By MANFRED BACK & LUIZ GONZAGA BELLUZZO*

As long as the 'macro media' insist on burying financial dynamics under linear equations and obsolete dichotomies, the real economy will remain hostage to a fetishism that ignores endogenous credit, the volatility of speculative flows and history itself.

Economist Simon Wren-Lewis used the term “mediamacro” to describe the dominant narrative in the media, committed to disseminating a certain view of the economy.

This view encompasses the syndrome as a set of medical signs and symptoms often associated with a specific condition or disease that may have multiple causes or the cause may be unknown.

In the case of economists mainstream, the symptoms and their causes are known, both defined in the ethereal regions of “scientific” fetishism: the movements of the monetary-financial-capitalist economy are restrained by linear functions and equations, transforming differences into equalities. Shamelessly, they create jargons, repeating them to exhaustion, like the daily chants in religious services.

The “macro media” transforms dynamics into statics by discarding the evidence that presents the movements that plague capitalist monetary-financial economies. In this way, they dispel temporality and the persistent fluctuations in income and employment, always mobilized by the forces of finance.

We ask permission to quote an article by Nimesh Vora in Reuters this week: the weakening of dollar since the beginning of Donald Trump's presidency has made it the preferred financing currency for “carry trade“, fueling strong flows into higher-yielding emerging market currencies.

Os carry trades financed by the dollar in the Indonesian rupiah, in the Indian rupee, in the real, in Turkish lira, among other currencies, are back in fashion, fund managers said. In a typical carry trade, investors use cheap currencies to borrow to finance investments in those with better yields. Returns are higher if the borrowed currency weakens.

Here is a quote from a recent article by Greek economist Yanis Voroufakis: “We also know who is not willing to help rebalance the world: the United States. While US Treasury Secretary Scott Bessent waxes lyrical about rebalancing trade and capital flows, the Trump administration he is working for is interested only in the contradictory goals of, on the one hand, devaluing the dollar and, on the other, attracting ever greater amounts of capital to the United States – a contradiction that can only be resolved through massive coercion that the US lacks the power and discipline to implement.”

The “macro media”, entrenched in the simplifications of the quantitative theory of money, insist, in a paranoid way, on dividing the world into two blocks, the real side of the economy and the monetary side. Money comes from outside, it is “external” to the movements of the economy. Thus, the endogenous condition of money in the movements that affect the decisions of agents is discarded. A cognitive disgrace.

In this monetarist tune, another worrying symptom emerges, propagated to the four corners, intending to guarantee that savings determine or finance investment, and to make any alienist worried, our “macro media” separate productive investment from financial investment.

Let us consider the so-called “transfer operations”. carry trade"This financial form revolves around the world in the region of one trillion dollars, seeking to make quick and easy money. Using exchange rate/interest arbitrage - (for laymen) this is the difference between currencies and their respective interest rates in countries.

This movement is increasing the value of other currencies in relation to the dollar. For example, the real at the moment. We ask the “macro media”: does this appreciation of the real caused by this influx of a financial transaction not interfere in the determination of the price of imported and exported products? Another question: why don’t these “savings” go to productive investment?

We ask the reader's permission and patience to once again unmask the narrative of the "macro media". We resort to the Holy Scriptures to record David's fight against Goliath. The stone thrown by David, in addition to being accurate, must be fatal.

In the article published in Institute for New Economic Thinking, Thomas Ferguson fired back: “The stark contrast between the growing role of finance and real capital formation is making the claim that finance serves the real economy, to the extent that it ever was true, quite precarious. The astronomical gross flows that flow through contemporary money markets are only obliquely related to real economic activity; a high percentage, probably the majority, arise from efforts to protect against the risks that the process itself, with all its leverage and tiny margins, creates.”

In his article, Thomas Ferguson reports that the total scale of financial intermediation is about 174% of GDP, while non-residential private fixed investment amounted to only 13% of GDP. It is clear that most financial intermediation (by shadow banks) in the US does not serve real capital formation in any sense.

The mismatches in macroeconomics are evident. The obsessive search for balance in an environment marked by fluctuations in GDP, employment, income and prices. In this cognitive environment, the dogma of dividing the economy into two tectonic plates survives: the investment-savings plate is opposed to the monetary-financial plate.

On the eve of the 2008 financial crisis, low inflation, abundant liquidity and risk appetite prevailed. Many analysts have taken the treacherous path of “global savings glut” as the cause of the transformations in capitalist monetary-financial economies. Credit lies in the limbo of the macro media.

Economist Claudio Borio, head of the monetary area at the Bank for International Settlements (BIS), dismissed this claim: “this is an excessively narrow and restricted view of finance, since it ignores the role of monetary credit (…) savings and financing are not equivalent in general”. The BIS economist laments that “financial factors still float on the periphery of macroeconomic thinking”.

*Manfred Back He has a degree in economics from PUC-SP and a master's degree in public administration from FGV-SP..

* Luiz Gonzaga Belluzzo, economist, is Professor Emeritus at Unicamp. Author, among other books, of Keynes's time in the times of capitalism (countercurrent). [https://amzn.to/45ZBh4D]

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