For a very long time, and still today, the financial markets have been suspended on the decisions of the central bankers, expecting them to validate or contradict their forecasts of inflation and interest rates. To believe that these rates will still have any impact on inflation is to understand nothing of the current situation: today’s inflation has no monetary origin; and to try to curb it by raising interest rates, as central banks are doing and will continue to do, is suicidal.

It is true that the amount of money and credit being poured into the world is immense, and many have long predicted that this would trigger very high inflation. This has not been the case, due to the power of competition implied by globalisation and the strength of technical progress; and it is not the quantity of money and credit available, nor even the war in Ukraine, that has triggered inflation, but rather, as I announced in these very columns a year ago, an exogenous shock linked to the sudden and massive increase in the prices of several raw materials that companies have had to resign themselves to transferring to their customers.

Yet central banks continue to raise their rates, to give the impression that they have some impact on reality. This will be fivefold counterproductive:

On the one hand, it will increase the burden of public debt, depriving governments of essential resources to finance their activities.

On the other hand, it will bring totally illegitimate excess profits to banks and insurance companies (at least as illegitimate as the super-profits of oil companies).

On the other hand, it will enrich the rentiers at the expense of those who work, further widening inequalities.

Moreover, it will increase the cost of financing absolutely vital investments to organise the transition from the economy of death to the economy of life.

Finally, it is absolutely absurd to subsidise consumers so that they continue to consume a poison, without in any serious way encouraging them to consume less of it, or above all without redirecting them towards products and services of the life economy, by obviously alleviating the impact of this price increase on the most vulnerable.

All in all, this will lead to a downward balance of supply and demand, dragging the economy into a recessionary spiral, when what is needed is a massive boost to investment in the sectors of the future, with very low interest rates.

If this policy continues, it will go down in history as a mistake as serious as the one made by central banks exactly a century ago when they imposed the return to the gold standard. We know where that led the world.

It is up to them to replace the “whatever it takes” of demand by a “whatever it takes” of supply, by a general mobilisation of banks and companies to finance the economy of life and the reconversion of the economy of death.

The winners of the current crisis will be those who understand it first. Will it be China, which has all the means to do so, but which does not seem, for the moment, to have decided to embark on it, so as not to strengthen its private sector?  Will it be the United States, which is already modestly trying with the Biden Plan?  Will it be the European Union, which has all the financial and technological means, but which is paralysed by its lack of vision, by the division of its governance bodies, and by the referral of all economic policy decisions to a Central Bank which, by its very nature, has no mandate in industrial policy?

Unless Africa or India wake up before the old powers.

The fate of the world in the 21st century depends on the answer to this question.

Painting : Massysm Quentin, The Moneylender and his Wife, 1514