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The money shortage and moral hazards PDF Print E-mail
The Labour Movement-Economy

oba"When goods don't cross borders, armies will.", Frédéric Bastiat
The duality of moral hazard and the shortage of money is, to a large degree, the main factor in all the problems of the economy, crises, and the gap between the institutions of society and of the economy.

In order to deal with this discord and to bring about systemic harmonisation, we must approach more effectively - than we have so far - the profiteering map of money.
Money in the age in which we live is in effect directed, by its profiteering proprietors, outside the field of real investments, into 'exotic' routes and geographies. This is the case because investments in the real economy usually yield smaller percentages of profit and have a field of performance requiring a longer period of time.

This tardiness in investments in the real economic cycle - that is, in that of the natural economic product (manufactured and commercial products), gives rise in major concentrations of capital to pressure for it to take flight. Because the real economy is not an attractive destination in the eyes of the managers of the large concentrations of capital, new fields of stock-market and capital fantasy promising 'high yields' have been created.

But as has been proved in the present world economic crisis, these factors are unable to have a 'cash-flow function' in the sphere of the real economy and of the real money cycle when this is required. In other words, what is now observable is the need to discover new ways of increasing the real - this time - cycle of the economy, taking into account the environmental restrictions, as well as the new investment opportunities generated by them. The shortage of money as regards rates of interest and stabilised liquidity shapes, within the institutional framework of its circulation, the terms for controlling the moral hazard.

There is a need for the creation of a parallel sector of the economy where there is already a common demand, as, for example, in the case of social joint ventures. Beneficial demand should be able to operate, and not be suspended because of the factor of moral risk, and thus liberate common benefit.
The liberation of common benefit must be one of our basic aims. Economic factors cannot function correctly inside the institutional geography of common benefit, and it is precisely for that reason that moral hazard must be restricted.

It is time, therefore, to bring into play creative imagination. Up to now, in institutions and in the economy, creative imagination has operated within the confines of the starting-point. Thus, for example, in the case of the institution of ownership, the use of the creative imagination has led to the search for new profiteering horizons. And there it has shown itself to be very effective. When, however, creative imagination in economics is detached from the real economy, - as the need for the correlation in cash terms of the real and the virtual economy is actually indispensable – then, serious problems result. It is as well that this happens, because otherwise we would be talking about the privatisation of the production of money.

For the time being, money production is a state affair. Here, the neo-liberals should accept and understand the fundamental statism of money. (The neo-capitalists, rather, because we consider the term neo-capitalists more appropriate.) The concept 'liberal' is a positive one, which has in history been burdened, regrettably, with a negative sense, in a cumulative way. Whereas the neo-capitalists have appropriated the notion of liberalism, as it is an attractive concept, the critics of their practices have, on the other hand, given it a negative charge because of them. We must accept that up to now there has been a fundamental role for the state - unless some would seek the privatisation of the production of money.

It is needful for us to approach afresh the functional and conceptual field of supply and demand and to make them line up in a way which is far more constructive than has been the case so far. It is a challenge to our civilisation to eliminate through this corresponding relation and interaction - because these two sides of the coin interact - the moral hazards and, in the end, economic shortages. It is only in this way that we shall emerge from the vicious circle of crises. It should not be forgotten that we are by no means sure whether the next crisis could lead to the collapse of money as - among others - a tool of our civilisation.


Ioannis Zisis, writer

 
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