MONEY AND WELLNESS by BIBLIOTECA JUAN MANUEL OCHOA TORRES

MONEY and

WELLNESS

JUAN MANUEL OCHOA TORRES

SOCIEDAD MEXICANA DE GEOGRAFÍA Y ESTADÍSTICA, A.C.

Original title in Spanish: Dinero y Bienestar FIRST EDITION: MAY 2018 ISBN: 978-607-7944-16-4 Registration No.: 03-2018-021310251300-01 Copyright © Juan Manuel Ochoa Torres Correspondence with the author: Juan Manuel Ochoa Torres: mailjmot@gmail.com www.juanmanuelochoat.blogspot.mx/

SOCIEDAD MEXICANA DE GEOGRAFÍA Y ESTADÍSTICA, A.C. Justo Sierra 19 Centro Histórico Telephone (52) (55) 5542 73 41 and 5522 2055 ismge@prodigy.net.mx http://smge-mexico.blogspot.com C.P. 06020, Mexico City MEXICO

Translation to English: M. E. Mauri Reviewed by: Ana Sofía Ochoa Ricoux Typography and layout: Luis Tovar Carrillo tecnografica64@gmail.com Cover page: Ana Sofía Ochoa Ricoux The total or partial reproduction of this book is prohibited without the author’s permission.

Table of contents

Introduction .........................................................

Part one. ............................................................... The past

Chapter 1............................................................... The creation and role of money Remote past

Chapter 2............................................................... Money Evolution and recent past Real basics

Chapter 3............................................................... More understandable inflation Spain 16th Century 1921-1923 German inflation................................

Chapter 4............................................................... Almost unforgivable inflations 20th Century inflations Ideological motivations........................................

Part two................................................................ The present

Chapter 5............................................................... Monetary balance – steady prices Congruency

Chapter 6............................................................... Growth with stability Actual development

Juan Manuel Ochoa Torres

Chapter 7............................................................... Naughty interference and their negative effects

Part three............................................................... 131 The future Chapter 8............................................................... An integrating element under fair ratios Idle reflection Background. ....................................................... Recent history...................................................... Wrong medications...............................................

133 133 136 139

Epilogue. ............................................................... 153 Appendix................................................................ 159

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This book is dedicated to all partners (today and forever) of the Benemérita Sociedad Mexicana de Geografía y Estadística (Meritorious Mexican Society of Geography and Statistics) that have made valuable contributions to the development of our community.

To my beautiful family, my wife Lucía, my son Juan Pedro (his wife Carol), my daughter Ana Sofía, and my grandchildren Ben and Emma, as well as all those to come, hoping they may have greater development opportunities.

Juan Manuel Ochoa Torres

Money and wellness

Introduction

I wonder if you have ever asked yourself a question similar to the one in the mind of this book’s author when he was little: What gives value to these squared little papers, commonly known as "money"? I thought. Why is it that, as groceries were usually marketed in the convenience store at the street corner ever since my remote childhood, these are accepted without hesitation in addition to receiving in exchange other merchandise? One day, on my way to the aforementioned nearby store run by a very kind little lady who everyone knew as "Doña Pachita", I kept on wondering: when and how was a kind of agreement established through which we can exchange copper coins or these so well printed paper rectangles for items? Why does Doña Pachita never refuse to receive them, and instead, she willingly exchanges them for different foodstuff once we give her this so-called "money" since these coins or printed papers cannot even be eaten?1 Well, guess what, these and other similar ideas rather than being forgotten grew over the years fluttering often through my mind with increasingly complex questions. I finally was lucky enough to attend University, and to have a very capable teacher of Economics —an EnglishIf you were to think that at some point I considered the possibility of eating them, I can assure you that they never seemed palatable to me, and I am sure you all, kind readers, have the same idea. 1

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man by the way— who putting up with me and my great interest and concern in the matter, kindly accepted to have a word with me off class schedule. “Professor…”, I told him once intrigued, “…you told us today in class that the amount of money issued by a government through its central bank must be supported and limited by the foreign currency reserves and gold of the applicable institution in each country, is that so?” “That’s right,” he answered. “Well, I think that's wrong," I said, while I felt his clear disbelief to the fact that someone challenged such a dogma at the time, “a country can’t be prevented from growing and developing depending on whether it has enough reserves and gold in its vaults.” “What you’re saying,” he adds in disbelief, “is a heresy in economic matters. In normal conditions, I would flunk you. What would give then value to a currency?” “A currency value must be based on the amount of goods and services each country is capable of producing, for a housewife or any citizen will not use their money mainly at the supermarket2 to acquire gold or foreign currency, but to buy the goods and services required.” “Therefore, and excuse me professor, every country’s currency has to be related rather to the productive capacity each community has,” I carried on. “But if it were as you say, and since many circumstances can modify a country’s productive conditions, their curCommercialization forms began to be modified to the detriment of the corner shops and small convenience stores of the previous years. 2

Money and wellness

rency should also vary, that is, it would have to ‘float’, which would be foolish,” my patient professor insisted. “Well, it can float. In any case that would be a better alternative than limiting its growth, and preventing people from having employment among many other things.” “So, imagine...,” he objected immediately. “How would international trade take place in such a scenario with floating or changing currencies?” “In any case,” I said, “annual variation percentages would not be significant enough to impact international trade, and not only that, if a country acts responsibly and a necessary balance between ‘money supply’ and ‘goods and services’ is safeguarded, there might be no inflation, don’t you think?” Needless to say, dear reader, that although we had a very interesting dialogue several times, we were not able to convince each other. The one thing we never imagined, however, is that just five years later, although I had already graduated from the University and had lost contact with my dear and patient teacher, the following occurred: In the early 70s, then President Richard Nixon announced that the US dollar’s value would no longer be tied to the price of gold, and devalued its currency. I am convinced that my consequent teacher, wherever he may have been, remembered our talks, and since he was several decades older than me, he probably did not get to live in the current world, where all currencies are subject to the "floating" scheme, which, by the way, does not impact the growing international trade. Even though factors impacted this evolution in monetary matters, you will discover them in a surprisingly clear 9

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way as you read this book. My intention with the brief narrative above is to describe, on the one hand, the changing economic and monetarist criterion, and to assure you that, if at some point you considered that this subject was too sophisticated and only available to specialists, let me tell you that this is not the case. This important science that concerns us all complies with basic principles and the most elementary common sense, which can and should be perfectly understandable to all audiences. As I said, I will try to prove throughout the book using a deliberately simple and clear language, including examples whenever possible. The first part describes how this important resource was created thousands of years ago through certain principles or laws that invisibly moved the economic resource: money. You will find in the second part the way it is used currently. The last part includes one of the ways we could take advantage of it in a more complete and comprehensive way for the benefit not only of the entire global community but also of each one of us. Therefore, whether you are or not involved, I assure you that you will have a much broader vision on the subject, and you will be surprised at the real possibilities with which this resource can influence our lives. Join me along the following pages and chapters and discover the potential this so-called "money" resource has, which in fact you keep (little or much) in your pocket now.â&#x20AC;&#x192;

Money and wellness

Part one The pastâ&#x20AC;&#x192;

Juan Manuel Ochoa Torres

Money and wellness

Chapter 1 The creation and role of money

Remote past What if someone from this century could go back to the Paleolithic era through an unknown device,3 and upon seeing with surprise that scruffy gentleman coming with his spear in one hand and carrying with difficulty the prey he has just hunted in the other, and our contemporary offered him money for his prey. Our predecessor would most likely throw his coins or bills to his head, if nothing worse happens. His reaction would have been understandable because everything seems to indicate —even in the most "advanced" periods of the Paleolithic era— that money as such did not yet exist. However, in the following (Neolithic) era a series of transformations occurred, which developed over many centuries and progressed in several regions and continents. However, how did such changes come about and what consequences did they have? In those remote years, some of our ancestors realized, probably by simple observation, that if one of the little seeds they had collected fell accidentally to the ground Paleolithic (from the Greek παλαιός, palaiós: “ancient”, and λίθος, lithos: “stone”) meaning "Ancient Stone", (also known as "stone age") is undoubtedly the longest period of human existence from around 2.8 million years to 12 000 years b.C. A period of transition concurred with an ice age followed by the Neolithic, a term that comes from the Greek (νέος, néos: “new”, and λίθος, lithos: “stone”), or "New Stone Age", which is another period of the "Stone Age" considered as divided. The Neolithic era is estimated to have lasted till 2 500 years b.C. 3

Juan Manuel Ochoa Torres

and it rained... Surprise! A plant similar in nature to the one it came from germinated. Surely they thought that the best of all was that this new plant, in turn, would produce more similar seeds. That fact would have surely made them think that if several of them were grown simultaneously, they wouldnâ&#x20AC;&#x2122;t have to be looking for them everywhere, but would have them right at hand. Others would have noticed as well the benefit of the domestication and fecundity of certain animal species â&#x20AC;&#x201D;as in fact happened with cows, oxen, sheep and goats, among othersâ&#x20AC;&#x201D; because they could make use of them or their products, such as their skin, work force, meat, milk and other things. Some built very primitive homes, and those watching realized that, indeed, it was much better to take refuge in them than to cover themselves under thickets or live in caves especially at the time that, when taking advantage of these new activities, they no longer had to travel as nomads from one place to another but to settle in predetermined places near rivers among other advantages. Since they no longer had to walk such enormous distances looking for food, they had more time. Thus, some realized the advantages of making very rustic clothing by spinning to protect and dress themselves, which others soon copied. Some more gradually learned the process of pottery and even saw the convenience of developing better tools. However, all those significant advances for them, centuries later would not only determine the development of agriculture, fishing, livestock, housing, textiles, pottery and others. But, guess what? These brought along a series 14

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of secondary changes that none of our heroic ancestors could, even remotely, have ever imagined. Each one of the different members of these communities should necessarily start having "surplus" and "missing" items of different merchandise. Someone had more —or was missing— cereals, milk, textiles, tools, seeds, pottery, straw, wood, meat, bricks and a very wide variety of item. Thus, in a completely natural and spontaneous way, there was a need to exchange some goods for others. More than one could have thought, “Oh gosh! Wouldn’t it be better to not depend on each other, to be "selfsufficient" in terms of production and consumption? An idea of this nature is absolutely outrageous. Imagine for a moment that you, kind reader, would suddenly decide nowadays to follow that same self-sufficiency principle, and totally convinced of such an idea, you tried to prepare or produce your own shoes, watches, clothes, glasses, food, cars, telephones and all that wide range of items that we require. How long would it take you to produce each item, if you were to succed?4 Well, let me assure you that our hard-working ancestors had a similar reasoning —although on a much smaller scale—, and they would have noticed —intuitively and I don’t pretend to discourage you my dear reader, but if you were to make something as simple as your own pair of shoes, I don’t know how long it could take you that laudable purpose. What I do believe is that you would use over 40 times the real time of an expert in the field, and the results would be rather dubious. I can almost assure you that neither the author of this book nor most of us would be especially interested in acquiring your brand new pair of shoes. Furthermore, since your so commendable effort and time would have prevented you —among other things— from reading this book, I dare to invite you to get rid of that idea, and continue with those profane "mercantile" procedures —as some say— and continue to exchange goods. 4

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naturally— that human beings seem to have a kind of disposition or ability for certain activities, while others are very difficult for us to perform. So, with this undeniable fact, we could also ask ourselves if a kind of decree was enacted by the authority —if existed— that would regulate the "labor division", or if a primitive edict was issued indicating that each community member would devote him/herself to certain specialty. No, it wasn’t so. It just occurred naturally, and without even realizing it we all specialized —so to speak— in certain tasks. What we did not realize is that humans act and proceed under certain invisible guidelines, which I will be raising throughout this book. I’ll just refer to one of them for now, which is a kind of efficiency in terms of the use of resources available to us that induces us to intuitively and unconsciously —given that every resource we have is limited or "finite", including time— try to give each thing the best possible use. Wow! And how does that happen? I think I can explain it better with an example. Let's suppose that you are an artisan shoemaker, and right now you are about to make your next pair. You have before you and on the worktable three squared meters of leather. I bet you that you will try to make efficient the raw material and use the smallest surface possible (perhaps about six or seven squared decimeters, that is, about two per cent of the total) for each pair, rather than using, say, eight per cent, which would undoubtedly happen if you did not make cuts on your canvas in an "efficient" and optimal way, don’t you think? Well, that same guideline shall apply to all the resources we manage in such a subtle way that the vast majority 16

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—then and now— will not even realize how this invisible incentive operates on everyone. Therefore, just as that artisan shoemaker was automatically induced to behave in that way, you, I and anyone would have proceeded in a similar way regardless of whether we would have had right there in front of us a three squared meter leather canvas, or even more. As I said, a similar principle of "exploitation" or efficiency of available resources, including time itself, should have invisibly driven our ancestors in the following direction: The accomplishment of those activities for which each one of them would have been more skillful in order to later exchange only some goods for others. As easy as that. A fisherman named Simon5 behaved according to that same principle. He had not received an official mandate or an operation manual, but intuitively perceived that if he were good at this activity, and less skillful or perhaps even disastrous in others, he would simply devote himself to that job so he could exchange the "leftover" items for the "missing ones". What did he do to carry out such an exchange? Did he put a fish in a pole on his boat? Or rather... He brought his basket of fish to a kind of primitive market —that is, a site that should have started to proliferate also naturally derived from the influence of the same invisible directive— to exchange them for something else?

Please do not assume that the author is that old to have had the pleasure of meeting that sure-footed fisherman of the Neolithic period. I just named him "Simon" arbitrarily as an example. I can send you a copy of my birth certificate if you want so you can verify that I was born in the 20th century (after Christ) and not in that remote period. 5

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As expected, the second approach occurred. Imagine for a moment that someone had not followed an efficient or logical procedure, and since he had to exchange 3 liters of "leftover" milk for something else, he would have wandered for many kilometers carrying his merchandise hoping to run into another person who in turn brought just what he wanted. This would have been not only inefficient but also irrational, don’t you think? Therefore, with the help of history books —one of the best means to look at the past—6 we can see how people talked about the existence of markets and something similar to money as a typo of exchange means or common ground of goods, in order to make easier, efficient or optimize their exchange. If we go back, however, to the early Neolithic period where money did not exist as such perhaps there was no other option than direct and simple bartering. But, guess what? Bartering was not a very efficient process because several conditions had to happen for the benefit of all participants since there should have been a kind of "match" between the needs or wishes of each one. Those who had fish "left" wanted bread, but those who had bread did not want fish but tools, and whoever had tools preferred milk and maybe a little wool or clothes.7 Let’s remember that writing —as a more coherent and descriptive means— was created around 4 800 years ago (before that period there were isolated events of proto-writing). In The nine books of History, Herodotus (historian and Greek geographer who lived between 484 and 425 BC, considered as "the Father of History" in the Western world and to whom we owe the merit of having developed one of the first reasoned and structured accounts of human actions) describes in the 5th century BC the existence of "markets" and money. In much more recent years —already in the newly American continent discovered by the Europeans— Bernal Díaz del Castillo (1496-1584, 16th century AD) tells us about the existence of very sophisticated markets, such as Tlatelolco. 6

Among the things that made “bartering” terribly inefficient and expensive was that, as I said above, a double match was required: it was imperative that... 7

Money and wellness

After too much time —a waste or inefficiency of this valuable but intangible resource— there could have been an agreement for an eventual exchange between fish and wood, but another conflict arose: How many fish should Simon deliver for the board he required to repair his boat? Surely after many failed experiences, a kind of "common denominators" or, in other words, a kind of "merchandisemoney" would have emerged almost spontaneously. Its main characteristic was that most individuals required them, as maybe it was the case of cereals, livestock or tools. Another characteristic was that they would last longer, as opposed to what happened to our friend Simon with his fish, since, although almost everyone liked fish, they only lasted one day. One more characteristic of the "merchandise-money" was that it was easily transported or could be stored. What was that? Why the hell should they also be "stored"? If we carefully observe Simon’s particular needs, we find that although there were days where he obtained abundant fishing, he was aware that he should take precautions because there would also be days when he would not catch almost anything. Something similar happened to Miguel who after picking his small wheat crop rather than exchanging his cereal for all the amount of goods, which he knew would last very little, he had to be proactive and keep as much surplus as he could for his next crop.

...each individual wanted the item of the other and in the desired quantities, and both had to agree in all basic conditions of any commercial operation. In other words, it depended on a match between the supplier and the demander in terms of wishes, products, quality, need and availability. Should there was no match between each and every one of them —as it should have happened most of the time— inefficiency was generated, a fact that undoubtedly harmed the social group then.

Juan Manuel Ochoa Torres

Thus, once the invisible inflow of efficiency improved they eventually realized that precious metals had all these abovementioned characteristics, which could become one of the best "common denominators" or medium of exchange accepted by everybody.8 It was no coincidence that the "monetization" process (already as "money" or medium of exchange itself) had arisen precisely in the metal age, and more specifically in the Bronze Age.9 There is no exact date in all regions and continents where we can say that coins were used as a common denominator or as a medium of exchanging goods. However, if we go to one of the most reliable testimonies of the 5th century BC, with no other than Herodotus, we will see that this outstanding character states that the first coins10 generally accepted as "money" were coined in Lydia in the 6th or 7th century BC. The same subtle action of efficiency was undoubtedly over time the main fact that made them round rather than squared for their easy handling and transport. 8

The age of metals were from 4,000 BC to 500 BC, first classified as Copper Age, then Bronze and later Iron Age, which occurred in different periods depending on the degree of progress of each specific region. The use of copper occurs during the first stage, since it was easier to obtain the metal given its presence on the surface of the earth, and could melt at slightly lower temperatures; then appeared the bronze, which although it was harder and more resistant than copper, the addition of tin (10%) was required. Finally, iron was better, although it required furnaces able to raise higher melting temperatures. The dominance of metals decisively had an impact in the already significant advances that had been achieved in agriculture, livestock, blacksmithing, housing, and textiles, however better and more efficient weapons were unfortunately produced. 10 The term "currency" comes from the fact that the building where coins were minted in ancient Rome was next to the temple of Juno Moneta, which was built on the northern summit of the capitol hill (one of the seven hills of the Roman Empireâ&#x20AC;&#x2122;s capital city) and it was assumed that said property, being next to the temple, was under the protection of the aforementioned goddess. (British Museum). 9

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This mintage apparently contained a lion as a heraldic symbol representing the Mermnada dynasty to which the kings belonged. The piece was coined in electrum (natural alloy of gold and silver), with a weight of 4.75 grams and a value of one third of the stater (local coin). Darius of Persia ordered the coin mintage after the conquest of Lydia, and later on in Greece. Have these been the first experiences with coins as "money" itself? I doubt it. It is difficult or almost impossible to establish it with certainty. If we refer to another much older text, for example the Code of Hammurabi,11 we will find evidence that money is already cited as such in many places. A portion of said code is shown below for this purpose: “35 If a man buys from an officer the cattle of sheep which the king has given to that officer, he shall forfeit his money. 36 In no case shall one sell the field or garden or house of an officer, constable or tax-gatherer” No name, weight or value of "money" is referred to, however, in this code. The most relevant note is that the concept is already described, that is, money as a medium of exchange or a common denominator of values. Don’t you think?

The Code is a stele where King Hammurabi’s code of 282 laws was recorded. The king supposedly received them from god Shamash. The stele was found in Susa in 1200 a. C. and taken as spoils of war by the king of Elam ShutrukNakhunte. It is preserved in the Louvre Museum in Paris. 11

The Code of Hammurabi is one of the oldest sets of laws that have been found and one of the best-preserved copies of this type of documents created in ancient Mesopotamia.

Juan Manuel Ochoa Torres

For the purposes of this analysis, it doesn’t really matter whether Hebrews called this common denominator of values “siclos”, or the Greeks called it drachmas, obolos or stater, qians in China, gins for the Sumerians12 or any other name. The relevance is that the concept we know as "money" was already operating since those remote years. Furthermore, its creation was a kind of product, result or consequence of the need to exchange goods between members and communities in the most efficient way possible. However, it would be extremely important to make the following reflection: Has money totally fulfilled its primary role from the early centuries of our era to date? Did it influence the prices of goods and services for good or sometimes for bad? This reading shows evidence of experiences humans have had, which you will identify immediately. Since we are dealing with monetary issues, we cannot finish this chapter without first asking: Would you like to know the origin of the word "money"? Money derives from "denarius" (silver coin from the Roman Empire),13 which originally had a weight of 4.5 The Ur-Nammu code is a set of laws (what remains of the original text) written in Sumerian. Its probable date is 2100-2050 a. C. and belongs to the renaissance period of this town. There may have been other sets of previous laws, although the Ur-Nammu code is maybe the oldest text of this type that has survived to this day. The first translation of this code was made by Samuel Noah Kramer and published in 1952. Kramer, Samuel Noah (1952), History begins at Sumer. Below is a brief part of this code that could be preserved: "If a man deprives (another man) from liberty, that man shall be taken prisoner (and) shall pay 15 silver gin ”. 12

Denary (from the Latin denarius) was an ancient Roman coin minted from the 3rd century BC. Its weight, composition and original equivalences were... 13

Money and wellness

grams. I suggest that the next time you go to the supermarket —regardless of whether the term money has come from "denarius"— do not try to pay your bill with that old currency or intend to make a conversion to it— its oddness has raised extraordinarily its value. A better option would be to use the common currency you use as money in your country.

