) and the National Treasury (STN).

The effectiveness of the monetary authority's intervention depends on the Central Bank's ability to centralize the banking system, in its coordinated interaction with the credit system. Thus, thinking of it as independent of the other components of the State suggests the schizophrenia necessary for the corrupt gains of speculation and a complete lack of control over monetary relations: money is social violence, but it is also a social contract.

It should be noted that the specific character of credit is related to the movements and management of loan capital, therefore the Central Bank's management and control policy are central elements of credit policies, but management of loan capital is more Well understood if it is studied as a “political art”, endowed with instruments internal to the credit system and not as exogenous control factors or mathematical models, the Central Bank is a political entity, part of the State and not a sophistry of neutrality.

The functionality of a monetary authority is always quite restricted. As Karl Marx prophetically recalled: “the power of the Central Bank begins where that of the private banks ends”, which implies that the Central Bank has limited power of action, both due to the real conditions of the accumulation cycle that determines the original monetary reserves as well as the mass of fictitious values ​​that influence the system and increase its inherent instability. This is due to the expansion of speculative credit and the possible impact that a generalized devaluation of these securities could have on real accumulation, which makes social control over the Central Bank an even more imperative need, making this sophistry of independence something more than absurd, a tyrannical and undemocratic bourgeois logic.

The developed credit system and the modern capital market concentrate the forces of convergence and divergence of multiple capitals, requiring a level of control that takes place through the State, through its monetary and fiscal functions present in the interaction between the Central Bank, the Federal Revenue Service and the National Treasury Secretariat. The relationship between “state management” of credit money and the banking system, inscribed in the credit system, corresponds, on the one hand, to the centralization of financing and, on the other hand, to a concentration of the management of payment money on a national scale, with money as social relationship is a condition of the State, and cannot be handed over to the various private interests, on the edge of disorder and social chaos, which implies that the Central Bank cannot be private or independent as the neoclassical charlatans want.

Finally, the social regulations of the neoliberal chaotic condition are visible in four aspects, which we can highlight: (i) the enormous value of wealth transferred from public power to private interests. Thus, in the last twenty years, the Brazilian State has paid interest and transferred wealth (data available on the National Treasury Secretariat page), more than five trillion reais for interest payments and public debt services; (ii) the so-called independence of the Central Bank is illogical in terms, a single entity, such as the State, has one of its parts segregated only to the interests of a capitalist segment, the financial sector; (iii) the interest rate that responds to a part of the average profit earned by capitalists becomes an autonomous anomaly, which disrupts the economy and paralyzes the pattern of capitalist growth; (iv) the impoverishment of Brazilian society becomes a reflection of the growing economic financialization. At the limit, sovereignty and national existence itself will be put into question.

The logic of a so-called "independent" Central Bank is related to the deepening of Brazilian dependence and the growing transfer of wealth from the Brazilian people to national and international expropriating segments, thus the volume of interest paid and expropriated by the Brazilian people is increasing, only in the last balance of the Central Bank we have the record of more than 448 billion reais paid in interest in the year 2021 (5% of the Brazilian GDP), this volume of resources we can theoretically call Expropriation Income of Dependent Economy (RDED), favoring the sectors rentiers of capital at a global level and deteriorating the basic living conditions of the Brazilian people.

The logic of this debate has already been called “Fiscal Dependence”, as can be read in a text already published here, breaking with this logic will be the only way to achieve a sovereign society, civilizational time awaits us, or barbarism will be inevitable!

*Jose Raimundo Trinidad He is a professor at the Institute of Applied Social Sciences at UFPA. Author, among other books, of Critique of the political economy of public debt and the capitalist credit system: a Marxist approach (CRV).

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