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Yves Dimicoli: “Use Euro Differently For New Economic Growth”

Translated Monday 5 September 2011, by Gene Zbikowski and reviewed by Derek Hanson

Yves Dimicoli, a French Communist Party economist, analyzes public debt and calls for credit reform and the creation of a new world reserve currency.

How did this explosion of sovereign debt come about, three years after the subprime crisis?

Yves Dimicoli: The 2008-2010 phase combined a financial crisis – the worst since the 1930s – followed by a world recession – the worst since World War II. It points to the way the capitalists use formidable productive potential, with the new communications tools, to boost financial profitability at the expense of employment. The pressure for profitability, which lowers wages and cuts employment, creates weak overall demand. Until now, it’s been possible to counterbalance that through company and household debt. In 2008, that led to the subprime crisis, with millions of poor, bankrupt households unable to pay off their home loans. Beginning with that American spark, enormous losses were chalked up by the banks in the United States, in Europe, and around the world. The knock-on effect was a rationing of credit and the big 2009 recession, with 112 million unemployed across the globe. In the face of the risk of a collapse of the financial system, and the risk of deflation, governments intervened massively to prop up their financial institutions with large amounts of public aid, even buying into their capital, or nationalizing. Together with this intervention there was a big fall in interest rates and a large-scale creation of money by the central banks. In late 2009, for example, American debt reached 1.5 trillion dollars. But all these measures were realized without touching bank and credit criteria and without touching the modalities of government aid.

Is there a risk that this mountain of debt is going to plunge the world economy into another recession?

Yves Dimicoli: The kind of response being made to this excessive government debt is going to lead to new excesses. In 2010, the boom in speculation on government bonds triggered a sudden rise in interest rates in ailing countries like Greece. The euro crisis brought massive intervention by the European Central Bank and the International Monetary Fund and the creation of a fund for financial stability. This instrument of payment borrows its resources on the financial markets to lend them to ailing countries so that they can continue to run up a debt on the markets – and all that, at the price of austerity policies that are curtailing economic growth and causing unemployment to skyrocket. It’s a veritable fiasco, since it has led to a new “bailout” plan, which is aggravating this logic, which increases the domination of the financial markets. Excessive government debt in Europe and the United States may lead to a new stock market crash.

Shouldn’t we pull out of the euro to avoid such a scenario?

Yves Dimicoli: No, because that would mean depriving ourselves of the strength of Europe-wide monetary creation, and then the financing conditions at our disposal wouldn’t be as good, especially for a medium-sized country like France. It would also amount to reinforcing the dollar in its dominant role as the world’s reserve currency, whereas the economic crisis calls for rethinking that hegemony. The challenge consists in using the euro differently, and in giving a whole new orientation to the European Central Bank, leading to a radical transformation of credit. We propose bank credit at a greatly lowered rate for real, material investment and for research that generates good jobs and good job training.

Doesn’t the economic crisis call for new world institutions?

Yves Dimicoli: The existing institutions, and notably the International Monetary Fund (IMF), need to be radically transformed through a reform of the right to special money issues. These bonds, created by the IMF and attributed by it to a central bank allow, through a cooperative mechanism, the minting of money and its refinancing. This would be a step towards a common world currency. It would be a means to use credit to develop human capacities, to push down speculation and to establish new and durable economic growth and development.

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