...4.5 grams of silver with an initial value of 10 “aces” (“ace” symbol was “I”, the symbol for a “denarius” was an “X”, which meant ten, and a quinary equaled five “aces” and its symbol was “V”). The denary would become as of the 3rd century b. C., the basis of the new Roman monetary system. Tito Livio (59 b. C.-17 a. C.) History of Rome from its foundation, Editorial Gredos, Madrid.

Juan Manuel Ochoa Torres

Money and wellness

Chapter 2 Money Evolution and recent past

Real basics It could be said that, as a result of what was mentioned in the previous chapter, and even though many have considered money as a concept that must have an intrinsic "value" or in itself, its true role always headed in another direction. Rather than pretending to become part of the goods and services to which it only represented, or considering it important enough to possess an intrinsic value, the moneyâ&#x20AC;&#x2122;s essential objective since its origin was to become a kind of common denominator of values available, which in turn would definitely make the relevant function of exchange of goods easier. It is worth highlighting something merely circumstantial that at the time we had to resolve: the fact that having assigned a kind of intrinsic value was only a provisional or temporary substitute, since given an understandable lack of credibility of the public towards this means of payment, money could comply with that which was, is and shall be its basic objective: to become a universal common denominator of interchangeable or tradable values. This shall help us better understand the circumstantial cause of having to give for so many centuries a kind of provisional "intrinsic value" to that element known in English as "money": to ensure its universal acceptance since once we were, sort of speak, influenced without 25

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even realizing it by the hidden and invisible stimulus of its "efficiency", we had to guarantee by all means the universal capacity of exchange of such medium of change. Just as the invisible influences of both "efficiency" and "mutual convenience" operated in favor of the universal acceptance of money, it should be added that —and to better understand the unfolding of this wonderful process— there were also factors that acted "in the opposite direction". As an evidence of this, let me describe some of them only: The vast majority —including some authorities in turn of the past centuries— did not fully assimilate that, if the role of money was not to have a value in itself, but rather to turn it into a kind of universally accepted means of payment, it was necessary to be able to generate the confidence of citizens towards this monetary element, which would depend to a large extent on the proper management of public finances. However, since this was not the vision or at least not at the required level establishing its basics was more than difficult. Oh, gosh! And what on earth are those “basics”? If money is only a medium of change, then we should look at what it really represented... And what was that? Well, it represented no other than all marketable values since the exchange of goods had become essential for all members of communities in the world since the barter, as we saw, was not an "efficient" or practical option in such a needed exchange. In other words, money would basically require no value in itself, although —listen up— something that we frequently overlooked is that, if we wanted it to fulfill its basic purpose, we should safeguard certain elementary rules. And which ones were those? 26

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If money "represents" certain amount of interchangeable values —by pure logic—, the amount of money circulating should always be a simple equivalent to the sum —as close as possible— of said goods and services. This matter sounds surprisingly simple, is it not? Well, despite the simplicity and overwhelming raison d'être of this axiom, many people didn’t consider it that way —even a few still today— or realize that deep down the real role of money is not other than becoming a kind of interchangeable and "visible" promissory note it represents: the tradable and available goods and services in society. This simple reasoning in turn leads us to understand the raison d'être of that kind of equation14 or essential balance that we must always keep if we really want this important monetary resource to work adequately. The fact that this reasoning is not fully assimilated throughout history makes us understand why we have been wrong so many times. And it will not matter whether the most convincing political leader or person in charge of public finances has the best intentions, believe me, whenever the aforementioned equation or equality between "goods" and "money" were not observed, its effects were as negative as the disparity between these factors. This explains why every time we have had a higher amount of money than its counterpart —for goods and services acquisition—, inflation has been manifested, and on the other hand, when the public's payment capacity was lower, deflation or recession ensued. The term equation means equality. In this case and for purposes of this analysis, we are referring to a mathematical equality between two expressions: "money circulating mass" and "available quantity of goods and services". 14

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Furthermore, we learned little by little that it is not advisable to be at either ends, since just as health itself, our organism does not work properly in the extremes but rather in a balanced condition.15 This same situation occurs in any community. Given something so obvious, the question is how is it possible that the political or financial authorities of past centuries had not noticed this and, in many cases, by neglecting the balance of the equation referred to as "circulating" and "goods", have placed in serious trouble their own people? For a better understanding of the matter, I would like to expose in the following chapters some cases that illustrate how, throughout history, we have incurred in those errors. But first let me show you those that have a greater degree of "justification" in such discrepancies, as well as some of its consequences. However, anyone could reasonably ask how could political or economic authorities incurring in such errors be "justified". In addition to some inability in the past to understand the importance of safeguarding the equation between "money" and "goods", there were other mitigating factors that better explain what happened, look: Just as in ancient times there were those who assumed that the Earth was flat, others argued that "the sky is round but the Earth is squared", and as incredible as it Our health, for example, is not good if the temperature, glucose, blood pressure, body weight, heart rate and many more elements are out of the recommended ranges, either up and down. All parameters must be within range. 15

Money and wellness

may sound to you only a few hundred years ago —17th century— after the Earth’s roundness was generally accepted, it was taken for granted that our planet remained still and the Sun revolved around us.16 This will make us understand why it was not until well into the 20th century, as I mentioned in the prologue, that the theses of most experts in economic matters began to evolve in the right direction.17 Other mitigating factors were the primitive and almost non-existent availability of control means. Nowadays we all know every country has a very respectable institution that acts as Central Bank responsible of issuing and controlling the amount of "circulating money" or means of payment. In the past centuries, there was not even the emergence of such key institutions. Surprising, isn’t it?18 A further justification for the absence of adequate monetary “controls” in previous centuries was the lack of measuring steps and institutional information. I can’t even imagine the primitive calculations available in those days. For example, I wonder how the appropriate amount of money possessed by citizens or the sum of goods produced in those years were evaluated in Spain during the 16th or Of course, there were many outstanding scientists who realized a different reality, as it happened since the ancient Greece with Eratosthenes and Aristarchus (3rd century BC), and in the 16th and 17th centuries with Copernicus, Kepler and Galileo. 16

It should be noted that there have always been people who intuitively glimpsed —as we will see later— the quantitative effect of money on the common well being, but their thinking could not be projected in a tangible way towards the whole community for different reasons. 17

For example, the final version of the US Central Bank, the Federal Reserve, one of the most advanced institutions in currency matters in the world, was created in December 23rd, 1913. One of its main purposes was to keep the money supply flexibility according to the currency and the country’s interests. http://www.federalreserve.gov/faqs/about_14986.htm 18

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17th century. That would explain or justify the serious mistakes incurred in those not so long ago centuries. As if it was not good enough, there was another mitigating factor19, perhaps one of the most powerful but in this case, we will refer to a psychological element, which represented an important role: Imagine, dear reader, that you were nothing less than the person responsible for the finances of the Roman Empire at the time of, say, Constantine the Great (Roman Empire, 4th century AD). The emperor asks you to address before the most crowded square of the capital city or the Senate and, given your power of persuasion, explain to them that —since precious metals are required for other purposes— from now on the coins of the whole empire shall no longer be coined of silver… future money will be made up of nickel, bronze and printed paper. This will not alter at all the purchasing power because you will be responsible for ensuring or maintaining a perfect balance between the two key factors mentioned above and, as a result, you agree to prevent altering the least possible the purchasing power of the citizenship. I don’t want to question, my dear reader, (for the moment, responsible for the finances of the Roman Empire) your so remarkable oratory ability, to be pessimistic or to underestimate your persuasive speech as recently assigned finance minister but I think that the results of your attempt shall not be successful either at political or economic level. I regret to say, my dear patient finance minister of the Roman Empire, that we will have to add other elements This doesn’t mean, dear reader that I received fees from the political or financial responsible entities back then for supporting their performance. I never met them, I was not born yet, you can bet on that. As I said, I was born in the 20th century. 19

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to these mitigating factors such as financial needs of some politicians, different military campaigns, plagues and other circumstantial calamities. Others could question that with such limitations in the past centuries and, to make matters worse, with no basic elements of any modern economy to maintain the necessary equity in terms of “circulating” and “assets”, how was it then that there were no more hyperinflation events as those occurred in more recent years. In this case I can only give you credit because you assigned a specific value, both of material and psychological nature, to the coins made of precious metals. The value of material nature stems from the significant fact that the “circulating” level was automatic and circumstantially restricted to the availability of precious metals (unlike paper money), which helped at least to safeguard certain equity of the aforementioned equation.20 As I said, before, we must not overlook the fact that having assigned the coin an “intrinsic value” was just a temporary and transitory substitute of the main element that should have ever existed: credibility in the institutions in charge of the monetary issuance that should have been responsible or aware enough of the topic in order to safeguard the essential equation between circulating “money” and “assets” available. These monetary authorities, control mechanisms and information, however, and the basic understanding in Don’t even think I miss this phenomenon of the past. The underlying reason and the real strength of any currency or means of payment in the world is its purchasing power and the equity with the goods and services such currency represents. When institutional credibility emerged in most countries, the need to assign an intrinsic value to the currency became void. 20

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the matter, as we know them now, were conspicuously absent, so precious metals had to take over, at least temporarily. This will help us to understand why, despite the lack of many monetary elements now considered basic, most of the time in the past centuries these inflationary events did not occur often. The circulating mass growth was necessarily circumscribed to the precious metals availability they were made of. To verify that the true solidity of any currency is essentially not its intrinsic value but the equivalence it actually represents, i.e., the goods and services available, I chose one of several cases that occurred throughout history where we can see that any circumstantial abundance of precious metals that would have allowed the minting of more currency than that of its counterpart —"goods and services"— generated the so feared inflation, which only confirms the validity of the aforementioned monetary equation. Therefore, I can assure you that there shall be no substitute or precious metal capable of replacing the responsibility or wise leadership of any government or central bank in the world. Let us refer now to the second aspect —in this case, the psychological nature— that makes us identify the role played by precious metals, which I deliberately related to a very important element that comes into play in the longed for price stability: the consumption rate. You might be thinking, what on earth is the author trying to tell us? I don’t pretend to drive you crazy, my dear and patient author, so let me give you an example: 32

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If any region of your country or the world were facing an impending catastrophic event such as a hurricane, a war or any other calamity, whether or not this potential risk has the negative consequence expected, the following would happen: A large amount of groceries, water and different items would disappear from the shelves of your nearest supermarket, and something similar would happen with fuels and many other products … It’s true! Some of you will say that you remember what happened at the mere possibility of such an event. What is the reason for this? The answer is simple, the purchasing “rate” increased, which in turn caused an impact in the already mentioned equation. But how did precious metals come into play in the past centuries? Since the consumer considered wiser and a more foresighted measure for him and his family to accumulate or keep his silver or gold coins instead of hastily acquiring goods he might have or not required, I guess he could have contributed in a small proportion to tempering or decreasing the consumption rate,21 which in turn contributed unwittingly to maintain the aforementioned equity. With this simple example of a catastrophic and unexpected event, my intention is to first highlight the way in which the element “rate” is also a decisive influence Let us never overlook that a country’s result shall not be more than a simple sum of all the individual decisions taken by millions of consumers. If a catastrophic event such as the one described is regional, temporary or nonrepresentative nationwide, it shall have no major consequences, otherwise, the authorities in charge of public finances will immediately take into account any eventual increase in the consumption rate to make their analyses, evaluate their effects and take further actions. 21

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as it circumstantially alters the normal pattern of citizen consumption. It also acknowledges the role that heavy metals played in the past and helped preventing someway many more inflationary events from triggering. As I said, I do not pretend to weigh the fact that money contains at present an intrinsic value in itself since, fortunately, the situation nowadays is different, and we already have institutional credibility, greater economic knowledge and countless means of control and information to safeguard the balance between money and goods, which made money with specific value meaningless. I just wanted to analyze its important role in past centuries. Now, in order to make this matter even clearer, I would like to provide you some more tangible and educational cases. Therefore, in the next chapter I will share a few experiences from history in which we can see our mistakes and the way we can and should prevent such discrepancies, because whoever learns well from the past can always count on a better future.

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Chapter 3 More understandable inflation

Spain 16th Century Let’s travel now through History to other less than to Spain in the mid-16th century —as if we were using again the wonderful but imaginary time machine— so, once there, we can be privileged witnesses of a unique scenario: Few nations in the world and throughout centuries had before them such a promising scenario as this country’s at that moment... Why? A few decades earlier, a series of highly relevant and unbelievably favorable events had come together in this European kingdom that, combined, had a very positive economic impact on Spain. Upon its unification at the end of the 15th Century, Spain found itself22 discovering a huge and promising continent full of resources where there was also a very favorable contrast regarding the development and management of different weapons, which practically guaranteed their “conquest”. To make matters even easier, they had reached an agreement with the Portuguese upon a singular partition of Spain learned of the fact until early 1493 upon the return of the first trip. It should be noted that the two surviving caravels arrived to the Iberian Peninsula by different routes because they drifted apart after a strong storm. Admiral of the Ocean Sea (Life of Christopher Columbus) Samuel Eliot Morison. Fondo de Cultura Económica. 22

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these newly discovered lands, which, they assumed legitimized such possession for their exploitation.23 Hence, by mid-16th Century, when they had almost consolidated their dominion not only over such territory but also over their resources, they could have never imagined even in their best dreams the scenario before their eyes. Therefore, huge quantities of precious metals, mainly silver, began flowing into Spain. The vast majority of the people would have bet that they had before them a phenomenal economic future with the resulting power in global context… But... Did the fact of such a surprising amount of financial resources entering in Spain in the form of a “hard” currency (coined in silver) actually mean that sufficient wealth, prosperity and stability had arrived in Spain to substantiate an unparalleled expansion? TORDESILLAS TREATY. Signed in Tordesillas (province of Valladolid, Spain) between by Spain and Portugal representatives on June 7th, 1494 in which they reached an agreement to divide the "New World" according to certain limits, although they were inaccurate. The king of Portugal (John II) claimed that derived from the previous Treaty of Alcáçovas, signed on September 4th, 1479, Portugal had certain rights over the newly discovered territory (later called "America"). Thus, King Ferdinand of Spain, taking advantage of the fact that he had already exchanged favors with the newly appointed Pope Alexander VI (Rodrigo Borgia), and to his considerable influence on him, requested and obtained his support over the aforementioned controversy with Portugal. The papal support was materialized through 4 bulls (Inter caetera I and II, Eximiae devotionis and Dudum siquidem) totally favouring the Spaniards by decreeing excommunion for all those who crossed a certain meridian. To avoid major conflicts, however, the aforementioned treaty was celebrated, which was later signed by Pope Julius II through the bull Ea quae pro bono pacis in 1506. Admiral of the Ocean Sea (Life of Christopher Columbus) Samuel Eliot Morison, Fondo de Cultura Económica. The Events that Led to the Treaty of Tordesillas, Lawrence Cohen; Terrae Incognitae 47 (2): 142-162. ISSN 0082-2884. Alexander VI and the demarcation of the maritime and colonial domains of Spain and Portugal, 1493-1494, Vander Linden; (Oct. 1916) The American Historical Review. Vol. 22 (N.º. 1). Pp. 1-20. 23

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Had there been a breakthrough in financial and economic management to, among other things, achieve an adequate equity between the “circulating” and “goods”, things would have been different. As expected, however, the situation resulted in something else due to the limited conditions of the time in terms of knowledge and means of control: Although these new possessions made Spain powerful during that period, the kingdom faced an economic conflict that no one ever imagined, which for years was also unexplainable for many. Wow! Why? Let me tell you what happened: Since the circulating mass had a strange growth within Spain with the entry of that unusually large amount of silver, they inadvertently altered the obligated balance or equation between the “circulating” and the “available goods,”24 which, in turn, generated extremely negative effects for them despite their bright perspectives. Note that the main problem of such a situation is that, when such a discrepancy arose between these factors, their harmful effects decreased not only to an apparent and harmless internal inflation, but also generated a gigantic imbalance with extremely damaging consequences: Do you think the author of this book is exaggerating? Could this inflation have hurt so much Spain? Was inflation even higher than the rest of Europe? The issue was not as simple as a mere price increase within the country; In other words, according to the most recent quantitative theory of money of the economist Irving Fisher (1867-1947) stated: P (prices) = M (money circulating mass) × VT (speed of transactions), formula similar to that of his predecessor Alfred Marshall (1842-1924). 24

Juan Manuel Ochoa Torres

this condition caused a pernicious domino effect that affected an undreamed-of number of issues. The following happened in its early stages: The items that were produced in Spain automatically turned out to be more “expensive” both for the Spanish consumer, as well as for the rest of Europe and other commercial partners. This fact halted Spanish exports because they became more expensive with respect to similar goods and instead favoured —competitively speaking— imports from those with whom they traded. Would the problem have stopped there? I wish it had been so, but that was only the beginning. That alteration in Spanish prices only lit the wick to a kind of time bomb that continued with a series of subsequent events... What events? As I said, such a situation has not only brought down to a seemingly harmless loss of competitiveness for the Spanish producer, but, obviously, it pushed the consumer to prefer imported goods as many times as he could. And what did that generate in turn? Not only did it have a decisive effect on the Spanish economic slowdown because it was necessarily followed by a decrease in the level of internal employment and productivity due to its products losing competitiveness, but this unforeseen phenomenon was accompanied by a not less harmful consequence: The loss of competitiveness of its own products caused by the excessive flow of imported goods has as one of its main disadvantages that it had to be paid for somehow just like a trade deficit —besides the decrease in its internal productivity and employment level. 38

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This led to a very significant and unfortunate cash drain from Spain —with the new arrival of silver from America— to foreign markets.25 We should add other aggravating factors to this problem, such as wars with some neighbouring countries, significant departure of citizens towards America, and, as if that were not enough, a weak and backward banking and financial system as a consequence of the unjustified expulsion of bankers and Jewish citizens* that began at the end of the previous century as a result of the religious intolerance of that period. These combined factors caused that —despite the extraordinary outlook of only a few decades before—, the Spanish crown entered in state of insolvency in several This phenomenon of inflation in Spain in the 16th and 17th centuries was adequately analyzed by the historian and economist Earl J. Hamilton (18991989) who addressed the issue in some of his works, such as American Treasure and the Price Revolution in Spain, 1501-1650), Harvard University Press, (1934); War and Prices in Spain, 1651-1800, Harvard University Press, (1947). However, since the 16th century, this singular fact was well observed by the priest, philosopher, theologian and Spanish economist Martín de Azpilcueta (1492-1586), who, among other academic activities, lectured at one of the most advanced learning centers of the world of the time, the University of Salamanca, Spain. He was also considered one of the most remarkable intellectuals of this period. Some intellectuals consider that Martin de Azpilcueta was one of the first formulators of the quantitative theory of money since he highlighted the impact on prices due to a possible excess or lack of precious metals. (Let us recall that silver was considered at the time closely linked to “circulating money”). 25

* The term “Jew” to designate the Hebrew people is incorrect. In Acts of the New Testament, the Israelite nation created after the reign of Solomon was divided into two sections: On section was the tribe of Judah (“Jews,” who settled in and around Jerusalem) and, to the north settled the remaining eleven tribes This community that referred to those in the Jerusalem region as “Jews.” Another fact is that those who wrote the already referred to texts came from the largest group —the eleven tribes— which, over the centuries, led to the incorrect denomination of the Israelite community. A more precise way to name this important population of the global community would be “Hebrews” or “Israelites”. This author refers to them as “Jews” because it is so recorded in many History books.

Juan Manuel Ochoa Torres

occasions, and its yet poorly developed financial and economic system managed to get through by very unfavorable financial arrangements to foreign bankers. It is fair to recognize, as I said before, that this type of discrepancies between “circulating” and “goods” has more attenuating or justifying elements because the economic knowledge and means available to preserve price equity at the time was much more behind. This situation allows us to understand to a large extent that the apparent and extraordinary prosperity they had was reduced to a possibility that lasted relatively little compared to the extraordinary potential they had at the time. The serious and reasonable errors in economic matters to which I referred were accompanied by political and humanistic nature issues such as the significant fact of having ignored prominent people, e.g., Count of Aranda.26 These circumstances made a great difference in decision making. Count of Aranda proposed in 1783 with a surPedro Pablo Abarca de Bolea (10th Count de Aranda, 1718-1798), Spanish general, diplomat and politician with illustrated and liberal ideas, very cultured and with a very advanced political vision for his time was highly respected among philosophers and encyclopaedists. Voltaire once said, “With half a dozen men like Aranda, Spain would regenerate”. He held positions as ambassador, president of the Council of Castile (1766-1773) and Secretary of State under King Charles IV of Spain (1792). He was ahead of his time and, in the last two decades of the 18th century (1783) during the reign of King Charles III, he proposed unsuccessfully the creation of a Spanish commonwealth that would give autonomy to almost all Spanish America, with its freedom and unity being prevailed taking into account certain mutual aid agreements between its members. This proposal, which was rejected by the lack of political and humanist perception of the Spanish crown at the time, became one of the most important factors that contributed to the brakeup of almost all the American domains from early 19th century. Should Spain would have followed such a guideline, it could have influenced politically in a universalist and integral direction of the Hispanic countries, as in fact happened much later with the “British Commonwealth” created at the beginning of the 20th century, in which, although the freedom and independence of its members is respected, there is a series of reciprocal advantages between them. 26

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prising vision to grant autonomy to almost all American domains, creating at the same time a kind of Hispanic commonwealth. Why do I also mention this political and humanistic aspect in the case of Spain during that period? Weren’t we supposed to be dealing with economic issues? It seems the author has already lost his way. As we will see in the last part of the book, if you have not thrown it away, the economic, political and humanistic aspects are closely linked, and the global dilemma at present is no longer limited to an incomplete “Hispanic commonwealth” but to something else with a much more advanced dimension. For the time being, join me in the analysis of the following case.

