Miss Status Quo

The entire Financial Times editorial board has published a piece urging Lula to cut government spending and appoint a finance minister who enjoys the confidence of investors. I get the impression that the FT editorial board has never opened an economics book other than some outdated introductory macroeconomics textbook, perhaps something by Mankiw. Otherwise, it's hard to explain such astonishing arrogance and economic ignorance. Lula and the Brazilian people have absolutely no reason to bow to the demands of financial markets. Brazil is Latin America's largest economy, a major regional power, and a country with a high degree of monetary sovereignty. Around 97% of the central government's debt is denominated in its own currency, the Brazilian real. The relationship between the state and financial markets is therefore nothing like the FT portrays it. Brazil is not dependent on financial markets. On the contrary, financial markets depend on government spending, which creates financial assets for the private sector, while government debt denominated in the national currency is one of the instruments through which those assets are held. What Brazil needs is not capitulation to financial markets, but an independent economic policy focused on expanding production, creating jobs, and improving people's living standards. Armed with the insights of heterodox economic theory, Brazil has the potential to show the world what a genuine economic miracle looks like. ft.com/content/79785581-88c2…