The President's concern about eradicating the fiscal deficit has motivated criticism from sectors linked to Unión por la Patria.
Some voices have suggested that financing the deficit with monetary emission is not problematic and that it can even generate a positive impact on the economy.
This fallacy has been entrenched in Argentina for several decades.
It rests on a false premise: that the government can create wealth by printing money.
The best way to demonstrate the fallacy is to return to the origin of money and its reason for existing.
To do this, let's imagine that money does not exist and that we find ourselves in a primitive society with a barter economy.
Suppose, in this scenario, a person wants to buy corn, and has some fruits to offer.
To carry out the exchange, this person must find someone who wants to buy fruit and also has corn to sell.
It will take a person a long time to find someone who sells exactly what they want to buy, and who in turn wants to buy exactly what they sell.
Trade in this context is slow and tedious, making it extremely difficult to get what you want and impeding the development of the economy.
In this situation, people quickly notice that a standardization process is necessary.
Thus, they begin to use a certain element (preferably, easy to manipulate so that it can be used in daily transactions) as a common denominator, so that those who buy and sell goods and services use it as a parameter to set prices and carry out exchanges. .
It is no longer necessary to look for perfect “trade partners”: since there is a common denominator that represents everything we can buy and sell, it is easier to reach trade agreements, which allows the economy to develop.
This is simply the reason for money: it has no value in itself, but only represents the goods and services that we can acquire.
Money is merely a medium of exchange, created to expedite trade and avoid the problems that a barter economy would entail.
The above illustrates why the wealth of an economy does not lie in the amount of money that circulates, but in the goods and services that are produced.
Suppose people decide that a type of stone be used as a medium of exchange.
If, for some reason, people stopped producing goods and services, then the medium of exchange would lose its usefulness.
It would be absurd to think that, in such a scenario, people would be richer if, for example, they found a greater quantity of stones.
In fact, if there were a central authority that stored a huge amount of stones, and circulated them through the economy without considering the quantity of goods and services produced, there would end up being too many stones in relation to the goods and services offered.
Stones will always look for goods and services to represent.
They stick like magnets to the goods and services offered.
But when there are too many stones and the goods and services produced are few, each good and service attracts a greater number of stones, generating what is known as “inflation.”
The harmful effect of inflation occurs because, although all prices increase, they do not do so at the same rate.
If all prices increased at the same rate (including wages, which are the price of labor), then the phenomenon would be neutral, affecting no one.
But inflation is not neutral: money enters the economy through different channels and at different rates, which distorts relative prices.
The bad thing about inflation is not that prices increase: it is, rather, that prices are disorganized.
Inflation turns the economy into a game of winners and losers.
Those who win are those who receive the money “fresh from the oven” (freshly printed) and are able to obtain goods and services before prices increase.
To do this, it is necessary to have some contact with the state apparatus.
Since not everyone can fit into this group, there are always many individuals who end up very disadvantaged.
In short, money is an instrument to facilitate trade.
Being only a means of exchange, the amount of money that circulates does not make society richer.
Wealth is not in money, but in the goods and services that are produced, of which money is a mere representative that acts as a common denominator so that buyers and sellers find each other more easily.
The fact that governments have decided to monopolize this instrument of change does not change its nature;
It does not convert it into wealth.
Ezequiel Spector is Director of the Master's Degree in Philosophy, Economics and Politics (Adolfo Ibáñez University, Chile)