1921-1923 German inflation The psychosocial effects influenced by the monetary imbalances of the case that I am about to describe should be considered as irrational and certainly reprehensible even though from a purely economic perspective these could be somewhat “understandable”. Regarding the economic context, what happened in those years that caused such a powerful impact in subsequent events? In WWI and subsequent years, Germany had generated a still tolerable inflation, which until the first half of 1921 made its currency (German mark) reach a level close to 60 marks per US dollar. However, the 1921 significant hyperinflation triggered, although it is not the strongest registered, influenced 41

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decisively in the disastrous events of the following years. Therefore, it is likely that no other negative monetary imbalance had been projected … What on earth happened then? There was already a higher level of understanding about the relevance of keeping an equity between the "money supply" and its important counterpart, "goods and services" during the first decades of the 20th century. The purpose in those years was to "link" in some way the amount of the "circulating mass of money" to existing reserves of gold or foreign currency27 to prevent a government —as a result of certain justified or not internal socioeconomic pressures— from issuing more paper money than recommended by economic logic. The German needs derived from the WWI itself, as well as a series of events to which I shall later refer, caused the issuance of much more paper money than financial caution advised, which not only caused "circulating mass" to exceed its existing reserves in precious metals

As I said, I believe that there shall be no substitute for the responsibility or lack thereof of any government in the world. When you do not proceed wisely, there will be no gold, silver, oil, diamonds or whatever comes to your mind that avoids the consequences of a wrongdoing. If a metal, anyone, were to be overexploited and exceeded the existing demand, its price would decrease (together with the currency it "represents") and its handicap would be proportional to the existing discrepancy. As an example of this —and since you have not thrown the book away yet— I quote some phrases taken from the Bible itself, from its historical context: (Chronicles 2 9:20) “Silver was considered of little value in Solomon’s day.” (Chronicles 2 9:21) “For the king´s ships went to Tarshish… every three years once came the ships of Tarshish bringing gold, and silver, ivory, and apes, and peacocks.” (Chronicles 2 9:27) “The king made silver as common in Jerusalem as stones, and cedar as plentiful as sycamore-fig trees in the foothills”. I doubt there is anyone who can provide reliable data on the exact amount in circulation in that realm in those very remote years. I could almost bet that said capital loss was a mere consequence of an excess supply with respect to a given demand, which only resulted in the aforementioned effect. 27

Money and wellness

and currencies, but also exceeded something much more important: the goods and services to be acquired by the money held by the public. You could have all the right to say... How could Germany incur in such a discrepancy? Didn’t those who were managing the German economy at that time know the risks of doing so? Of course they did, although they certainly assumed that was the least harmful option. But what effects did such a monetary imbalance have on the social wellness of the country? Every inflationary situation is harmful to any community in every way and from very different angles. This social and economic damage shall depend on the level of monetary discrepancy that takes place, and as I mentioned: the discrepancy between the level of "circulating" and " goods and services available." For this reason, the prices of goods and services —as it usually happens in this type of cases— began to raise in Germany since 1921 in an increasingly sharp way, reducing thereby the purchasing power of the citizenship. The price of bread, for example, along with the long list of groceries was rising by leaps and bounds, and, among other effects, the exchange rate during the first half of 1922 (Deutsche mark — US dollar) had already changed a lot, although it seemed to stabilize around 320 marks for every US dollar. However, in a situation like this completely understandable nature, another element of a psychological nature must necessarily be added up, as I described in previous pages, and refers to the way the public reacts to another type of eventuality... But, to make matters worse, how can factors related to human attitude also come into play? 43

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Believe me, if we don’t take into account the public reaction, our forecasts will fail. Damn! Why? Look: Consumers, upon a fast and growing money deterioration and justifiably concerned about the decrease in their purchasing power, modify their usual pattern of consumption, which, in economic terms, accelerates the "speed of expenditure" and exponentially weigh the discrepancy between the currency and goods, as I mentioned in previous pages (before the sole possibility of a catastrophic event), derived from an extremely simple reasoning… Since people are not interested —rightly— to keep a means of payment that each day is worth less, they choose better to keep "goods" than "money". Therefore, as soon as they have funds, they acquire goods and get rid of their money. As you will understand, once all negative elements of such a situation were combined, the damage started appearing to such an extent in the German community that by mid-1922, a very prominent US banker named J.P. Morgan tried unsuccessfully to intervene and mitigate such a lousy situation. However, once the hyperinflationary process continued its pernicious course, as well as the causes that gave rise to it by December 1922 the Deutsche mark had already skyrocketed to 8,000 per US dollar. As you can imagine, this situation —especially when it comes to such a sharp imbalance— is not limited to a mere loss of the purchasing power of all citizens, which in itself is already serious, but like a gigantic "tsunami", an expansive wave is produced altering the entire social and economic structure. As evidence of this, even the German farmers refused to sell their products in exchange of a currency that plummet precipitously, and requested that they get paid 44

Money and wellness

with other types of "goods". With this posture, society seemed to go backwards with respect to the "evolution of money", in which one of its intermediate stages was precisely the "barter" that operated with a very high level of "inefficiency" already discarded. Many people, however, preferred the “barter because of the situation”. Unbelievable, right? The socioeconomic situation reached such a level in 1923 that a saver who wanted to withdraw money from a banking institution —even modest sums—, had to carry suitcase with him to transport his resources, although in fact, he could not buy much with that voluminous amount of bills. It’s not hard to imagine dear reader, that such a situation discouraged altogether something essential in every economy, saving. To make matters worse, the ordinary citizen could not even acquire foreign currency in order to save since such a resource was required by the government in order to pay war reparations. Another drawback of this hyperinflation was that those citizens who managed to save throughout their lives, in prevention for old age, diseases and the unexpected, almost suddenly saw the effort of their entire lives turned to dust. The harmful expansive wave, however, continued its course. Those who wanted to carry out a productive investment by creating some kind of business that would generate employment and contribute in a small proportion to improving the economy couldn´t meet their goals. If at all, they would manage to cover a wall with that pile of money paper since they could not use them to start a modest store or factory, which only contributed to worsen the conflictive situation.28 As you see, the discrepancy in the important equation between "circulating" and "assets" can occur not only when there is an abnormal increase in... 28

Juan Manuel Ochoa Torres

As if that were not enough, faced with such a fragile situation and with the consequent unemployment and collapse in purchasing power, the potential "market" was little or nothing attractive for an eventual national or foreign investor who thought to undertake any type of activity. The combination and interrelation of all the negative factors was such that by November 1923,29 one pound of bread cost 3,000 million and one pound of meat 36,000 million deutsche marks, respectively.30 You might ask, how could they have allowed this situation to be reached, causing such a gigantic social and economic damage? In previous pages I referred to the political and humanistic aspect —for better or for worse, depending on the right or wrong approaches each one has— that shall always be projected towards the economic issue. In this particular case, if some of the German politicians or from abroad who had an impact on the matter had an exclusive and limited vision, the problem could have been perfectly well founded... So what was behind this unfortunate German economic discrepancy in the early twenties? First, I will describe some of the causes behind the scenes that decisively influenced this discrepancy, and then some of its effects. At the end of this chapter —before you decide to destroy the book— we’ll see the reason why I deliberately chose this monetary imbalance. ...the first factor (money) but also by a decrease of the second one (goods). With the economic activity decrease, this second but crucial element of the equation weakens or falls, causing an impact in its balance. 29 Data taken from a commemorative Medal of the German inflation period. https://www.pinterest.com/pin/270919733807671590 The great inflation, Germany 1919-23, William Guttmann; Patricia Meehan, Gordon and Cremonesi Ltd, 1976. 30

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Let us see therefore the singular approach that unfortunately prevailed in some characters of European politics immediately after the end of World War I. It should be noted that I do not pretend to attribute any responsibility to a certain country. In all the peoples of the world there have always been very valuable people, along with others who do not have a complete social perspective,31 and their actions are only a simple projection or consequence of their particular way of thinking. What were some politicians of that period thinking? Due to a series of revenges and quarrels derived from previous war conflicts,32 and as settled in the Treaty of Versailles in which not only the defeated nations were held responsible for such a war but they were forced to war reparations way above —in terms and conditions demanded— their real capacity unless they complied to the detriment of their healthy development, just as it happened. This meant that the "hard" currency (supported by gold and foreign currency) they had in Germany had to leave the country in the first payments on account of the repairs demanded, while they had to print paper currency Note: the author of this book worked in the field of international trade for years. I had the opportunity to meet a lot of people from a business or commercial rather than a “tourist” approach, and believe me, that’s where you can get to know everyone better. I assure you that there are many people with a great human quality. And others, nor so much. 31

These quarrels derived from past wars, such as the Napoleonic war, the Franco-Prussian War and others, which seriously contaminated the thinking of some leaders at the end of that so-called “Great War” (1914-1918). This thinking influenced in the decision of “punishing” and almost humiliating in a very special way the “defeated” nations, as it was expressed in terms of the Treaty of Versailles signed on June 28th, 1919. Some dates were deliberately chosen, such as the day of the treaty signing, which was the 5th anniversary of Archduke’s Franz Ferdinand assassination, one of the events that led to such a regrettable event: World War I. 32

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for their domestic needs in an amount far higher than its counterpart in goods and services. The severity of the 1919 Treaty of Versailles33 provisions reflected the particular way of thinking of some politicians who prepared the manuscript, causing the unfortunate socio-economic result within Germany that only strengthen the antagonistic feelings that would result in a much worse conflict: World War II.34 George B. Clemenceau (French politician, 1841-1929) was one of the politicians whose negative influence lead to the mistakes in the Treaty of Versailles that took part as one of the most prominent negotiators of the Paris Peace Conference in 1919. During the preparation of the Treaty of Versailles, he eagerly insisted to punish Germany in an admonitory way through the payment of high war reparations, the incorporation of the Rhineland to the French economy, the complete extinction of the German colonial empire, the expropriation of properties from German citizens in these colonies, as well as other plans to decisively weaken the defeated army. Its extreme position was partially mitigated by the president of the United States, Woodrow Wilson and the British Prime Minister, Lloyd George, who opposed to such a position preventing thus Clemenceau’s intentions from being fulfilled, although they could not prevent the approval to several provisions designed to “definitely” weaken Germany. Clemenceau believed until the end of his days that the defeated Germany had been treated “too kindly”. I consider that the majority of the French people did not support their extremely inflexible position since in 1920 Clemenceau lost the elections for the Republic Presidency. Most historians, analysts and advisers of those years estimated that the terms of the Treaty of Versailles were too harsh; the damage was done. For example, John Maynard Keynes declared that this was a kind of “Carthaginian Peace”, a term that referred to the brutal and humiliating peace inflicted on an enemy that has been defeated in war. It stated that the peace imposed by the Romans on Carthage after its defeat in the Punic War II (218-201 BC) in which Carthage lost all its colonies, was forced to demilitarize and pay a constant tribute to Rome. Perhaps that is why the English Lord George Curzon declared with great skill: “This is not a peace treaty, but a 20-year truce”. “The Economic Consequences of the Peace, John Maynard Keynes, London: Macmillan & Co., Ltd. 34 It is worth mentioning that throughout the 1920s, the economic situation was somewhat attenuated despite the severity of the payments required due partially to the timely intervention of the German economist (Hjalmar Schacht 1877-1970) who managed to lessen the deteriorated socioeconomic outlook. The United States Great Depression in 1929, however, had a serious... 33

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The following is an example of only one of the negative stages fostered by such limited political and humanist thinking: If you have wondered where anti-Semitism originated before World War II, it could be said that it was a mixture of three factors. The first one was the misinformation of some journalists and writers who dealt with lightness and ignorance the pathetic situation already described of the referred hyperinflation and attributed the responsibility of such regrettable state of things to the "speculators" among which they chose as their favorite villains, the "Jews" and "bankers". The second factor was the severe difficulties of the period and, third, the emergence of populist, radical, racist and of course misinformed leaders35 â&#x20AC;&#x201D;which usually happens in these casesâ&#x20AC;&#x201D; as Adolfo Hitler. Anyone could think... How on earth could the German negotiators had agreed to sign the Treaty of Versailles in 1919 in such unfavorable terms? They had no room for maneuver, they had already been warned that their refusal meant the "resumption of hostilities" and, with the recent incorporation of the United States in the warfare (1917), the situation had turned completely towards the allies, which was unfortunately exploited to toughen the terms of such treaty. Why do we relive this type of events? The purpose is only to weigh the impact of having or lacking the right approach. Thus, I am presenting as evidence a different action and effects in a similar situation: ...impact around the whole world, impacting more vulnerable economies, which also caused more bankruptcies and unemployment in Germany. This US depression could have been attenuated and above all prevented should more advanced economic and monetary knowledge had been available. This finally caused an impact to the already fragile German situation, which gave access to power to a populist and ill-informed leader like Adolf Hitler. For a number of reasons that we will see in the following chapters, the populist is usually unable to offer real solutions to conflictive situations, and their solutions are worse than the problems themselves. 35

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Believe it or not, at the end of the World War II there were several politicians with an extremely limited vision36 â&#x20AC;&#x201D;similar to those who influenced in 1919 and 1920â&#x20AC;&#x201D; who wanted to reapply the same failed idea of the Treaty of Versailles (imagine), or worse still, which fortunately did not happen. The position of outstanding characters such as George Marshall prevailed for the benefit of all.37 Marshall fully realized that when human beings make the serious mistake of reacting to an irrational position by putting ahead a similar or even worse position, we completely break down the social fabric that only worsen things. Therefore, George Marshall, rather than preferring the proposed revengeful position, chose a series of principles and values that should always prevail in the global community, contributing and influencing decisively a plan for European reconstruction through the support of the victors and the vanquished. As you may suppose, this performance generated diametrically opposed results, since with the support of other outstanding personalities,38 this

Such as the American Henry Morgenthau Jr. (1891-1967).

George Marshall (1880-1959), general and American politician (Nobel Peace Prize), was the main promoter of a plan called "European Recovery Program" (ERP), better known as the Marshall Plan, which had a great impact (along with other characters of similar thinking) in the European recovery. This different vision contributed to the European unification by promoting the elimination of tariff barriers, the creation of institutions to improve its economy and fostering a shared development. He was able to carry out this project despite the opposition of politicians from different countries. 38 Robert Schuman (1886-1963), due to his origin from Luxembourg, France and Germany, had a decisive influence in the European Union composition. On May 9th, 1950, he delivered a famous speech that is considered the first formal declaration of such integration. For this reason, at the Milan Summit in 1985, the Heads of State and Government present decided to establish May 9th as the Day of Europe, in commemoration of such declaration. 37

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different position paid off in the right path and over the years resulted in the European Union. Therefore, in addition to analyzing the causes and effects of the hyperinflation above, I used precisely this example that occurred in Germany during the 1920s to weigh first the negative effects and incorrect vision in comparison with the results of a very different position at the end of World War II. In the final part of this book —if you haven’t destroyed it yet— I’ll tell you why I made this decision. But the bad news for now is that the book is not over yet and, worst of all, I invite you to continue reading so that you cannot only learn about other inflations less justified, but the causes that produced them.

Juan Manuel Ochoa Torres

Money and wellness

Chapter 4 Almost unforgivable inflations

20th Century inflations I shall describe below some somewhat representative inflations that occurred during the last century, which would be convenient to analyze in terms of their origins and consequences. Have you ever wondered what has been the sharpest inflation in history? It all seems to indicate that it occurred in Hungary in 1945 and 1946. As a result of a kind of "perfect storm" in terms of its origins, this monetarist phenomenon not only broke all the imaginable parameters and turned its currency into dust, but it also had a very serious impact on the Hungarian society that required it as means of change. What happened and how far did things go? At the end of World War II (1939-1945), the collapse of the Hungarian population purchasing power was so sharp that shortly after the end of such a disastrous war, and once completed the Soviet occupation of its territory, 10 million (its currency was called "pengó") bills were already circulating. But that was only the beginning. The country’s productive capacity was so weak that in the following months the prices of products began to rise at an astonishing speed, and doubled in such reduced periods that they two-folded every 15 hours. Imagine the purchasing power collapse of the citizenship.39 Peter Z. Grossman y János Horváth. “The Dynamics of the Hungarian Hyperinflation, 1945-1946: A New Perspective”, vol. 29 Iss. 2 (2000) p. 405-427, Journal of European Economic History. 39

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The inflation daily rate was slightly higher than 200 percent,40 until 100-billion pengó notes were printed at some point,41 which gives us an idea of the purchasing power loss. How can anyone solve this kind of situation especially with things reaching such an extreme? The solution in this case could not be other than adjusting the monetary base to the real production level of goods and services. It should be noted, however, that such a measure —especially in the short term— would bring the country into shock at a socioeconomic level. In a country with liberties, such an adjustment would generate many demonstrations, strikes, work stoppages and serious problems that would cause a vicious circle in terms of the economic health recovery of the society in question. However, in this totalitarian society they were all of a sudden under the Soviet guardianship, they had no great options so, over the years, the "medicine" applied provided certain stability with obviously the terrible limitations such an economic system entails.

Inflation continued to grow despite the fact that the Hungarian government created a new currency as an emergency measure: The "adópengó". However, since the causes that gave rise to the economic imbalance persisted, the deterioration in purchasing power continued its course. 40

I considered the possibility of selling this book in a billion pengós, although I changed my mind mainly for four reasons: 1. The coin is no longer in use as it was replaced first by the adópengó, then by the guilder, and lately by the euro; 2. I would not sell a single copy because apart from the fact that no one has such currency, the price would scare away all possible buyers; 3. This price would not fit in the labels; and 4. The department stores would not accept my books since they would assume that I am out of my mind, something very far (I hope) from reality. But guess what, I would love to keep a bill if I found one as a reminder of the terrible experience the Hungarians went through. 41

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But... How did such a situation arise? What made such a state of affairs grow? As I said, several unfavorable elements were combined. The following are the most relevant. First of all, the significant clashes between the German and Soviet forces within their territory in the final phase of the war caused a considerable destruction of their economic infrastructure, which, as expected, reduced their productive capacity in almost all orders.42 As for the political aspect... How the hell could any leader with the most basic common sense thought to collaborate in some way with a racist, fanatical, aggressive and misinformed dictator as Adolf Hitler in such a war adventure —apart from other considerations— when his own regent Nicolás Horthy43 was convinced that the odds of winning a war against the allies were reduced, especially if the United States intervened again, just as it happened. You are not going to believe it, but among other elements that contributed to that fatal decision was another event similar to the Treaty of Versailles that has been already mentioned in previous pages, which had a decisive impact.44 As I said, an inflationary situation can occur mainly by two means: a) Unduly increase the monetary base, or, b) Reduce the productive capacity for any reason. The simultaneous combination of both alternatives would be a worse situation. 42

Nicolás Horthy (Miklós Horthy de Nagybánya, 1868-1957) was regent of Hungary from 1920 to 1944. He had the faculty to place or remove the prime minister. He had political leadership of the country during that period. 43

The Treaty of Versailles version for Hungary was the Treaty of Trianon, also signed in France on June 4th, 1920, by which the Hungarians not only saw their territory decrease from 325,000 to 93,036 squared kilometers (many of the separate regions of Hungary were already a critical topic, but nowadays they have all merged successfully into a new community that has a much more advanced inclusive spirit: the European Union. However, the terms of said Treaty of Trianon only created antagonisms, revenges and serious hostilities). The Hungarians lost 63 per cent of their population (without prior consul... 44

Juan Manuel Ochoa Torres

This influenced in Hungary’s political decision to cooperate with Hitler. They realized their fatal decision too late, which bounced off against them at the end of World War II. Another element that contributed to the discrepancy between "money" and "goods" —a key element of all inflation— was the psychological aspect, which was projected in two ways: On the one hand, the population perception before such a doubtful political scenario, and once the Soviet invasion and control was completed, increased the uncertainty which accelerated the citizen pattern of spending that, in practice and economic terms, increased the "speed of consumption". This fact further altered the already deteriorated balance between "money" and "goods", which certainly had an effect on a higher price increase and less availability of goods, contributing to the increase of citizen distrust and exponentiation of its effect. The second but not less important psychological element that also caused an impact was that, before the citizen's belief (grounded or not) of the almost imminent forced establishment of a "centrally planned" Soviet-style economy, the already limited possibility of private investment in the production and services line was further reduced, which contributed to a decrease of the meager supply of "goods". ...tation of the segregated population), all of their gold, silver, mercury, copper and salt mines, half of the coal mines and almost all of the iron mines, 84% of its timber resources, and 43% of its farmable land. The perception in Hungary at that time was that the Treaty of Trianon not only had stripped off, but also slowed their economic recovery, which generated a great feeling of revenge of fatal consequences. The country’s policy in the following years was oriented towards the revocation of the aforementioned treaty, which Adolph Hitler, as any good populist as he was, had offered. “Revolutionary Hungary 1918-1921”, Szilassy, Sándor (1971). Danubian Press.

