50 times more money in 50 years

It’s always nice to find comments and feedback, including criticisms of what’s written and when “coin” is mentioned, how it was created and by whom, and there’s often no shortage of criticism as it’s such a sticky topic. Claudio Rometti, in his commentary on one of our works, brings to mind a widespread idea when he invokes “Currency floodsThat lead to Venezuela, Argentina and Weimar. Fortunately for us, they were caught by the European Central Bank (and other central banks before it), and that is the conclusion.

Romiti writes: “(…) if it were so easy to anticipate the increase in real wealth which it produces coin Flood, Why, with the exception of a few bankrupt countries, no one in the world adheres to this very simple strategy? Perhaps what happened in recent years in Argentina and Venezuela, and in the past in Germany with the Weimar Republic, when in a few years the value of the mark fell a billion times, is a concrete warning (…)“

Below we have pasted the trend of the amount of money in the bank in Europe since 1970.

“Central Bank Independence” It dates back to the 1970s in France, and from 1981 in Italy and the rest of Europe, around which time all governments left central banks “independent” of any control, free to do as they pleased. As you can see, there was a “currency flood” in Europe, because money in the bank (which the stats measure in “M3”) They went from 300 to 16 trillionan increase of about 50 times.

It is the money in bank accounts of all types, including cash accounts and repo accounts, except for stocks and funds. An enormous amount of money has been created, without the economists, experts and the same central banks warning us all about the huge danger that Venezuela poses. Let’s talk about 16 trillion euros are in the bank today and were not there in 1970. This figure also includes Germany, Austria, Denmark and the Netherlands, all of which are virtuous countries with smaller public deficits than we do. And from them, the money in the bank multiplied dozens of times.

However, since 1970 until today, the standard of living of the majority of the population has increased dramatically, in some respects more in some countries and in others less, but much economic progress has been made compared to what it was 50 years ago. . Despite the terrible “currency”, it exploded about 50 times, from 300 to 16 trillion. The questions we would like to ask those who, as soon as they hear about the reality of the creation of money, conjure up the specter of Venezuela, Argentina and Weimar are:

1. Who created this “money flood”?

2. Would it have been better not to do that and just leave the money in the bank in the same amount as it was in 1970?

3. On the other hand, if money must be constantly increasing (as this graph shows), who should create it?

We will try to answer this last question in another article. We are interested in Rometty’s answer to the first two questions.

Paolo Picci and Giovanni Zepordi, September 4, 2023