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The combined action of all these elements caused this economic imbalance to reach the dimensions described above. Let's look in another direction, in another continents, and analyze other inflations that might seem small compared to the one I just referred to. However, I think it is important to analyze not only the consequences on their population, but also their true origins. In Latin America of the 1970s, there were monetary imbalances that could not go unnoticed... What happened? According to the influence of a determined political and economic tendency that was fashionable in several politicians of Latin American countries and even in certain international organisms of the time, and —according to the perception— derived from a certain dose of "progressive" ideology, it was considered that perhaps State interventionism should be encouraged to further stimulate the region's growth, socioeconomic development and income redistribution. I am certain that some were really convinced that "public" investment could become a kind of engine or trigger element of a much greater growth, which would transform the scenario of the region as a whole. Despite these so worthy intentions, however, the results were not only disappointing but also even counterproductive,45 although in each of the Latin American countries where this route was chosen different levels of damage were reflected.

45 This was manifested in the monetary issue —which is the topic that concerns us today— but it had a very negative impact in the social wellness of each community that carried out this experiment.

Juan Manuel Ochoa Torres

Let us analyze, for example, what happened in Mexico from 1970 to 1982.46 It should be mentioned that this country had had a stable growth since the establishment of a single political party.47 Furthermore, in the twelve years prior to the described statistical experiment, Mexico had had an annual sustained economic growth of around seven per cent, with an inflation lower than that of its main trading partners. This period was known by the international financial media as the "Mexican miracle". However, a new political group created within the dominant party influenced by the described "stabilizing" feeling observed that despite having had for many years, especially from 1958 to 1970, one of the highest economic growth in the world, there were still important social backwardness48. They made, in my opinion, a somewhat erroneous and light diagnosis: They considered that the "economic model" had to be modified given that —as they said— the previous one was already obsolete. They proceeded, with the conviction of those who feel possessed by a special enlightenment, Period comprising two public administrations, Luis Echeverría Álvarez and José López Portillo. 46

Although that party had different denominations since its inception, its last and current name is Institutional Revolutionary Party (PRI). It should be noted that many people in Mexico and abroad mistakenly consider that the fact of having had only one party for decades meant in some way the continuation of a single political or economic trend, which is inaccurate. There were presidencies and economic policies of almost all aspects throughout the term of this party in power. 47

These gentlemen did not put on the analysis table that one of the causes of social backwardness was that the Mexican population of the time was growing too fast since it doubled in periods of 28 or 29 years (data from the National Institute of Statistics, Geography and Information Technology, INEGI-Mexico). This fact made it impossible to two-fold the infrastructure required at that same rhythm, which was physically manifested with many deficiencies in housing, employment, education, water supply and many other things. 48

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and soon amended the previous monetary policy known as "stabilizing development",49 replacing it with another model they named "shared development". This new monetary and economic project —without prior citizen consultation— included as one of its main characteristics the growth and channeling of important financial resources to state enterprises, which they believed would guarantee a better and safer return in the form of goods, services, productivity and, in short, wellness for the entire community. Despite these praiseworthy intentions, the results went in a far from expected direction. Perhaps those creating this project were the most surprised with the disappointing response of said productive scheme; and its negative effect was manifested at the end of the first presidential period when the economy was already in trouble and the previously strong economic situation had deteriorated significantly. But think about this... how do you imagine that the group in power reacted? Did they immediately backtrack on that risky project? Not only did they continue in that same direction, they even emphasized even more in state interventionism. Furthermore, they ensured that whoever continued in the next political administration (1976-1982), should have that same line of thought. Oh! Right, they attributed the serious economic setbacks to "external factors" but with an additional element: they trusted something they considered would be the decisive factor that would ensure their success: Mexico’s large reserves of oil, assuming thus, that the abundance administration was just around the corner . Applied masterfully by whom I believe has been the best Mexico’s Secretary of the Treasury of all times, Antonio Ortiz Mena (1907-2007). 49

Juan Manuel Ochoa Torres

A few years later, the economy once again showed another unexpected scenario. Despite a gigantic entry of oil resources in that second public administration,50 reality manifested itself in another way. Nevertheless, they miscalculated things. They forgot, e.g., that oil prices could stabilize again, which in fact happened. This unexpected aspect, along with other mistakes, caused a financial catastrophe: The foreign currency reserves were exhausted. The external debt payment was suspended for a while. In that 12-year period, the accumulated inflation was 1233.51 percent,51 the fiscal deficit and the balance of payments became untenable. There was already shortage of some products, Mexican credit cards were no longer accepted abroad. Mistrust grew as manifested in capital flight, foreign and domestic debt grew at an inconceivable level of 1204 per cent,52 and state companies,53 as you can suppose, continued their insatiable thirst for financial resources, which had to be withdrawn from somewhere. In 1976-1982 45.4 billion dollars entered Mexico from oil. Surely many must have considered: How could such a figure not be reached? Source: Mexican Energy Sector. 50

Source: INEGI (National Institute of Statistics, Geography and Information Technology; Mexico) National consumer price index. 51

Sixth President’s Government Report Gustavo Díaz Ordaz. September 1st, 1970/. House of Representatives; Centro de Estudios de las Finanzas Públicas; Estadísticas Históricas De La Deuda Pública En México, 1980-2002, p. 16. Super bicentennial table Mexico 1810-2016 52

It is important to mention that some advocates of state interventionism are totally convinced that state companies (such as PEMEX in Mexico) are practically bankrupt because “the State took away their resources”. The truth is actually that the government did not even withdraw from that state entity the value of crude oil and gas extracted from the subsoil, which do not belong to the state company but to the whole country. PEMEX should only have always handled the direct and indirect cost of extraction, exploration, and refining in its case, the rest should have fully gone to public finances. I hope there comes the day soon when a specialized technical audit reveals the amount of resources that the state company wasted. 53

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How did the creators of such an economic project explain that unfortunate situation? The "external factors" and the "bad Mexicans" were blamed again, just as if a bad engineer or architect would react if his recently built house had just collapsed blamed the force of the wind or even gravity, rather than stating that the laws of physics were simply not respected. What failed in that disgraceful experiment from 1970 to 1982? Werenâ&#x20AC;&#x2122;t the intentions of that political group not only good but excellent? History is full of examples that show that it is not enough to have the most praiseworthy intentions; it is essential to stick to the laws and invisible conditions that move the world around us astonishingly. The specific way in which the economic project of the two political administrations referred to was completely broken down occurred as follows: For reasons that I shall refer to hereinafter, state-owned companies in general have no rate of return equivalent to the amount invested, which is a seemingly harmless aspect. Rather it means that the production of goods and services does not only grow proportionally to the amount of "circulating" channeled towards them.54 In practical terms, it alters the equation between" circulating "and" goods". Furthermore, they begin to borrow at a striking rate, which not only increases internal and external debt, but the entire community must pay, both the principal amount and interest. For example, in March 2017 PEMEX owed $181.1 billion dollars. This figure means that if such a debt were distributed among all Mexican families, $96,325 pesos would belong to each family. Strictly speaking this figure would be supported by PEMEX "assets", however, a large part of them are considered as scrap, and others have already exceeded their useful life; but the debt of such company must be paid any way. Source: PEMEX; Consolidated Balance Sheet, March 31st, 2017; INEGI number of families. 2016. 54

Juan Manuel Ochoa Torres

The next mandatory step of such a productive vacuum would be manifested first in the much-feared inflation, which will have to be devaluated year after year by the "inflationary differential" should this be greater than its trading partners.55 Damn! Why does this procedure have to be necessary? The opposite would cause something similar to what happened in the 16th century Spain, as easy as that. In other words, things are not as simple as the brave defenders say about the "state-owned company" who just need to wrap themselves in the national flag when delivering their moving speeches. Let’s take a look to what actually happened: The fact of working this type of entities with "higher costs" with respect to other competitive national or international companies —that will also force them to operate as monopolies— is equivalent in practical terms to the description below. Their lower efficiency shall be transferred invisibly to the public, who will receive it, almost without realizing it, as a "productive vacuum", which imperceptibly contributes to alter the equity factors of the cited equation between "circulating" and "produced goods", pushing undoubtedly prices up.

That is, if a country has 12 per cent inflation and its main trading partner’s is 4 per cent, the currency must necessarily be (duly) devaluated (let me remind you that at that time there was no floating scheme) in 8 per cent. Now, if you do not want to face the political cost —careful— something similar to the competitiveness loss in the 16th century Spain will occur. Domestic exports will be expensive in the international market —which shall decrease— and imports shall at the same time cut their prices, which shall increase them, a fact that will open a "hole" in the trade balance that implies a significant outflow of financial resources, unemployment and a decrease in the domestic economic activity. 55

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This apparently irrelevant aspect started the 1970-1982 period crisis, as I already mentioned, starting in the form of inflation that led to a loss of competitiveness of domestic products, followed by the trade balance deficit, chronic need for financial resources and increasing indebtedness of public entities, subsequent unavoidable devaluations, mistrust, capital outflows and many other issues.56,57 Now, as I was saying, the political, humanistic and economic aspects will usually be closely linked, which would force us to an essential reflection: What ideological motivations were behind those policies that led â&#x20AC;&#x201D;among other thingsâ&#x20AC;&#x201D; to the inflation that occurred in Latin America? Were these also one of the factors that influenced this very serious monetary imbalance that occurred in Hungary in 1945-1946?

Ideological motivations One of the elements influencing to a greater or lesser extent the politicians who promoted state interventionism58 derives from certain slight though unnecessarily In the specific case of Mexico, the following presidents of that same party (Miguel de la Madrid Hurtado and Carlos Salinas de Gortari), despite being people from their own team, realized from their privileged positions the unparalleled economic setback and began to return to the previous scheme, a change that took another 12 years. This caused a) a significant decrease in economic growth after 1982 due, among other reasons, to the payment of interest on the monumental debt left by the previous ones, and b) an important split in the ruling party (PRI). In 1988, those who left found another party to continue with that same 1970-1982 project, despite the disastrous results obtained. 56

In the 1970-1982 period of the failed state interventionist experiment, Mexico devaluated its currency by 1094 per cent. Source: Magical Mexico; Thermometer of the Mexican economy, historical indicators 1935-2017. 57

Almost all advocates of the state productive scheme felt some antagonism to the free enterprise system and grant very little legitimacy, which drives them in some way towards the bureaucratized company. 58

Juan Manuel Ochoa Torres

voluminous analyses prepared by scholars on social issues, such as Karl Marx, which makes us carry out a brief and yet better analysis of his theories. This character posed his very singular point of view with full certainty in his statements and such a deceptive erudition in his words that many of us —yes, including me before reaching the age of 20 and of course without having made yet a deep analysis on the matter— were impressed by his revelations. In my case, I changed my mind after analyzing the matter and exchanging ideas and opinions with people who had experienced the way of life, productivity, availability of goods, bureaucracy and other aspects of a "socialist" country. Have you ever wondered why this dark difference between the voluminous theory and good intentions of this 19th century writer with such a different reality apply to this thesis? Why if one of Karl Marx postulates was precisely "to free the people from the heavy burden of bureaucracy", but actually his followers only got exactly the opposite, i.e., the establishment of the bureaucracy of bureaucracies where everyone became employees of a clumsy and inefficient State leaded by a corrupt minority that, to top it all, has to be dictatorial in order to safeguard the permanence of such a socioeconomic useless theory. The reason is incredibly simple. Things were far from being duly structured at economic, sociological, historical or political level starting from the base itself of that fuzzy and so elaborate theory. Given its interrelation with the monetary balance, I’d like to share with you my point of view so you can judge why I consider it so. 64

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The good news is that I won’t need the three volumes —1 441 heavy pages— of The Capital59. I’ll just try to explain in a few pages the relevant issues, hoping also that by the time you finish reading this book and decide to get rid of it, it won’t take took much space in your bin. One of Marx’s statements, which is not far from the economic and social reality, is the “Work Value”,60 although I must say in this regard that the author could not avoid using a complex pseudoscientific terminology often dazzling many people, including me.

Karl Marx (1818-1883). I refer to the three volumes of The Capital. The first volume was written in 1867, the second (1885) and third (1894) volumes were written by Frederick Engels after Karl Marx’s death based on Marx’s manuscripts. Over 20 books written by Marx are known, some of them with Frederick Engels as co-author. The first book was fiction. The best known are: Economic and philosophical manuscripts (written in 1844 and published posthumously until 1932), The Communist Manifesto (together with Federico Engels in 1848), The Capital, Volume I (1867), The Capital Volumes II and III (written by Federico Engels in 1885 and 1894). 59

Adam Smith (1723-1790) is one of the greatest classical economists. Some Marxists pointed out that he argued that the value of work is an unmovable element. This assessment is, however, incorrect since he defined it clearly as a variable factor. A proof of this is that in his masterpiece (The Wealth of Nations, 1776), Smith states that the value of work is a factor of mobile production, among others, when employers, seeking to optimize their costs, will try to develop any product in the country or region with a more competitive labor cost. This optimizing dynamic —not considered by Adam Smith— also contributes in an invisible way to disseminating or universalizing economic and social development towards less advanced areas and reducing its subsequent sale price in more developed ones. Furthermore, David Ricardo (1772-1823) added other components, and Karl Marx later defines that the value of work is subject to the "socially necessary" time of work to produce each commodity, a statement that in practice might not say much. We now know that the value of work will be subject to a combination of elements such as labor quality, training or education, specific demand of each commodity, local skill of personnel employed, productivity, technological advances, emergence of alternative products, demographic factors (a country with a higher population growth sometimes increases labor supply —usually not trained—, which pushes down the value of labor force in an abnormal way) as well as many other temporary aspects. 60

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For example, he describes that the price of a product should be subject to its "use" and "change" value. I refer to such reasoning because despite its validity, he omitted or perhaps didnâ&#x20AC;&#x2122;t know that such elements are just a part of the natural components of the demand. The worst thing is, however, that in the practice (believe me) establishing the "use" and "change" values for each item purchased without considering the other elements intervening would require a huge amount of specialized personnel to reach an uncertain and useless result. It would even be ridiculous to pretend establishing all prices that way, whether referred to the cost of any of the production factors or the sale of all merchandise. Furthermore, it would be unforgivable not to analyze many of his statements. In large part of his voluminous work The Capital â&#x20AC;&#x201D;absolutely convinced of his thesesâ&#x20AC;&#x201D;, Marx repeatedly implies that a worker always produces "surplus value", a vital element that the entrepreneur, in a somewhat advantageous way according to his particular perspective, took advantage in his benefit. This statement is inaccurate. Human work does not always produce "surplus value." For example, what would happen if an entrepreneur, whether large, small, or even a worker owns a workshop, produces items or provides services and has an inadequate management of resources, such as time availability for him/her or his/her subordinates, monitoring production costs, quality control, raw material use, packaging, storage, inventory control, design, competitive prices, good service and many other things? Far from producing the well-known "surplus value", this situation will generate something that we could call "handicap", which the employer or worker shall be responsible of, if he were to own his small company or workshop. 66

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The key question would be: Who will pay for it? The sum of all those "disabilities" will be borne precisely by the employer, or the owner of the workshop or business in question. In the case of a "productive State enterprise", i.e., a bureaucratized company,61 it generates "handicaps" â&#x20AC;&#x201D;as it usually happens in themâ&#x20AC;&#x201D; and accumulated losses will go directly to the public treasury. Damn! And why does such a thing happen? The reason is extremely simple, and results from a serious omission in the aforementioned theories. Letâ&#x20AC;&#x2122;s see: Something that went unnoticed by Marx and his loyal followers is that Nature endowed all process considered as vital,62 with a certain "primary" stimulus. This generates, without realizing it, another "secondary" consequence, which although almost always goes unnoticed, produces something that will be truly important from a social and economic context. Thus, if the owner of a large or small business, or as I said, even the worker as owner of a workshop, wants to obtain a utility (primary stimulus), the owner will feel impelled to make a careful use of "his costs" without there having no decree in this regard, i.e., the resources available starting with time, raw material, quality, good prices, good service and other elements. Should they operate otherwise, far from obtaining the desired utility, an Not all state companies are harmful. There are some educational and service issues that should operate well if they are properly supervised. In the case of productive companies the situation is different, mainly with the exploitation of certain renewable or non-renewable natural resources where a successful mixed partnership between "public" and "private" companies would be suitable to take advantage of and minimize the disadvantages of both schemes, provided that they are properly controlled in terms of their operation and results. 61

Among which we could state human procreation, paternity, food, health and life care, personal development and effort, resource optimization (as the case referred to above) since all assets and countless other things are "limited". 62

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automatic "loss" will ensue that would go directly against the pocket. This would also act as an invisible "punishment" towards anyone who does not use properly the assets under his/her responsibility. This simple mechanism acts in such an unnoticeable way that it completely eluded both Marx and his brave and sometimes fanatical followers.63 Imagine for a moment what would happen if all the citizens of our country or the world were not motivated for that invisible and surprising conditioning factor created... What do you think would happen almost immediately? Correct! We would unconsciously but significantly decrease our level of care regarding the correct use of resources. This would mean that, among other things, all entities or individuals —as in the vast majority or the "productive State enterprises"— would no longer employ with the same care truly qualified staff for each position, monitor adequately that the purchase of inputs and the granting of contracts is made at inflated prices,64 neglect the control of in process or finished products, waste part of raw material,65,66 operate with higher costs than the competition and many other essential issues. While there are elements such as the one described, which were not even remotely perceived by any follower of the "socialist" (or state interventionist) theses, it must be acknowledged that these have been “successful” regarding the expansion strategy of their theories, focusing their theses towards certain key organizations: a) teacher training institutes, b) state universities and c) certain (few) governmental or non-governmental organizations. Thus, especially in the teacher training institutes and certain universities, since most students are not very knowledgeable about the subject, they can lead them to accept this doctrine, and the influence that they in turn project on the society will be more significant. 63

It is therefore no coincidence that corruption flourishes precisely in this type of productive scheme. 64

As with PEMEX in Mexico, where the “productive state enterprise” —among other things— uselessly burned almost all of the associated gas from one of the largest oil deposits in the world (Cantarell), some officials argued (who prefer... 65

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One of the first manifestations of operating in this way would be the following: the productivity of goods and services would be significantly reduced, even from its early stages, which would contribute to the rise in prices, followed by a long sequel of negative effects, and, if the whole economy were under this contrived scheme, it would put in serious risk even the food itself. The worst thing is that, in case of prolonging the use of this not so new "secret recipe", there would be problems of basic supply for large sectors of the population. This is how serious the problem would be —as it has already happened in the countries where it was applied— and all this is due to something apparently simple: the seemingly inoffensive fact of ignoring the actual operation of the free enterprise system created by nature since ever for our benefit. One of Marx's far-reaching discoveries was that property was a kind of dispossession for the community. Unfortunately reality was not exactly on his side... Why do I say it? Results obtained from economic entities and property conservation have always been conditioned in an invisible, natural and simple way to its correct administration. ...to maintain anonymous), that “they did not have resources”, when a company operating different, even assuming they did not have working capital, would simply have issued bonds or obligations equivalent to a percentage of what they would obtain with said gas, and take advantage of the rest. I insist: no technical analysis from a specialized organization reliably indicating the dreadful amount of billions of dollars that the inefficiency of this state-owned company has cost the country has been carried out yet, or at least not made public, while there were serious deficiencies in countless areas. Would it be better not to know? It is very important to point out that within many state-owned companies, such as PEMEX, highly distinguished people often collaborate, but in spite of their capacity, they can not usually reach their true potential due to the bureaucracy that this type of entities divest. 66

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For example, let's say that John Doe —greetings to all those who bear such a name, although I hope they do not charge me with royalties for quoting them— receives as a legacy a ranch, factory or even a small workshop. If John does not carefully monitor the resources under his responsibility, he will lose his property. Gee! Why? The conservation of the property and all assets is conditioned to its proper management, which is only a consequence of John having the ability to optimize as best as possible all the resources he now has in hands. Let us imagine for a moment that we ignore Marx —or his current disciples— and we suddenly get rid of this invisible mechanism. How would we monitor and even encourage the efficient use of resources to be used by each and every citizen of the economically active population? If a huge and incredibly expensive army of inspectors walked through the streets of your country performing tons of all kind of audits, even using very sophisticated accounting and administrative control procedures such as "time and motion analysis" among others... What would we achieve? Actually nothing, apart from further decreasing the limited social productivity and receiving mainly a real burst of excuses and pretexts. There would be nothing more than vain explanations with a long, ingenious and witty list of reasons why they are not only unproductive but also trying to give grounds to receive an increasing support or subsidy from the government in turn, or whoever was in charge of the economic activity. Damn! And how could we avoid this? The answer is by keeping in a drawer Marx’s discoveries and observing 70

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that the system naturally and simply stimulates â&#x20AC;&#x201D;or punishes in its caseâ&#x20AC;&#x201D; the productivity and efficiency level of everything each one carries out. Would it be necessary to ask another hard-working discoverer like Karl Marx to help us find such a system? I think the best thing would be to not bother them because we already have one that has always been with us: the free enterprise system. What we must do is circumscribe and channel all its angles through appropriate health, civil, criminal, labor, tax, corporate, environmental and consumer care laws so that the productive citizen action is focused towards the real common benefit. Observe carefully what is achieved through such a system (if someone prefers, we could call it "new" to have a sense of discovering something). Do you know what John would do if he disregarded the proper management of his ranch, factory or workshop he has just inherited? He would lose his property and would have to sell what remains of the property to someone who would also be subject to the same rules. But the opposite could also happen. If our hypothetical friend John is on the ball, makes an effort, does enough research, surrounds himself with, trains and pays well the right staff, experts advise him, and is market oriented, among other things... What would happen? Not only shall he keep his new property or business, but he will make it grow generating thus more employment, contributing in a small proportion to increase the production of goods and services, which along with others acting like him, will increase productivity and everyone's standard of living. With respect to those who are not careful, will the free enterprise system not be acting too drastic against them, 71

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since they must lose everything for the simple fact of not being a good administrator? I feel that nature does not want to take risks because what is really at stake is nothing less than the wellness of the entire community and prefers that the cost of all inefficiency be paid only by whoever falls into it. Isn’t the author exaggerating? Taking advantage of your patience and making use of our imagination, I invite you to let it fly a little. Let's suppose that John did not properly manage his inheritance and, since we want to be kind to him, we don’t want him to lose his property... Would there be any way out there to "protect" him so that this sly automatic "punishment" that always comes into action every time someone does not manage well his/her property cannot impact him? Should there be an additional help for that "loss", "disability" and the subsequent debts that John is generating as expected, how could we endorse the cost of all this to someone else? Well, there is a way, my dear reader, although I ask you never to tell anyone that a clueless book author suggested it. If we can nationalize every mismanaged ranch, factory or workshop, the cost of any inappropriate management will no longer impact our now protected friend John, although the following scenario will ensue… In a nationalized company the "primary" stimulus of selfinterest disappears, since it is usually managed by careless people who would not “pay for the mistakes made". This will not only significantly reduce the subsequent "secondary" effect, which is the so needed contribution of goods and services. But John would have something much better: He will no longer have to worry so much 72

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about all the debt or deficit he generated, since this shall be the public treasury responsibility.67 Furthermore, if John manages his public relations well — he will have to be very clever—, offers jobs recommended by certain officials or key political groups, grants the contracts to those “assigned” by senior executives (even if they are high or low "inflated"), and lavishly distributes perks, he could continue with the possession and administration of the nationalized assets almost as if he were the owner. It would someway be better than before, because now, as I was saying, he would no longer have the annoying usual worries of every owner, such as the accumulation of debts derived from the losses generated. May I ask as a special favor to those who follow this free advice from the author? Don’t mention that the real way to harm or deprive the community is not owning a property, as Karl Marx said, but following the original suggestions of the confused author of the book you are holding. Off the record —be discreet, please—, you should know that if many companies follow my not so original prescription, they would reduce substantially the contribution of goods and services to the community, which will impact from its early stages the so feared inflation. Later will be worse, so much so that, I assure you, the true cost of consequences will be transferred to the entire community in a disguised manner. Despite the fact that the cost of an eventual mismanagement is the responsibility of the owners, there are significant oversights and waste in the use of resources, as evidenced by the closure of a significant percentage of companies. How would this affect the level of administrative efficiency of each business if all "loss", "disability", "deficit" —or whatever you to call it—, and their subsequent debts were no longer in charge of the owners but the public treasury? Which would be the community results? 67

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Thinking about it, I'd better say: considering that the damage of my nothing new indication would be so disastrous —including not only the reader, author, relatives, acquaintances and practically everyone, even John himself—, I sincerely ask you to strip off the previous page, and tear it into pieces even before you throw it. I would not like someone to carry out such nonsense, otherwise, it would make any country to rely from abroad in almost every way. Well, once the author has regained his poor judgment, let's continue now from another perspective... How is it possible for these invisible mechanisms to operate in such an unnoticed way on human action? In the first chapters we talked about the way human beings move influenced by a series of motivations that, although they have gone unnoticed by most, do not cease to be surprising. One of them, as I also described, is the search for "efficiency", which together with other conditioning factors, helped us end up with what we know today as "money". Now, something worthy of attention is that one of the most remarkable characteristics of these invisible conditions is that they sometimes act in ways that are not only parallel, but also often even "mixed" with each other... Wow! What does the author want to tell us? Let me describe it: One of those conditions that influences everyone could be called the "law of least effort", which forces us to proceed more or less as follows: If you have to make a deposit at a banking institution, would you go to the nearest branch, or to the one located at the other end of the city where you live? Do not answer this question if you like, although thanks anyway... Do you know why you could decide in a flashy way? That’s 74

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right, because you decided under the influence of the law of least effort.68 As you can see, they act as if they were a tiny part of the most sophisticated carburetor you know, where many of its pieces operate as if they were "mixed" with each other, acting in a synchronized way, deliberately trying to produce a certain subsequent effect. And believe it or not, the "stimulus" of self-interest, and, surprise, the "law of least effort" interact —at the same time— in you, everyone, even me. Now, let's say that we all become faithful followers of that witty writer of the 19th century, Karl Marx, and we take it as a great revealed truth that the self-interest stimulus is "illegitimate", and therefore we get rid of it... Do you know what would happen? Easy, an invisible conditioner would prevail in each other: The law of least effort, which, unnoticed as well, would generate devastating social and economic results, I assure you. As for the postulates in Marx economic sense, almost all his statements are of this kind, although I would like to make one more observation regarding his interpretation of the historical aspect. Marx assumed as an indisputable fact that the free enterprise system was only a kind of contrived invention of some individuals to take advantage of others. Such an assessment is also inaccurate. It is worth mentioning that to support —some even called it "scientific support"— to their particular historical interpretation, Marx and Engels integrated, grammatically, in their analyzes (calling them "dialectical development

If you do not operate under this "law of least effort", please, don’t ask me to go with you in your car to make a bank deposit. 68

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of History") the term "dialectic".69 However, they did not practice it in terms of argumentative mechanics to reach their conclusions, since the fundamental element of this process is precisely the integration, evaluation and comparison of divergent or contrary theories. It should be noted that Marx's political followers did not respect the basic elements of dialectics, since for them there was one truth: theirs! Now... How could we consider valid the fact that the free enterprise system —contrary to Marx’s statements— has been present and acting together with the human being since practically living in society? A fisherman, let's say 20 or 30 centuries ago —now we’ll call him Santiago—, spending whole nights trying to get fish and take them to the market, didn’t act so as a result deep social sense that made him contribute to the provision of goods and services that every community requires. Rather, Santiago was driven by something else. He wanted to obtain a "benefit" or "utility" from his actions, and believe me, without even realizing it, Santiago and everyone else contributed in a small proportion to the great total of goods produced and at the same time demanded by collectivity.

If the well-known dialectical triad “thesis, antithesis and synthesis” is not even respected, any such position could only be placed within the first step: a simple thesis first subject to its corresponding theoretical analysis and then to its practical verification. One of the first and true experts of this area of the so-called “dialectic” philosophy was the great Greek philosopher Heraclitus (540480 BC), who claimed that human truths are in permanent mobility subject to the action of opposites. He argued that contradiction is the origin of all things. Much later, another great philosopher, among many, was Hegel (1770-1831) who explored even more on the subject. But Marx used the term to support his particular vision of Economics, Sociology and History by interpreting the advance of times as a continuous class struggle or confrontation. 69

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Had this invisible "stimulus" —the basic characteristic of the free enterprise system— not been so strong, the "law of least effort" would have prevailed in Santiago, and he would have slept peacefully at home. As for Karl Marx as a philosopher, we will find more surprises, although I would like to address the subject briefly in the following chapters, if I may. By the way, more than one Marx’s followers would have claimed loud and clear that his thinking is "progressive" or avant-garde, since he agrees with the aforementioned theses. How much reason this perception would have? Let me tell you something... Do you know why on ships the right side is called "starboard" —looking towards the bow— and "port" on the left? Wouldn’t be easier to say "right side" and "left side"?70 The answer is to avoid that crewmen incorrectly oriented or moving to the stern, can invert the sides and create confusion. Something similar could happen to us in everyday life. How? Looking also at things from another perspective. More than one will right now ensure that they are adopting a "progressive" stance by following discoveries like those described. But, actually, they are going backwards If you walk to the bow —front of the boat— the port is to the left and starboard to the right, regardless of whether the boat is moving forward or backward. The reason for such a specific name is to avoid confusion because if a crew member moves to the stern, and calls it "right" or "left" on either side, it would be exactly the opposite if he goes towards the bow. This way, there is no possible confusion. The word "port" comes from the Dutch bakboord, and "starboard" in turn comes from the German steurobord (consisting of two roots), where "steuro" means "rudder" and "bord" is "side of the boat". In the old boats, there were no fixed rudders; the helmsman used a special oar to guide it, which was located on the current "starboard". Diccionario de la Real Academia Española (RAE), “Starboard” Online etymology dictionary. 70

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and contributing to create an erroneous postmodern version of the now anachronistic feudal lords. The difference is that now the feudal lord will be represented by a bureaucratized, slow and inefficient state that must necessarily be managed by a minority. Most of the time, this minority is not prepared for such a position and perhaps its only —although questionable— merit was having the "ability" to escalate or take power by assault. This is a fatal attraction for some to the extent that even —almost as a rule— the "advantages" of a high political position predominate to such a level that in practice they place it far above their own convictions and principles. Do you think I exaggerate? Let me tell you an odd story that happened to me. One day I collaborated in an important radio program in national coverage71 that was broadcasted from Mexico City. Suddenly, the news reached the information center that someone had asked Fidel Castro a rare question, who at the time was still the acting President. —Do you believe —asked the foreign interviewer to Fidel— that socialism is good for Latin America? —Socialism is not good even for Cuba—, replied Fidel. At the moment, I made Adriana, who was hosting the program, the following observation: —Mr. Castro— I said —has just had an unexpected access to honesty (maybe because of his age he was just saying what he thought, and he no longer answered to political convenience or his position). But I assure you, Adriana —I continued while we were on the air— that his statement shall be denied before a week, arguing that the reporters were wrong or any other excuse… 71

The host was Adriana Pérez Cañedo and we were at Núcleo Radio Mil.

Money and wellness

I then realized that I had gone very far when talking about one week. Two days later, they not only denied it but also put Fidel behind the scenes, and placed their brother Raúl in his place. But the important thing is: How can translate that statement? That not even a politician like him can afford to speak truthfully when that after ten or fifteen years of "socialism" in Cuba, they realized that this system didn’t work...72 However, what reason could they have had — had they publicly acknowledged it— after being one of the longest dictatorships of all time? None. What was the meaning then of having acted as they did? His interest for power, in practice, was beyond the wellness of his fellow citizens as well as his convictions and principles. I don’t if you, kind reader, can see it in any other way. Another less relevant issue is: Why does this chapter include in its title the adjective "unforgivable"? Some errors of previous centuries had a higher level of justification for many things were unknown. As we also quote, however, with the increasing level of information and current progress many aspects and assessments now become automatically nothing less than inexcusable. However, this unfortunate effect not only happens at economic level. There are political and social positions and adventurism that are also unforgivable, for example, Even though they used the argument of the US commercial "blockade" as a justifying element for a long time before the misinformed public. I know at first hand that the commercial blockade did not affect them much, since they could always trade with more than ninety percent of the countries. Even this author tried to sell them in the seventies tuna, preserves, tomatoes, toiletries and many other missing items, and I never had the slightest encumbrance to do so. The real problem was that due to their great lack of productivity, they did not have resources and they wanted everything conditioned to a loan granting of very doubtful recoverability. 72

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the racial prejudice: a segregationist stance is nowadays totally out of place... why? I remember that as a child I studied Political Geography where different "races" that made up our world were clearly identified. To this day, however, due to a series of important advances in the scientific field, such as the case of the extraordinary research carried out on the human genome,73 a never imagined reality came true a few decades ago, forcing us to another more realistic and perfectly informed approach: Through this scientific research we know for a fact that all human beings come from the same genetic ancestor, and that the external physical characteristics that we believed divided us are only the product of other conditioning factors such as the different exposure levels to the sun's ultraviolet rays, food diversity, climate effects, education, life habits and other factors that, over millennia, generated certain external characteristics. Back to the subject of this book, weâ&#x20AC;&#x2122;ll see in this chapter the type of monetary experiences derived from state interventionism at different levels, which along with other negative interacting elements, influenced in the economic upheavals and ups and downs. I invite you now to move on to the second part where we will focus on the present time. Which is the best way to control a modern economy from a monetary point of view, so that the equity required for achieving a generalized wellness is safeguarded? What risks do we still have? Follow me. More than 280,000 regulatory elements are detected in the human genome. The Human Genome Project started in 1990 and concluded in 2005, although research continues. Human history somehow reconstructs in its evolutionary process. The first ancient genome was traced to the African continent where we all come from. â&#x20AC;&#x153;Ancient Ethiopian genome reveals extensive Eurasian admixture throughout the African continentâ&#x20AC;?. Science 350, 820-822. 73

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Part two The present

Juan Manuel Ochoa Torres

Money and wellness

Chapter 5 Monetary balance — steady prices As we can deduce from what has been explained in the previous chapters, every modern State —through the appropriate administration of its Central Bank and based on a sound economic policy— can and must maintain price stability. Therefore, the State must take advantage of —among other key mechanisms— the essential balance between its monetary base74 and the quantity of goods and services available. However, many may doubt whether we could really achieve such a goal considering that all countries already use a currency or "money" that we could classify as "fiduciary". As if that were not enough, the emergence of an uninformed government in the matter would be enough to put an end to the social and economic wellness. With regards to the "fiduciary money",75 let me tell you that all kinds of "money" in history have always been, are and shall be "fiduciary" money... Wow! Why so, if for centuries we have used, among others, goods-money, items and large and heavy silver and gold coins? The only thing that has changed over the years is that fortunately, nowadays, such a "confidence" required from a people towards their currency —whatever the name Also known by economists as "circulating mass of money". This term, however, must be pointed out due to the increasingly sophisticated methods of payment. Thus, a "monetary base" constitutes everything having the "capacity to purchase goods". This amount is reasonably quantifiable by the Central Bank and collateral information and control agencies. 74

The word "fiduciary" comes from the Latin fiduciarius (Diccionario de la Real Academia Española, RAE), a word that is related to "trust", "faith" or "strength", an essential element required for its generalized or universal acceptance. 75

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may be— has already moved to where it should have always been: solid and reliable institutions. What basically happened in past millennia was that, in the absence of reliable, well informed and responsible agencies —or at least unlike today—, this "fide", "faith" or "confidence" had to be temporarily deposited in some means of payment on certain physical objects. These items were no more than temporary substitutes for what should always give sustainability to the so-called "money", that is, the goods and services that can be acquired with it,76 which is the ultimate balance that every Central Bank protects. This institution knows that if in said balance, the greatest possible equity is not preserved for whatever circumstance, it won’t matter how gleaming the “coins” may be.77 Moreover, if some politicians promise that they own As we saw in previous chapters, thousands of years ago the simple, primitive and inefficient "barter" operated (in whose exchanged items "trust" or "faith" was deposited). Then the trust moved to the "merchandise-money" (cereals, cattle and others), and further to certain items or metals that were widely used by the majority, such as salt, copper, bronze and iron. Later trust was in precious metals, such as gold and silver and simple certificates (as ultimately intended with bills or paper money), that had no real equivalence in practice. From a statement by then President Richard Nixon in 1971, fiduciary money was universally accepted and for practical purposes, which was perfectly supported the goods and services that could be acquired. Let's not forget that money is nothing more than a kind of "voucher", "promissory note" or "common denominator" of what it really represents: goods and services. That is why I have excellent news for you: it shall not be necessary that you depend on bartering to exchange some goods for others, or to walk down the street (unless you come back from the market) with livestock, fruit, meat, cereal, cheese, a drum of gas and many more articles to exchange them for other necessary products. All it requires is to take those small pieces of paper printed by the Central Bank, "plastic money" or other means of payment in its many different forms. If I see a person carrying bulky items on the sidewalk to be exchanged by others in the "market", I will have to deduce that he completely ignored the author's free advice. 76

One of the possible advantages of not having yet destroyed this book is that you could check again, if you want, the inflationary experience of Spain in the 16th century, where you would see again how, despite the Spanish people had a large amount of shiny pure silver coins, inflation was triggered because the referred equity was not preserved. 77

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the most excellent truths revealed, I can assure you that as soon as the congruence between these two factors is lost, in practice there shall be nothing more than the crook and disguised tax called “inflation”, which shall be followed by a series of negative effects. As if this was not enough, it shall hit mainly the most unprotected sectors of our community. Damn! And how can we mitigate the risks of wrong handling? Later on we will talk about the subject, but to avoid this kind of setbacks, it would be very helpful to be able to count not only on the opinions of economic experts, finance ministers and researchers who have preceded us78 but also to have the ability as well to carefully evaluate the failed experiences, some of them referred to in the previous pages. But let's go to the field of practice, which will be established in the simplest and most accessible way for everyone... How can we preserve the aforementioned transcendental equivalence, as well as everything that can come from it? Once each director or CEO —according to the country— of the Central Bank establishes the most approximate Among the most outstanding economists regarding the "quantitative theory of money", I can only highlight: Martín de Azpilcueta (Spanish, 1492-1586), John Stuart Mill (English 1806-1873), Alfred Marshall (English, 1842-1924), Knut Wicksell (Swedish 1851-1926), Irving Fischer (American 1867-1947), Ralph George Hawtrey (English 1879-1975), Ludwig von Mises (Austrian 18811973), John Maynard Keynes (English, 1883-1946), Clark Warburton (American, 1896-1979), Earl Jefferson Hamilton (American, 1899-1989), Friedrich Ha-yek (Austrian, 1899-1992), Antonio Ortiz Mena (Mexican, although more practical than theoretical, 1907-2007), Milton Friedman (American 1912-2006), Paul Samuelson (American, 1915-2009), Robert Mundell (Canadian 1932), John B. Taylor (American, 1946) and several more that I do not mention due to lack of space. I also include the extraordinary classical economists such as the Englishman Adam Smith (1723-1790), David Ricardo (1772-1823) and so many more that have made valuable contributions. 78

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amount possible of the "available assets", as well as its variables79 that may come into play... What kind of mechanisms does this institution have in order to adapt the amount of means of payment —i.e., "money" in all senses— and safeguard the legitimate wellness of the public? To this day there are very effective means so that experts and responsible entities in the matter maintain that monetary balance, from which I describe briefly and synthesized the most important ones: If the Central Bank interest rate is adjusted upward or downwards, the circulating money held by the public can be increased —additionally to other aspects mentioned below— or reduced. Something similar will happen if the legal reserve that the banking system must keep is modified. Another effective means of control —something well known in the financial media— will be operations in the open market... What the hell is that? Don’t worry it is nothing out of this world. For example, if the Central Bank —or the institutions under its control— "sell" securities to the public, its "collection" is equivalent to reducing the money supply —circulating money—. If, on the contrary, Among them is the competitiveness of the exchange rate. It is very important to remember that within the "assets available" for the citizenship of any country, the "imported" items (that is, those manufactured abroad) also intervene and should be considered. I would like to emphasize something that many do not take into account, or at least not with the relevance required: an "overvalued" currency automatically and invisibly "cheapens" imports and "increases" exports. On the contrary, an "undervalued" currency shall have the opposite effect. Therefore, we are talking about a crucial factor that every Central Bank official should watch in a very special way since an excess of imports will be an open tap that "drains" in a very dangerous and irresponsible way the financial resource abroad, thus reducing productivity and employment and damaging multiple internal variables. 79

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securities are "bought" from banks or from the public, their "payment" means or is equivalent to the increase of the "circulating money" held by the public. It's not as complicated as it seems, right? It should also be mentioned that the "sales" or "purchases" of securities in the Central Bank open market also have an impact on the natural interest rate, since, by reducing or increasing the financial resources held by the public, these have an effect on said rate. The direct issuance of money obviously influences the same way. In short, dear reader, what I intend to tell you is that if true experts in the field manage of these variables, and if it is feasible to increase, or, where appropriate, decrease the amount of money, not only can it be but, of course, it will be necessary to maintain the much-needed stability already mentioned, avoiding thus —except in the case of truly catastrophic events— the feared inflation or deflation. Thus, whether at the present time, in practice and in the vast majority of cases, an eventual risk in that sense no longer comes so much from the field of economics. In later chapters I’ll describe better what I mean. But before reaching this point, if I may, I would like to briefly address a key point that may have already come to your mind. Would it be possible not only to maintain monetary stability with the consequent benefit that it entails but also to encourage growth in order to have a favorable impact on social wellness, and thus, to be able to grow even more in a solid and sustained manner? Please, don’t throw away the book yet! Come with me, although this reading might seem like a torment to you.

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Chapter 6 Growth with stability Actual development Now that the author has come to introduce us in this type of economic and monetary intricacies â&#x20AC;&#x201D;although he has tried to make it understandable to all audiencesâ&#x20AC;&#x201D;, would it be possible, as he says, to combine that muchdesired price stability with the no less important goal of greater growth in order to contribute in a real way to social wellness? The author considers that if we are able to proceed properly it would be perfectly possible to combine both goals, as long as we also avoid the interference of other aspects that we will deal with immediately. Furthermore, we should act with all caution, proportionality, supervision, responsibility and foresight deserved by the socioeconomic health of our fellow citizens. In that order of ideas, the first and essential condition sine qua non80 to achieve it would be to always maintain as balanced as possible the equation between "circulating money" and "assets". Even, if I may and before I go on with a negative example, I invite you to carefully observe the way, wrong in my opinion,81 in which some proceeded in the recent past: Glossary = Sine qua non, Latin expression that in English means " without which no" (Cambridge Dictionary). It refers to an indispensable, essential or imperative condition for something to happen. 80

Several of the most successful economists (in my opinion), for example Marshall, Keynes (in most of his postulates), Friedman (one of the main promoters of Chicagoâ&#x20AC;&#x2122;s supply school) and Ortiz Mena (more in the field... 81

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Therefore, I ask you to go back to the aforementioned Mexican case, since this experiment is highly illustrative or representative that other Latin American countries repeated with similar results, when state interventionism was so fashionable (in the aforementioned period of 1970-1982 in Mexico) in which the following actions were taken: The failure to recognize de facto that these "public" entities were unable —due to their intrinsic inefficiency— to make the crucial return of the "goods and services" produced as well as the consequent reimbursement, i.e., the money applied, caused channeling significant resources to state enterprises. Moreover, to make matters worse, they generated year after year an astronomical debt. Which were the causes? This will surely make you doubt. Therefore, let’s go over again but from the "monetarist" approach now. What made them take those actions, say, under a context of pure economic theory? The promoters of such a policy pretended, in an illusive and incompetent manner, the supposed creation of a certain "aggregate demand" component that would "stimulate growth" in an important way. Were they right? As expressed under another perspective in previous chapters, this led to the aforementioned disaster, and the only thing that could prevent a much greater damage was an understandable change of course in the follow...of practical instrumentation than in monetary theory) who showed us in different ways —either with their theories or concrete facts— the feasibility of obtaining really solid growth. On the other hand, there were other Latin American economists who, largely influenced by their ideological cut, in the seventies and eighties of the 20th century, applied in a distorted and erroneous way the Keynes’ theories combining them with a strong dose of state interventionism, which led to a complete disaster as briefly exposed above.

Money and wellness

ing six years. However, it should be noted that during the period when the problem was rectified —i.e., after 1982— they could not avoid being severely restricted in terms of growth and development, due to the fact that, among other things, the service of the monumental debt inherited from this disastrous experience tied their hands almost completely. Excuse me for insisting, but how did the consequences of this failed experiment manifest themselves? First of all in inflation, then loss of international competitiveness, mismatch in trade and payment balance, indebtedness, capital flight, greater dependence from abroad and devaluations, among others. If someone wanted to "stimulate the economy" of any country as described, it would do them much better to take very long, distant and well-deserved vacations. At this point, I beg you to refrain from doing so. That is not the way. In any case, if someone insisted on repeating such an experiment, a less harmful way would be to simply let the same inertia or natural force of the market and productivity boost the growth. However, as I said... Would there be any —healthy— way to encourage development? This author considers so. Rather than encouraging the "demand" —and above all with such economic infantilism as the one described—, it would be better82 to advise the promotion of productive "supply" of goods and services. This would also increase Note: this suggestion is just one of the healthy, sustainable and viable options. The amount of the suggested fund, procedures and instrumentation will depend on the conjuncture, potential and specific circumstances of each country and shall be subject to the good judgment of the authority in turn. This is one of the ways to obtain a general healthy growth with price stability. 82

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the demand in a natural and parallel way since, by persuading the community towards a situation of full employment that would consequently induce greater consumption, growth would be possible in a balanced and healthy way because the "suppliers" of some products, are —believe it or not—, at the same time, the main "claimants" of others. I invite you to analyze its specific functioning already in practice: if a kind of "Fund" is created that operates as second-tier banking through the banking system, channeling financial resources at preferential rates —to the productive sector of proven recoverability, guarantee and capacity only— any increase in the circulating mass compensated with a consequent productive increase could be achieved. This would safeguard —pardon my insistence, but it is an essential conditioner— the muchneeded equity between "money" and "assets".83 Now, given that the funds channeled through this means would be granted at preferential rates, the banking system itself must become responsible for its total recoverability and its proper destination. For purposes of this fund only, resources should be allocated exclusively to those who, through adequate study and analysis, have a proven potential for a subsequent increase in "assets", demonstrating that they already have available installed capacity, experience, human capital, moral and economic solvency, market studies and others. Otherwise, the traditional bank would be directly responsible for all those resources that would have been The existence of such a fund does not pretend to avoid all public works, social services, educational, hospital and many other areas, except that the characteristics required in terms of investment destination are exclusive to the aforementioned fund. The wide range of other essential issues mentioned must be carried out under strict adherence and within a normal and balanced budget of income and expenditures that every nation must have. 83

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channeled to another line that did not comply with such requirements. Let us always keep in mind the validity of that old adage: Given and unsupervised order is worthless. Therefore, it would be absolutely essential to supervise, and where appropriate, punish exemplarily all money that would have been directed to another destination, as would be the case of the resources used to pay liabilities, public spending, speculative investments, luxury goods or any other destination not indicated —I repeat, only in relation to the aforementioned fund—. Now... At what percentage would the funds described be channeled towards each particular line of production? It will of course depend on the percentage "spent" by the citizens themselves, that is, in the same proportion as the population allocates its resources such as tourism, clothing, housing, food, health, recreation, capital goods, education, transportation and others. All those areas whose productive growth and recoverability are short-term should be given priority, i.e., that these not only have the guarantee of sufficient recoverability of their due return in "assets" but also their financial reimbursement, for which they must demonstrate to the banking that they effectively have the experience, real potential and enough installed capacity to do it verifiably. Let's see the following example: the banking system —which is ultimately responsible for its correct use— knows that it must invest a certain percentage —for the purposes of this specific project— in a certain number of hotel rooms (in its different socioeconomic strata). As the bank is in a privileged position to detect not only capable entrepreneurs, but also has a sufficient guarantee and proven experience, it can perfectly fulfill the requirement that any increase in "circulating money" be compensated with a consequent increase in "assets". 93

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Remember that this financial return has not been channeled into a "lost fund," as is the case with many areas in public spending. When addressed to companies or individuals with proven efficiency, guarantee and recoverability and meeting the agreed return program, resources will automatically refund and become part of the same revolving fund, so they will be able to repeat the same "investment-recovery" cycle in the applicable productive line. Something similar must happen with the other productive lines managed by such fund, and, as stated, just in the proportions and trends determined by the "citizen's own consumption". As for the disposition of resources for the aforementioned fund, the federal government can issue bonds or obligations, or any other means determined as the most convenient source. This same resource would not jeopardize the financial health of any country since such an increase in "debt" is channeled into a secure increase in assets, whose return to the productive revolving fund is practically assured and under the responsibility of the national banking, depending on the own percentages and amounts each institution uses from this project. Given the relevance of the adequate resource management of said fund for its due recoverability and the good result of this policy, an adequate control mechanism, audits and full surveillance must be implemented before its creation at all stages of its operation. This is because the following factors must be ensured: full guarantee of the fund recoverability, since the fund will operate as a second-tier bank and through private banking. Furthermore, as stated, the volume of amount and conditions to which they are channeled to "productive 94

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investment" shall depend on the employment situation, production potential and internal and external market conditions, as well as the growth and equity observed between the circulating money, and goods and services produced. Wow! After all, the proposals of this dreadful author do not sound so crazy, but then —more than one would say—, why on earth has not been done despite it does not sound that bad? I ask you to wait a little longer in your already longed for destruction of the book, and in the meantime follow me now with the next chapter.

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Chapter 7 Naughty interference And their negative effects I'd like to guess your next question, if I may. We have already seen the potential of the economic and monetary aspect, as well as its consequent social projection (this author also thought the same and I hope you donâ&#x20AC;&#x2122;t accuse me of mental plagiarism). What the hell has prevented us from making much more progress on this important issue? Before going on with what you surely consider as another of the author's insufferable explanations, let me tell you something relevant. The last and most significant advances in economic and monetary matters do not go beyond eighty or ninety years ago.84 Moreover, I consider that every sensitive economist today would agree with most of the explanation above. So, what on earth got in the way of its applicable implementation? It may seem illogical, but the practical application of the implementation and execution of the aforementioned in the economics field is subject to the public administration in turn, and to the correct â&#x20AC;&#x201D;or sometimes not so muchâ&#x20AC;&#x201D; political direction. Although there were isolated cases of characters with great common sense as Martin de Azpilcueta (Spanish, 1492-1586) and Antonio Ortiz Mena (Mexican 1907-2007). Ortiz Mena held the position of Secretary of the Treasury, where he applied a monetary policy called "stabilizing development", which was nothing more than a variant of what was stated in the previous chapter, although its application was adapted to the conditions of that time. In a context of an open economy and with free trade agreements, I believe that its success would have been even greater. 84

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I must say that one of the objectives of writing this book —no matter how much you insist on burning it— was precisely to extend the topic to as many of our fellow citizens as possible. The subject is too important. However, other doubts arise... How can this disoriented author say such a thing? Is he implying that a politician could do something that was not aimed at benefiting the citizenship? Most of the time —I can assure you that almost in all the failed cases—, the main character in charge of the public administration, although it seems incredible, has tried to benefit the citizenship, but sometimes he has done it through false routes.85 This significant fact gives validity to that old but accurate saying: "The road to hell is paved with good intentions". Would that be possible? While recognizing that fortunately there have been very capable politicians and with great economic sense, others have not been so. In order for you to evaluate the scope of what I now intend to say, let me submit to your consideration some of the most common ways on how, sometimes-poor political leadership, has influenced the economic field. I am going to present some of these interferences in three groups only for analysis purposes: a) History examples, b) Apparent convenience, and c) Misinformation. Are you with me? a) History examples. One of the economists capable of —among other things— stabilizing the currency in

I quote a phrase of Milton Friedman that is relevant: "One of the biggest mistakes is to judge the policies and programs by their intentions, rather than their results". 85

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Germany after the phenomenal inflationary mess already described during the twenties of the 20th century (immediately after World War I) was: Hjalmar Schacht.86 Once that phenomenal inflationary conflict was resolved, and well into the next decade —the thirties— when Germany was under the "political guide" of Adolf Hitler, do you consider that an economist of his class did not realize that the monumental rearmament ordered by Hitler would impact in an inflationary rebound with the dreaded lag between circulating money and assets taking place, and an abnormal financial and human effort devoted to the production of weapons, instead of orienting it towards the great amount of things that the community consumed? Of course he knew, and whenever he could, he even told so —in private— to the pathetic character described. Now, to highlight the subordination of the economic issue to politics... Could this outstanding economist in practice have modified in a single millimeter the obsessive deterMany reproached Hjalmar Schacht (1877-1970) for having been Secretary of Economy under the Nazi regime from 1934 to 1937. At the author's discretion, this economist was also influenced in some way —emotionally speaking— by the errors and revanchist perspective of the treaties of Versailles, Trianon and others signed in France after World War I, which implicitly involved a sociological conception that must be overcome. An evidence of this, as we will see immediately, is that the treaties sowed the seed that unleashed, as many analysts pointed out at the time, World War II. It is worth mentioning in his defense —apart from the fact that the analysis presented here is only related to his performance as an economist— that he never voluntarily joined the Nazi party (although he was named an "honorary member", trying to have him on their side). This character was in total disagreement with anti-Semitic politics, and above all, with the monumental expenditure of military rearmament, a factor that led to his dismissal in 1937. However, in order to agree with the regime and its great capacity, they held him as adviser in the Secretariat of Economy and the Reichsbank until 1943. He was accused by the Nazis of being involved in the attack on Hitler in 1944, so he was kept locked in a concentration camp until the end of the war. 86

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mination that this ominous dictator had pre-established? I doubt that he could have been able to made public the slightest observation. Many similar cases expose this economic subordination to the political leadership in turn. One of the most prominent economists and experts on the monetary issue was none other than Milton Friedman, who had the privileged opportunity of advising several Presidents of United States. Let me ask you an important question, dear reader. Taking into consideration that one of the presidents Friedman had the opportunity to advise was nothing less than Richard Nixon... Do you consider that this expert in economic matters did not fully realize that, say the Vietnam War —irrespective of its moral validity—, was consuming a huge amount of financial and human resources, which undoubtedly altered the crucial balance between "circulating money" and "assets", and put at risk the country’s good economic performance?87 Do not doubt for a second that he knew it perfectly, but this remarkable economist was subject to certain geopolitical guidelines, whether these were right or not. Since we are talking about the issue, and as a passing comment regarding the moral validity of that war —since many will assure that we were in the middle of the cold war, and "the communist advance should be stopped in It is no coincidence that just early in the 1970s —in the middle of the Vietnam War—, began an already chronic negative trade balance of the United States. This resulted in their growing and understandable indebtedness, due to the fact that an abnormal amount of human and financial resources was used in an unusual war effort, which was deducted from the normal productivity of goods and services. https:// es.actualitix.com/pais/usa/estados-unidos-balanzacomercial-dolares.php 87

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any way"— in my opinion, human beings often follow complicated and sometimes even immoral routes without first exhausting our capacity for dialogue and having used in a wise, constructive and correct way the transforming capacity of true dialectics.88 In spite of taking the risk of considering that the author is out of his mind, I will share with you an experience, as I think it is appropriate … When I had the opportunity to write my first book,89 I had the following conversation with one of the directors of the publishing house:90 “Tocayo” (TN)* that’s how I called the executive— let me go to Central America as if I were a salesman or collaborator of your company to promote this book since the Cuban "revolution" (beginning of the eighties) has just been transplanted in Nicaragua and is threatening to extend to the entire Central American area… * TN Tocayo — Informal and friendly term used when two or more individuals share the same first name. 88 One of the meanings of this important science is the good use of argumentation in which the purpose is to improve social evolution and human development using the contribution of opposing ideas or forces. For a better performance, however, it is necessary to adopt a philosophical and humanistic position more in line with reality, as I will try to describe in some of the following pages. El Sistema que sigue —¿comunismo o capitalismo?—, Editorial EDAMEX (1984) ISBN 968-409-030-7. 89

José Manuel Colmenares Grünberger (deputy director) played a very prominent and invaluable role in Editorial EDAMEX. Do not think that the author was out of his mind. I only felt to a certain extent involved in that ideological process, since, in my remote youth, I granted viability to the "socialist" position. However, this situation was modified by analyzing the subject more thoroughly (both in theory and in its practical application), which made me feel empathy for those who saw this as a viable alternative and I considered that the solution was not to kill them, but just let them see what a system like this really meant for citizens. 90

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—Sure—, he replied. —I wish all our authors did the same thing with their work, but… Why are you doing it? —The solution—, I insisted —is not to kill them, as some people want, even implying the “contras”, but to show them the truth at economic, sociological and philosophical level. Marxist theses are not anywhere near the solution. They are going to cause further damage... and on top of that, they will lose their freedom.91 —Remember Juan Manuel—, he said — that the world is likely to go right in that direction. —That system is so badly structured in every way—, I kept saying —that it is going to break down from within. Believe me. The only ones who still believe in this are those who have not experienced it, as it happens in Latin America. I had the opportunity to distribute the book throughout Central America,92 and I fortunately continued to publish books in that publishing house. Ten years of this conversation had not elapsed, when Russia and China corrected the course. Months later, this same executive telephoned me. I almost did not remember what we had talked about at the time.… —I’ve been remembering what you once told me, Tocayo—, he said —the cold war prospect changed completely…

I would like to quote another phrase from Milton Friedman on freedom: “A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both”. 91

Except Nicaragua —as you will understand—, as it happens in these cases, the only prevailing truth is theirs. The rest are mere imperialist plots. 92

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What is the intention of this anecdote? Now that I have mentioned the case of the Vietnam War, it made me think... How many times in history have we experienced the "imperative need" to forcefully impose our own truths, causing countless deaths and wasting tons of resources we required in other basic needs? I believe that something we have lacked —and still need— is that, rather than seeking to "win", we must pretend to "convince" or, if the case, that others persuade us about a certain point of view.93 However we were talking about the subordination of the economic aspect to politics.94 In addition, I promised not to describe the multiple cases in a little over more than 1440 hard going pages of The Capital where it is obvious that those responsible —in their different levels and times— of the economic issue was always subject to a —good or bad— political leadership. But let's now look at another type of no less harmful interference: b) Apparent convenience. Is it possible that the interest of a certain politician does not agree with the community There is a wise English quote: “When you have a hammer in your hand, everything around starts looking like a nail”. And I would add: that is not the worst. We often forget that before carrying hammers, we were endowed with mouth to express our arguments, ears to listen to those of our peers, and even more, brain to choose the best option. The hammer, my dear and patient reader, is nothing but a contrived element appropriate for a limited group of activities, and not suitable for dealing with rational individuals. It is true that some wars were —unfortunately— almost inevitable and a mere response to an aggression (as in the World War II, while evaluating the events that influenced in it). However, the Vietnam, Iraq and many others wars were just the product of the irrationality and sociological limitation that has always characterized us. 93

It should be noted precisely why, in order to avoid economic dependence on the political aspect, it has tried to minimize itself in many countries, granting the Central Bank's management autonomy. However, in practice, a certain interference of the political element on the economic issue cannot be completely avoided, especially in those countries with a more fragile institutional framework… 94

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interest? In the end —as we will see right away — all human interest in the world is hopelessly associated with the rest. Let’s analyze these aspects. As we will see, the problem arises from the fact that an individual misunderstands or does not fully perceive the process of social interrelation, which is extremely common, and therefore, decides to mess around. However, such a procedure will not only harm others, but the damage it generates shall return to him/herself. Wow! How could that be? To illustrate it better, I will tell you another one of my experiences. Not many years ago, someone was kind enough —or had the misfortune— of inviting me to a Forum on Agricultural Productivity, an issue that interests me greatly, which is why I accepted immediately… Before the event began, attended by some legislators, several specialists in the field, officials and former employees of the agricultural sector, I approached one of the organizers and asked: —Can I speak without any restrictions? —Sure—, he replied convinced—, that’s why we invited you. After listening very carefully to the other interesting presentations that, for the most part, highlighted the "great importance" of the topic, it soon came my turn to speak. Gentlemen —I said—, the relative lower95 productivity that we have in some lines, as in the case of corn, not Glossary: "Relative productivity" is the productivity associated or interrelated to that of other countries, mainly those with whom we trade. 95

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only makes us more vulnerable and dependent from abroad, but also produces an unnecessary leakage of foreign currency and even certain health problems. And guess what? The fault is not on the population, but ours. Let me explain you why I consider it so… —We are making a serious mistake with the granting of subsidies to the field— I continued. I feel that although it is essential to support our fellow farmers, and even in a greater way, it should not be through subsidies, since we currently grant such support in a generalized way without associating them with the productivity levels that each one obtains. —I will refer specifically — I continued while observing the surprised glance of some — to the case of the corn. We have an average productivity close to 2.9 tons per hectare, while our northern neighbors, whom with we trade most of the product, is almost 3-fold, with around 9 tons per hectare. That is why many of our farmers complain that the price "from abroad" is lower than ours, even though they have a more expensive workforce. The worst thing is that the leaders of our fellow farmers do not explain to them the true cause of this contrast: The origin of this more competitive price is because our neighbor’s productivity is much higher, which allows them to commercialize in the international market at more accessible prices. But, why is the productivity higher, if even the climatic conditions here are much better and the price of labor (I insist) is lower? —It is true that there is a partial influence on the significantly lower production of smallholding, I continued, especially for the type of crop that has a lower incidence of labor than vegetables. But one of the main culprits of this phenomenon is the generalized and politicized form in the granting of subsidies. 105

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— Further support to farmers is essential —I emphasized—, but subsidy should be conditioned to a certain minimum, although growing, productivity depending on their effort, and starting at least from 5 tons per hectare. Otherwise, we not only cause them damage, but the entire country as well. —Let me give you an example,96 I continued. Imagine that the owner of a business97 pretends to be very large— hearted to his staff and decides to pay the salary to his collaborators, regardless of whether they go to work or not. What do you imagine that shall happen? Exactly. That business shall start to have every day less staff, while piling up the number of complaining customers, until its bankruptcy... Don’t you think? Well, I have bad news for you. The country is no more than a simple sum of all, and if individualities are unproductive, you just have to add them all and that's how simple the result shall be. —We have to find a way to grant them through an agile system —I continued— even with a little more resources than now, but only to hard-working and efficient producers. But let's see what we caused in the practice. I know many janitors, masons, painters and others workers who carry out other activities in the cities, but they have one, two or three hectares of land in rural areas and their main purpose is to continue receiving subsidy from the support program, without them caring the least if their

Idle clarification: this unfortunate author has the habit (in case you have not noticed) to include examples of his nonsense. I only trust that the ocular wear derived from the excess of reading, does not derive in a judicial demand on the part of some annoyed reader. 96

I’m not referring to any “John Doe” for their sake and mine… just in case they are after me already, with a stone in hand for mentioning them in such a disrespectful book. 97

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harvest is miserable and pitiful. Probably the fault is not theirs, but ours… — If we could raise—, I kept on saying —the average productivity per hectare to five tons or more,98 do the math. Not only do we not need to import corn, but we could export surplus as well … — The current system—, I added —of generalized granting of subsidies, is not only a serious impact to the country’s economy, but to health as well. Creole white corn (our corn) has lower carbohydrate content and is more appropriate for human consumption. Yellow corn genetically modified is preferred abroad by its specific components, and its greater potential to fatten livestock. It should be noted that this is also why, when foreign manufacturers process corn, they obtain a higher amount of fructose.99 Local and foreign sweetened beverage and food manufacturers almost always prefer fructose to sucrose, since

The author had the opportunity to keep the books for years in an irrigation ranch where productivity was sometimes obtained (in corn) up to 25 percent higher than the average of our neighbors in the North. We meticulously looked after the proportion and content of soil nutrients, pH, timely irrigation, immediate attention to all types of opportunistic plagues, and use of quality seed among other things. The relationship of the agricultural land in Mexico and the US of "irrigation and rough weather" is not very different. There is a ratio close to one of irrigation per four of rough weather in both countries. Source: In Mexico: INEGI; National Agricultural Survey 2014; In U.S.A.: https:// en.wikipedia.org/wiki/List_of_countries_by_irrigated_land_area and https:// en.wikipedia.org/wiki/Land_use_statistics_by_country 98

Fructose, despite its “sweet” name (high fructose corn syrup or HFCS), in its refined process causes a long series of chronic-degenerative conditions such as diabetes, hypertension, heart disease, kidney, digestive and eye disorders. Many soft drinks and processed sweetened products are fructose added. For more information on the subject, you can find the book of this same author in: El futuro Chatarra by Dr. Gustavo Cruz Santiago and Juan Manuel Ochoa Torres, SOCIEDAD MEXICANA DE GEOGRAFÍA Y ESTADÍSTICA, A.C. Available for download in www.juanmanuelochoat.blogspot.com Sucrose (common sugar) is harmful to health, but fructose is worse. 99

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it has a greater sweetening potential despite causing more damage and being an influence in a decisive way in the genealogy of many chronic-degenerative diseases.100 However, it generates more utility. Once I finished my speech, a period for questions and answers started immediately. I must confess that I thought I’d receive an overwhelming number of objections but, surprisingly, everyone agreed with me. I only trust now that you are not going to ask me if anything was done about it, since I will let you down, because nothing was done in that regard.101 Do not ask me the reason either since I would have to answer, “I think —from my particular perspective— that someone considered it ‘politically unfeasible’”, i.e., modifying such a scheme was not advisable, that simple.102 Political favoring would be lost. That is precisely what I mean when I consider that an undue and ill-focused personal political expediency is nothing more than a mere interference in the economic process. Imagine for a second that the person in charge of economic issues poses his political leader the need to If you want to know why chronic-degenerative diseases due to poor dieting have become the number one health problem —and its effects— in the world, I invite you to download the aforementioned book: El futuro chatarra by Dr. Gustavo Cruz Santiago y Juan Manuel Ochoa Torres, SOCIEDAD MEXICANA DE GEOGRAFÍA Y ESTADÍSTICA, A.C., in the same website. 100

In no way do I pretend to hold the event organizers responsible. They acted in a professional manner and with excellent goodwill, and surely the political decision (or lack of it) was made elsewhere. However, from my own perspective, it just faded away in the —often— complex bureaucratic mechanism. 101

Any populist politician will tend to not modify a scheme like the one described since they want to be considered as extraordinary and incredibly generous human beings, although in practice, they know (I hope) that they do more harm and provide less benefit. 102

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condition the support granting to the agricultural and forestry sectors —even if it meant higher support— depending on the productivity achieved by each one. Should the support in forestry were conditioned depending on the number of surviving trees per farm, could a leader accept it if perhaps he won the election due to the large number of gifts he offered in order to win. Would you, therefore, consider that this would be a case of unfortunate political "interference" in the economic process that seeks to provide generalized wellness? Let us imagine now the case of a president from a developed country —where these cases also occur, but to a lesser extent—, who would have carried out his campaign on inaccurate or incomplete postulates. Still with the previous case, imagine that in the office of this country’s leader, suddenly one of the most important external counselors has the audacity to make his president see that the high illegal migration that country receives is not a mere and simple consequence of another problem, whose genealogy has deliberately ignored such administration. This counselor, in a gesture of great political temerity and knowing that the head of the nation may not like what he says and may fire him, makes him see very politely that his immigration position is incorrect since that phenomenon is not but a simple effect of the demographic question that he has decided to ignore. The counselor tells him that in most of the underdeveloped world, the rate of population growth is still a little higher than normal. As a result, the population-doubling period in many of these countries is between 25 and 45 years. This timeframe is too short to allow them to double 109

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all infrastructure required in key areas such as education, employment, drinking water, drainage, housing, law enforcement, conveying values, among others. The deficit accrued over decades cannot be reduced during this period and part of the infrastructure exceeding its useful life can not be replaced, which in turn, shall generate unnoticed the following:* —Look, Mr. President —he says respectfully— when these countries face a wide range of unmet needs (in addition, these deficiencies are perniciously interrelated), not only do serious deficiencies occur, but it also causes more violence, generates social unrest towards the government in turn, drives away the investment required, and to top it all, it also has an impact on us. Furthermore, it is reasonable to assume that certain percentage of its population would try to emigrate. —And let me remind you, sir— he continued —a certain number of legal immigrants could help us in many key productive tasks. However, you know that if this flow is illegal and exceeds certain limits and to top it off, it is about people without the proper educational and civic training, this will generate problems. In this imaginary and almost unthinkable scenario, it is likely that the political leader of that developed country has not had the slightest idea of the different approach that this external adviser is now proposing. However, he is acknowledging that he never was interested enough to investigate on the subject because he was busy in his personal business.

* If any of the readers wish to be tormented further by this irreverent book, I recommend reading the appendix.

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And, however much he internally and partially accepts what has just been posed to him, the leader reconsiders a little his previous position on the subject and understands better that interpreting many deficiencies of underdeveloped countries as mere governmental inefficiency, in fact, could be largely due to what he has just heard. He quietly acknowledges that migration could be only one of the consequences, although the issue bothers him since the perspective he maintained throughout his life cannot be modified all of a sudden. But what this important politician did not expect is that this daring external consultant is not finished yet. He goes on saying in the most polite way that the animosity to migration that he has laid out before the citizens is badly focused. If the leader accepts that it is another external manifestation or negative effect of the referred socio-demographic mismatch, he should take into consideration that at the beginning of his mandate he canceled all kinds of information programs in developing countries. This would have contributed to what the country now is going through, which at a certain moment —he emphasizes— citizens will realize. This would affect him personally in a very negative way. Such an approach increasingly displeases the president, although he decides at the moment not to throw him out from his office because he wants to see how far his daring comes. Therefore, since the counselor suspects that his advisory work will end soon and given that he knows in his own heart that he must say things by his name and following his own conviction, takes advantage of that brief period and continues: —If you actually build a wall —he continues before the astonished gaze of his boss—, that will not only become 111

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a costly, anti-ecological and useless monument to irrationality, but something worse. At the time, most of the people will realize that problems are only solved when causes originating them are met, and not only when attention is given to the effects they produce.… —Therefore —he continues— the wisest thing related to migration would be to promote the dissemination of clear, understandable and well-founded messages that make the entire world and the underdeveloped countries see the scope and the enormous real socio-economic impact that would have a more balanced and manageable demographic profile on themselves and the global environment. —The world population, Mr. President, —he adds— is capable of reacting adequately, but only when duly informed. If we do not help in that sense, we are only playing the game of the opposing ultraconservative groups, for the simple reason that they have not bothered to analyze in depth the matter and, I assure you, the consequences shall be disastrous for all.… —Something very similar —diplomatically added while being allowed to speak— will happen with drugs. The idea of solving this very serious problem with walls is ridiculous. Even if we made ten walls on all four sides, as long as consumption continued, I can assure you that drugs will continue to be produced, maybe even synthetically but from within our own territory. —The only alternative —continues this insistent but imaginary counselor— to end that terrible problem would be to get to the bottom of the matter and the strategy has to be another. Let's not forget —he insists— that we are facing an extremely serious and widespread addiction in certain sectors of the community, but our great people 112

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have been able to react and emerge victorious from worse problems. I am convinced that you shall also be successful in this, as long as we focus on the true origin of the problem, and not only on its external manifestations: production and trafficking, but rather, on consumption, and on the psychosocial causes acting. When the president of this fictitious scene was about to request the support of the security personnel to remove him from the premises, this clever counselor takes advantage of his last moments and goes on: —We could only succeed in this Mr. President speaking to our people not so much with simplistic or apparently easy solutions. As much as they are profitable from an electoral point of view, believe me, our community is perfectly capable of reacting in an extraordinary way if spoken to with the truth clearly explaining the risks we face and their terrible consequences. That could end consumption, which is the real problem in the background. —Therefore, —he continues—, I suggest to improve more the strategy and support us in the media, schools, parents, all kinds of organizations, experts and to show the importance of retaking the values that made our nation great. The rest are palliatives that will only make us lose more valuable time. The people, my dear sir, are capable of reacting in a way that you cannot imagine. On the contrary, if they realize later, as I think it will happen, of the bad management at the time of the matter will have adverse political results. When this daring counselor observes that his now former boss presses a button to escort him to the main door, he decides to leave by himself. Moments later, in this imaginary scenario, the hypothetical leader could not help but think in his chair: 113

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—What if this guy was right? —he wondered thoughtful— but, all my campaign, strategy and political project went in another direction... Would it be worth modifying it? Although in such a case... What would think the sector supporting me? And then... How would the ultraconservative groups that followed me react if I told them now that we must once again promote population stabilization campaigns for the benefit of the entire planet, and that global warming is a reality? —Although —he meditates— perhaps my advantages, such as the tax modification, could increase productivity and employment, which would minimize other things... Anyway, I think I need to talk to my personal advisors. They are clever and agree with me on everything, not like this guy who just left. Do you consider it possible to have such an unrealistic scenario as the one described, dear reader? And if such a situation is feasible, since we are letting the imagination fly... Could a leader rectify his strategy? I doubt it, because it would simply not be convenient from a limited political perspective. Now, and only for the purpose of analyzing possible "interferences", derived in turn from supposed conveniences or even personal errors... Would they influence, if any, in a negative way in a certain economic direction? I think the answer is obvious. Don’t you think? But let's stop imagining things, and return to this earthly world, before one of the already so tormented readers requests the admission of the author in a psychiatric center. So already in the field of reality, we could have another question. Could this type of "interference" be associated with another sociological element? I ask you to judge for yourself: 114

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c) Misinformation. As if the above were not enough, the element that I will describe below also impacts in a very special way all good economic performance. If a sociologist or supposed philosopher has a false perspective, could it influence the economic field since this would affect on the way some react? Before going further into the topic, let me give you a bit of background: It may seem incredible to you, but there are a certain number of leaders who, even today, believe blindly — although they do not recognize it openly—, in the validity of Marx’s 19th century seductive postulates already described. Although Marx was considered by himself and by others as a leading economist, sociologist and philosopher, from my modest point of view he was simply somewhat out of touch with reality. Goodness gracious! To top it all, this author is not only dismal but also disrespectful, right? Let me describe why I consider it so… First of all, from an economic perspective, this restless gentleman hinted that a citizen seeking his interest was only the product of an incorrect procedure originated by a “selfish” feeling and, as a consequence, of an artificial system created for the exploitation of some human beings from others. I really regret not having been Marx’s contemporary, since I believe I could have shown him that reality is quite different. As I already indicated, Nature, in an incredibly wise way, deliberately endowed all process considered vital, not only within the human performance but also in the environment of the animated world that surrounds us, 115

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with certain kind of primary “stimulus” (self-interest), so those following it shall generate without even realizing in an invisible and automatic manner, a secondary objective, which is almost always the really important stimulus. The above is appreciated not only in the economic and human aspect, as I mentioned in previous chapters, but even in Nature itself: What do you imagine that induces a tree to grow up? Let Marx excuse us but what drives a tree upwards is its “selfish” and primary interest103 in order to get more solar energy to better develop photosynthesis, for which it extends its trunk and branches upwards and sideways. This process lets the tree achieve its “primary purpose” (please observe the way trees, when around others of their kind, grow even more but mainly upwards, since they feel like they are in some competition with those who are at their side, and all of them shall have a longer stem). But that apparent “selfish” interest of the tree, which Karl Marx was so worried about, generates another secondary and invisible benefit: it develops in addition many basic consistent objectives, which even humans and ecology could not go on without.

It should be noted that there will be plenty of people saying that the tree components and all its tiny parts “do not think” or decide, since they do not have a brain. Although in the strict sense they are right, I consider that in countless aspects of the animated world that surrounds us, their cells have some form not yet fully known that “make decisions” on certain things. I invite you to do the following experiment: plant a small tree too close to a large one. Do you know how the small tree will “decide” to develop? It shall grow completely on its side and twisted, trying to avoid the “shadow” of the greater, and moving its growth towards the sunniest area despite its trunk growing inclined and unstable, even with a certain risk of falling. The outstanding thing about such process is that something inside it made it act like this, and to have gone after the sun. It seems sometimes that we are the ones who do not take advantage of the brain we treasure so much. 103

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What keeps bees working so busy? Will they follow a kind of mysterious secret or invisible protocol pointing out the importance of pollination? I am sorry to say that it was not like that, they act so because they are behind that same “selfish” primary objective: their nutrition and the subsequent storage of surpluses of a series of sugars vital for their survival. However, without even realizing that with their performance they get something much more important and crucial for Nature: they realize that secondary objective, which is nothing less than pollination. And so, I could go on with countless of similar cases. Some will surely say, but the author forgets the search for human equality! So I add something that, at first glance, might seem illogical: if we seek equality as a primary objective, everything breaks down. What? How can you dare to say such a thing? Do you know what would happen without a certain inequality in everything that surrounds us in the Universe? Nothing would work, that’s the way things are… For example, when we take a shower in the morning, do you know what makes the water come out? It is a kind of “inequality” between the pressure of the water tank on the roof of your house and that small object that threw the water on your body. Had a brilliant plumber or “equalizer” technician worked in your house, like witty Marx, you would have had no shower since, when turning the key, only three drops would have dropped (which I imagine would not have been enough, unless you are an extraordinary economizer of that vital liquid). Why? Because the nice “equalizer” plumber left the pressures equal and so, I assure you, the water will never run through the pipeline. 117

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Believe it or not, what makes rainfall is also the product of a long series of inequalities. First, the heat and pressure differentials evaporate the ocean water; other physical disparities such as the movement of the wind, rotation of the planet, bring the clouds. Finally, phenomena of electrical type, pressure and temperature are responsible for making that vital liquid fall. Should there were absolute equality in our community, everything would paralyze... Do you know what makes the taxi driver you know take you to your destination? There is an invisible “inequality” not only in terms of your activities, professions, abilities, time and many other things, but also between the content of your wallet with his, which this fellow taxi driver will seek to partially compensate by providing the service. Imagine (hopefully that’s the case) that this efficient fellow citizen and your friend wins the lottery jackpot, and suddenly becomes an immensely rich character. The day after collecting his prize, would he take you back to your destination? I don’t think so. The “inequality” as it was, disappeared, and it is already in another direction. Perhaps, using that same though different “inequality”, it would be him —as you already know him and you were his client and friend for years— who asks advice for his investment. And guess what? Maybe you would agree to help him, using the same current differential between the resources, experience, knowledge of that former taxi driver friend and you. Strange, is it not? Look what this reckless author is saying! So you claim that equality should not be sought? Of course it is imperative to pursue it always! But on the right track: looking for a partnership with equal opportunities. However, it is essential to see things from the perspective of reality: Poverty is not a cause in itself, but a mere 118

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effect or consequence of other things, such as lack of education or training, inadequate attitude, incorrect use of available resources —often time itself—, lack of family planning, unfavorable economic environment, among others. Undoubtedly, what we should try to modify with the greatest effort of which we are capable are the real causes. Now, we should not be surprised that many politicians, due to their limited vision —especially those that we could classify as populist, of which we will find more in the developing countries—, attack incorrectly the effect, leaving almost intact the causes that are actually those generating serious socio-economic problems. Now, my patient reader, let’s move on to the already mentioned sociological or philosophical aspect, which will be hopelessly interrelated in all kinds of human actions. Is it true that, as some say, human interests are in some way opposed, and actually there is a kind of dissociation, confrontation or “class struggle”? From the author’s perspective, such a posture is only the product of a completely superficial, limited and, we could say, a bit childish perception, but without pretending to blame the authors who have been its victims. What do I mean? There have been countless authors in the sociological, and even “philosophical” (very trivial, in my opinion) fields taking for granted that there are two kinds of interests in all kinds of human interrelation. One of them is the “rational” interest (which is parallel, like father and son, or husband-wife). In contrast, the “irrational” interests are in some way confronted, “contrary” or opposed (as would be those of an employer and a worker, or a citizen of any society with those of another neighboring or distant country). To what extent is this true? 119

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Basically, all individuals and nations are subject to “rational” interests —following that same terminology— and go perfectly and absolutely hand in hand with each other, although the significant fact of not having perceived it that way, does not mean that this mechanism has not always operated. The only thing that happened was that our so superficial and limited judgment —sociological in this case— prevented us from visualizing it correctly and completely. This in turn generated all this phenomenal mutual and self-inflicted harm that we have caused each other, extraordinarily limiting the universal and generalized development in a fierce and shameful way for the human race. Damn! Will this clueless author who has so tormented us with his theories be somewhat right? One more thing: that small and poor human sociological and philosophical vision made us not even realize something very serious. Most of our congeners return to the land with their potential almost intact and without exploiting, mostly as a consequence of this seemingly inoffensive, although erroneous, sociological and philosophical approach. I do not go on about this subject because the present book is of economic nature.104 However, I cannot avoid this three examples that I think it will clarify what I intend to say: Assad had always been a citizen like so many from an Arab country. Unfortunately, due to the very negative In another book by this author called Violencia o desarrollo you can appreciate in a slightly broader way what I mean. The book can be downloaded from www.juanmanuelochoat.blogspot.com In its second part, where the subject “sociology” is referred to, you will be able to appreciate more extensively what I mean, including more examples. 104

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influence of a fanatical and violent group, he believed that it was almost his duty to cover his body with explosives and blow himself up in a crowded European mall. That group had convinced him that (you would not believe) such action would not only give Assad immediate access to a lovely heavenly place, but they also assured him that it would punish righteously those who should be considered “enemies” of his own people and beliefs. Unfortunately, although Assad carried out his purpose, the real consequences of his action produced effects very different from those he thought, which did not agree at all with what he had been assured. Far from having only harmed an “enemy”, the damage caused by Assad included a small decrease in the European productive capacity. This in turn slightly reduced the potential for purchase, employment and tourism in that area, which —he never imagined— had a certain impact also on his place of origin, since it diminished although imperceptibly the number of visitors, the ability to acquire products made in his homeland and, to top it off, the possibility of receiving other fellow immigrants, among many other effects that affected his country, friends, family and descendants. In the dimension where Assad is now —although nothing can he do about it— he discovered horrified —and too late— a completely different reality: the God of his group, of Christians, Hebrews, Hindus and absolutely all inhabitants in the planet and the Universe is exactly the same. He has just realized, to his surprise, that this Supreme Being never wanted such acts to take place. Assad has also just learned that, in the dimension he left, not only did he harm the Europeans, and foolishly 121

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took away lives of innocent people, some of whom were even sympathetic to Assad’s nation. But the worst part is that the damage shall return in very different ways. Now that he learned late of another reality, he understands with deep anguish that he was only a victim of the same coarse deception in which humans have always fallen. The following example is about two entrepreneurs I met in my professional life. Businessman “A” tried to give back to his collaborators as little as possible, he never thought about training them, he did not take good care of the quality, and he always tried to fool everyone as much as he could. On the other hand, Businessman “B” acted exactly the other way around. He always sought to reward his staff in the best possible way, implemented an ingenious series of incentives to those who had a better job performance, trained his staff, kept up with market and technical studies to adapt to the public demand, and took care that their products were at the forefront in terms of quality, as well as an often changing citizen preference. I bet you can imagine the different results they both had. The first one not only had a high and counterproductive rotation of personnel due to the working conditions offered. The quality in their products (shoes) was decreasing to the extent that many shoe stores rejected them because of the continuous complaints of customers, causing a delay in payments to suppliers, until it disappeared from the market. In the case of this Businessman “A”, under a broader social context... did he only hurt himself? Of course not, in addition to the immediate self-infliction in the first instance, the damage impacted his employees, customers, family, suppliers and descendants. Furthermore, a 122

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secondary —invisible— action occurred that he did not even notice: Businessman “A” contributed in a small proportion to the decrease in his community’s productivity, even if only in a very small proportion, diminishing thus the great total of goods and services. This in turn even impacted a very small percentage —although he did not know—, in the economy progress of his country, collective image and other things he complained about his community. He never imagined that the great total produced in his country, is nothing but a mere result of everyone’s acts. In the case of Businessman “B” the exact opposite happened, which resulted in something completely different. His collaborators, customers, suppliers, family, and many others received several favorable effects, reaching even in a tiny proportion their descendants. Do you consider possible, dear reader — as some argue — that human interests are somehow dissociated, confronted, or in a permanent “struggle”? A way of interpreting this social interrelation, as I was saying, is only a product of extreme superficiality, and the worst thing is that many still have this idea. I could suggest something similar in every type of human act: in the father-son relationship, husband-wife, employer-worker, teacher-student, political-citizen leader, producer-consumer and in as many social relationship comes to mind. You would see in them, for better or worse, the way the smallest or largest action will be hopelessly projected not only towards others, but it will return as well to the issuer. I assure you there is no way to act on the planet that a person can avoid an effect on others, which brings on consequences in many different ways. I won’t go beyond, but, since I love to distress the reader with as much as I can, this is one more —sorry— example, 123

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which is a nonexistent though illustrative case of anthropomorphic type:105 A gentleman —hypothetically speaking— is walking down the street when suddenly, without him even noticing, some of the billions of cells in his body said to have made an amazing discovery: These cells assured that they belonged to the muscle tissue and were victims of an irrational exploitation. Stating very convinced pretending erudition and certainty in what they said, they had carried out a deep “scientific” study on the cellular interrelation. According to them, this study showed that, since they were the ones mobilizing the body, they would therefore take total control over the organism because they were the only ones working.106 Moreover, to top it off, they said indignantly, the distribution of blood, nutrients and oxygen was uneven, as there were parts such as the brain, eyes, lungs, heart, spleen, kidneys and others, which received a higher percentage of these crucial elements. Their determination and conviction was such that they soon issued a manifesto, with the following final motto, “Unite fellow comrades, you have nothing else to lose than your chains”, which called the attention of many. Glossary: Anthropomorphic means "related to the human being". I use this type of examples only for didactic purposes, since as someone could tell me cells have no capacity to make decisions. However, we can deduce —as I said— that they have (an element that has not yet been studied enough) some kind of action guideline that, over the years, we will get to know. 105

Muscle tissues is part of the human body in about 40 percent of its mass. Different types of cells specialize, among other things, in “contractile” type activities, which means that many of them have an elongated, significant shape that allows us to move. This tissue is strategically distributed and integrated into several parts of the organism of living beings belonging to the animal kingdom. Anatomía humana, Alfredo Ruiz Liard and Michel Latarjet, Editorial Médica Panamericana. 106

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In their supposed phenomenal discovery, they did not consider that in fact all parts of the body work in different ways and that the wellbeing or discomfort of all its parts is inevitably associated with the rest of the organism. Furthermore, the fact of trying to dissociate or face the interest of some cells against others through the “cell class struggle” was a huge blunder. In addition, those who did not share that “revolutionary” vision said that while it seemed that muscle tissue was the largest volume good or poor performance of any of the parts will have a palpable impact on the rest, which they can ascertain. That supposedly innovative and witty group of cells insisted that the organism was divided into many parts, in this case those belonging to the muscle tissue of the left forearm. Therefore, they said, it highlighted that there were “insurmountable differences” between them, and that, since they all had unique different characteristics like those from the eyes, nerves, blood, bones and others, it was essential to be respectful of each one’s use. Divisions, barriers and autonomies should be established all throughout the body. The most expert cells had a completely opposite view. These cells claimed that they actually were part of an indivisible whole that should be kept integrated, since it is the only way they could make a common front against all kinds of adversities, otherwise the body survival would be at stake. They emphasized that they all had the same origin because they were the result of the chromosome integration of only two haploid cells107 —spermatozoon Haploid cell is the one that only has half of the chromosomes (in higher organisms such as mammals) as it happens with the male sperm and the female ovum. The human conception is achieved precisely by the integration of both cells and the subsequent integration of the two sets of chromosomes of each of them. The rest of the cells (also called diploids) of a higher organism usually already have two sets of chromosomes (that is, 46). Embriología Médica con orientación clínica, Sandler and Lagman, Editorial Panamericana. 107

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and ovule— and that, if they had been divided later into very different functions, it was only to specialize in different areas, for it is the only possible way to optimize the efficiency of the whole. But cells that considered themselves as great reformers completely rejected such position assuring that these arguments were nothing but palpable evidence of a kind of oppressive plot to maintain the exploitation and hegemony of one another. These revolutionary cells also showed that organic functioning was poorly designed, since every cell, organ or tissue pursued a “selfish” particular interest. This incorrect attitude should be replaced immediately by another mechanism and centralized control, which they would implement. The other cells responded that such a point of view was one of the greatest nonsense they have ever heard, since it was through millions of years of evolution that this ingenious and surprising mechanism was reached, which produced the effect following among other things: During the search of the primary stimulus of each cell or group, such objective or individualized “benefit” was only achieved when each tiny part optimized or made good use of the different nutrients and oxygen that was received automatically, and invisibly induced something of extraordinary relevance for the rest: the generalized bodily productivity, which resulted in a wonderful multiplier effect. The fact that they were not aware of something so elementary was significant, which indicated that their theses were unviable and too superficial. They added that if they removed the primary stimulus to each cell or group, productivity and good brain, eye, 126

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kidney, pulmonary, cardiac, digestive, muscular, nervous, reproductive, immunological, hormonal results would collapse immediately. This would surely make the amount of reciprocal benefits to the whole — including the benefit the tissue receives from the muscle through the cells— fall far below minimum subsistence levels. However, these kinds of arguments —no matter how convincing they seemed to be— did not persuade the revolutionary cells, which, rather than trying to analyze the reason that those of inclusive thought could have, pretended to take full control of the organism in order to be able to carry out those that they considered were their so outstanding theories. The cells that were waiting for the arguments of both groups concluded that perhaps the reforming cells were not even so convinced of these fragile arguments. Rather, they only used them as a means or excuse for a total body control. Meanwhile, out in the streets, this gentleman gets worriless home, and is about to carry out other activities. He would never have imagined the odd and rather wacky battle that is going on inside him. For the moment, the only thing that we could explain is that their survival shall depend on the reason prevailing in all its very small parts and realize that they are actually integrated in the same whole, and fully perceive that good or evil of some shall hopelessly be associated with the rest. Going back to the main subject of the book and before the author discusses another of his atrocious examples... We could say that, if the citizens of any country are subject to these and other types of interference, what kind of defense could we put forward should we want a better economy? 127

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This and any other risk can be tackled with increasing knowledge and information from the audience on crucial issues. No wonder the statement, “Democracy is not perfect, but it is the best existing system.” However, we sometimes forget that a counterpart is required for its optimal though sometimes minimized performance: We need and adequate perception and capacity of judgment of the whole community since, otherwise, a deceptively attractive, simplistic or sometimes unrealistic approach of some individuals would be enough to cause atrocious complications to the world. To achieve the informational development required, it is also crucial to maintain full press freedom, since one of the first things that any lost leader (and possible dictator) shall do —perhaps unwittingly aware of his ideological fragility— as a rule is to silence under any alleged reason all kinds of opposing opinions. Let’s see one of Hitler’s regrettable examples. Do you recall one of the first things he did? I can assure you that, if press freedom had been “allowed”, all his racist, anti-Semitic, belligerent, territorial expansion, hatred and other misguided assumptions would never have caught on, had there been —even within his own country—, superior, solid, sensible arguments and contrary ideological positions much closer to reason. Don’t you think? Some might say that meaningless ideologies can also arise, such as those of the “revolutionary” cells of the previous example. It’s true, but —beware— in the face of such an eventuality, it would only highlight the need to have a higher level of knowledge. I assure you that an audience going thoroughly through all kinds of options has the ability to properly decide the origin or lack thereof of any alternative. Thus, a crazy thesis shall be stopped 128

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and exposed to the community in less than a stuttering cock crowing.108 Furthermore, something worth noting is that this same freedom and greater generalized knowledge will also allow us to shed more light on the best way forward. This shall make us realize, among other advantages, that all walls and barriers we have arbitrarily fabricated throughout history among peoples are no more than unreasonable artificial divisions, which were only the result of the same sociological and philosophical superficiality with which we have conducted ourselves. It will make us realize that the future can be perfectly manageable if we are able to integrate what should never have disintegrated. Only then can we extend socioeconomic development to all our brothers in the world, and realize a small detail that we have forgotten: we are part of a team called the World. Should we have a higher level of knowledge, we could acknowledge another issue that we pretend non-existent: the greatest human crime of all times has been to allow the resources that the Supreme Being placed in all —in very different areas— to be returning in its vast majority —in a shameful way— to dust without being able to project its potential and benefit. They first come back in many different ways to individuals, then, as I said, to the whole community, and later on, to the issuer of the action. This in turn will have a decisive impact —in an Excuse me for this joke. I use this term because I like the nice and distinctive way of cockcrow. I also emphasize something odd. All those with ideas similar to the “revolutionary” cells that have emerged throughout history used a procedure that is worth highlighting: first they used press freedom to disseminate what they considered surprising discoveries and then, once they got the power, they ruled out all possibility of opposing arguments. 108

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extraordinary multiplier effect— on real wellness and universal development. “What if we remind this often lost author that this book is about economics?” More than one reader would say. Therefore, could you please be so kind as to go back, kind author, to the monetary aspect with which you have bored us so much? And to make things clear... Could the economic issue help, at least in a small proportion to what he has just told us, even in a gradual economic integration? The most important thing for this ambitious goal shall undoubtedly be, as I mentioned, to perceive the important sociological and philosophical factor in its appropriate, comprehensive and inclusive dimension, which is achieved by increasing the level of knowledge and education in very different areas. This in turn would make us discover —among many other things— that the financial aspect, properly managed, can in fact contribute eventually in different ways to the much-needed integration. In the following pages I will describe one of them, but not before giving you the good news that there is very little left to finish the book giving soon an end, therefore, to the torment derived from reading it. But do not rush dear reader, don’t throw it away yet, there is one more chapter to go.

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Part three The future

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Chapter 8 An integrating element under fair ratios

Idle reflection In previous pages we had comments on experiences of history, anecdotes, examples, expert advice and several observations as objective as possible. In the next chapter the author will make a reflection on the topic. Therefore, with your permission, I propose that we see what the author can comment on a possible progress in the economic and monetary issue for the futureâ&#x20AC;Ś When we put on the analysis table a topic that has not been explored enough, and taking into account that when looking forward we can not help but notice that we must be very cautious, and conform our thinking and go on not only under the limited optics or vision of a single person, but of the contributions of all. It seems as if the Supreme Being, or Nature, as you prefer to call it, has intentionally endowed each one with a little piece of truth so that only through the contribution, analysis and argumentation of all, we can access to longer stays of knowledge. Only in this way can we and must we move forward in a real way. Would it be possible to use money not only as a generator of wellness, but as a fair exchange integrator and contributing to this long-awaited generalized development?

Background Let's look at the strictly economic issue first. In one of the aspects raised in the previous pages, I highlighted 133

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the way foreign trade in a somewhat imperceptible way increasingly affects each country. It's true... but why does it happen like that? What the hell has to do with a "mercantile" issue or with a simple exchange of goods between countries, if the economy and the monetary policy seem to be something of exclusive competence of each nationâ&#x20AC;&#x2122;s government? I ask you to consider the following: everything that modifies in some sense the so essential equation or balance between "assets" and "circulating" will automatically force us to link to foreign trade. Why? As I described, that topic is included in the crucial equation or balance indicated. I almost dared to say that a book like the one you are just reading would have been incomplete, if we had not addressed the subject. Oh my Gosh! Isnâ&#x20AC;&#x2122;t the author exaggerating? Judge for yourself if an excess of imports or exports affect the "balance" between "circulating money" and "assets", and if it affects the monetary issue. Is it not that the author is clinging to include an inappropriate topic? Or maybe... Shall it happen as he says and he got into the economic life of each country? I also note that in a strict or merely arithmetical sense, any "excessive" imports of goods would be in some way self-compensated with its counterpart: its payment or the corresponding remittance of "money" abroad to pay for it. Some do not perceive fully that it will not always happen that way, since the natural "usual" commercial flow shall very often be influenced by other variables... Damn! Once again the author came up with his complicated stuff? 134

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What kind of variables intervenes? It is not as complicated as it actually seems believe me. What is expressed is due to very simple principles, look: I will use another of my examples again, just in case you have not had enough. Let's imagine that any country has an abnormal deficit in its trade balance (more imports than exports). This will automatically make (if the other economic variables remain the same, or céteris paribus109 as experts would say) that the country pays in some way the "financial shortage", because that country "bought" more from abroad than it "sold" —among other drawbacks. Note carefully the difference of what happens when other variables come into play. A "trade balance" can end the year with a "surplus" or "deficit" balance. In contrast, in the "balance of payments" the same cannot happen. Why? In that same period, the balance always has to end in "zero", hell! But then... against what can we adjust it, since we will always have a "surplus" or a "missing" in terms of trade? Any "surplus" or, as the case may be, "shortage", must necessarily be reflected in one or more of the following: a) Increase or decrease in its foreign exchange reserves, b) Compensation with capital transfers that have been made, or c) Fluctuations in the debt amount. There is no other way.110 Ceteris paribus: (o caeteris paribus) is a Latin phrase meaning "once the other variables are equal". This method is used in some sciences, mostly for analysis purposes. Isolation and Aggregation in Economics Schlicht, E., Editorial Springer. 109

Hence the extraordinary importance that every political leader must have an excellent domain of public finances, otherwise, one of the adverse results shall be an inevitable increase in “debt”, as in the unfortunate case of the two openly populists presidential terms in Mexico already described (19701982). Part of the negative effects of such period were reflected in an extra-... 110

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However, although in the first instance this seems to be limited to a simple "adjustment" in one or several of the described lines overlooked by the political or financial authority of a country could lead to really serious problems. As proof of above, we shall now interrelate this fact with the following.

Recent history I invite you to a small but illustrative journey in time. With the "time machine" that we already use to move to the Paleolithic at the beginning of this book, let's go only a few decades ago, let's say to the forties of the last century, a little before the Bretton Woods agreements.111

...ordinary increase of the Mexican debt of 1 204 percent. Sources: Sixth Government Report of President Gustavo DĂaz Ordaz. September 1st, 1970/. Chamber of Deputies; Center for Public Finance Studies; Historical Statistics of the Public Debt in Mexico, 1980-2002, p16. The Bretton Woods agreements are the resolutions of the United Nations monetary and financial conference, held in Bretton Woods (New Hampshire, USA), from July 1st to 22nd, 1944. Bases of the commercial and financial relations between the countries were established in an attempt to eliminate the protectionism that had prevailed since 1914. It was considered that the free trade policy would help development, which would contribute to world peace. The World Bank and the International Monetary Fund (IMF) were created using the US dollar as the international reference currency, having started to operate upon these agreements in 1946. One of the forefathers of such agreements was the Atlantic Charter signed by Franklin D. Roosevelt and Winston Churchill in 1941, when they met on a ship in the North Atlantic. Roosevelt had a very clear and visionary perception about the postwar world, so, in that letter, the right of all nations to access trade and free trade was established; and, in a way, the Bretton Woods agreements were nothing more than a way of completing the sense of the Atlantic Charter. At Bretton Woods, the desirability of creating a third world economic organization, which would be called the International Trade Organization, was also proposed, which was later replaced by the General Agreement on Tariffs and Trade (GATT), that in turn was absorbed by the World Trade Organization (WTO). Eric Helleiner, Cornell University Press. 111

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Once placed in the context of that time, we will see that the United States produced little more than 50 percent of world GDP and since the war had been catastrophic in different parts of the globe, it had a favorable trade balance. This caused them to accumulate reserves year after year, and, as if that were not enough, they had very prominent institutionality and leadership,112 which allowed them to have an understandable global credibility and respectability. That is why it will be easy to understand why the American political and economic position prevailed in the agreements mentioned at Bretton Woods, which was very reasonable for the time. There is doubt either that, for practical purposes, the most understandable and even logical issue was that in those years these commercial and financial agreements were reached with the US dollar as a reference and common denominator universally accepted in global transactions, which in fact worked efficiently for decades. It should also be noted that the commitment was to keep the US currency equivalent to $ 35 per ounce of gold. I would like to remind our readers that, strictly speaking, it is not necessary to have a payment method "associated" with a certain amount of silver or gold, since, what actually gives sustainability to any currency is the goods and services it represents. This "equivalence" with a certain precious metal was basically for two purposes. One of them was the psychoAs it happened with Franklin D. Roosevelt (1882-1945) who was the only one in the U.S. to have won four presidential elections in 1932, 1936, 1940 and 1944. He could not conclude the latter. Page: "The Presidents of the United States" http://presidenteseeuu.blogspot.mx/2009/10/franklin-droosevelt.html 112

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logical character, that is, achieving public credibility and its subsequent universal acceptance; and the second one was intended to avoid an eventual disorder or irresponsibility from any government in the world. Now, once we could appreciate in the forties that authentic world catastrophe of the Second World War, as well as the strenuous recovery of the following years, let us now return twenty-five years more to the present time, that is, in the early seventies. What do we have now? Surprisingly in those relatively few years, the global context was completely transformed. The United States began to have a negative balance in its trade balance —which later became chronic—, and many other regions of the developed and developing world recovered —or grew, respectively— in terms of their productive capacity. But what is the problem with it? Actually none except that the scenario changed completely. Although come to think of it, the only fundamental problem of a changing environment like the one described —and almost anyone—, would not be so much to face a new situation in itself, but rather, how to react to it. Therefore... Did the United States proceed correctly in the face of this different panorama? The then President Nixon adopted certain measures such as abandoning the dollar equivalence with respect to gold. This resulted in a depreciation of said currency in its relative value regarding other currencies and the imports of several merchandise was taxed with certain rates.113 According to the criterion of the author and taking the risk to make a judgment —I do not have enough elements to support this claim— I feel that he was advised (especially in the first two points) by a very capable economist, as it could have been Milton Friedman, who had the privileged opportunity to advise him. Likewise, I believe that said "depreciation" was not carried out in the required proportion given that its fixation was left to market forces... 113

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As we prefer that the facts speak for themselves and given that we are worried about our old time machine, let’s go back to the present. What has happened since the seventies to date? Was the North American trade balance resolved in a radical and definitive way? Furthermore... What happened to their currency? Did it continue to be a world reference in world trade? The trade balance problem not only was not solved but also worsened. The US dollar depreciation did not result in this currency to be at its real levels according to its foreign trade flow. What happened? Why did not the currency depreciate to such a level that it would have made products more competitive? The disguised variables already mentioned went into action in an invisible way to which, believe me, they love making mischief. An unusual international effort to "buy" that currency placed it at a certain percentage above its real value. At the same time, this unusual influx of resources allowed them to comfortably settle the growing deficit in their trade balance... Oh dear! Those variants that this insufferable author told us so much are really naughty! So, what got in the way that made us come to all this?

Wrong medication If you or your servant were doctors —in the case of the author, don’t panic I am not, so you are not at risk of ...(a mechanism in which Friedman firmly believed — with good reason), although they did not take into account that the market in turn was unduly influenced by a more substantive element that we will mention below.

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entering my office— and we realized that, with certain prescription our patients get worse, I am sure that we would have changed almost immediately any indication of any specialist, don’t you think? But it did not happen that way with the description above. Perhaps this is precisely due to the interference of those overlapping variables mentioned introduced in a concealed manner in a certain scenario without permission —or sometimes even with it— and, in the best of cases, cause distortions. What do I mean? I submit for your consideration my particular perception. Although the Bretton Woods agreements at the time and under the circumstances were successful, over the years were obsolete. I think the reason is simple. It is not adequate to base or interrelate an international means of payment on any specific good —whether gold, silver, diamonds, oil or whatever comes to mind—114 since we would be subject to accidental or intentional modifications derived from the understandable offer or demand oscillations, or both. This in turn would lead to unwanted variations not only in the currency itself, but also in the goods that it represents. It would not be a good option either to use the currency of any country or region as a means of international payment however "solid" it might seem... Why? It would happen just what happens right now... And what’s that? Can you explain a little more why you consider it that way? All currencies are subject to their own needs, internal As I am sure you understand, there have been individuals who have suggested —in a superficial way— a hypothetical international currency based on "oil", which is not convenient. John Maynard Keynes, a real knowledgeable economist, suggested once a means of global change associated with the price of 30 items. In my humble opinion, it would be more precise and simple to interrelate not with a limited number of assets, but with all, which we naturally obtain with "the sum of the goods and services" available. 114

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policies, conveniences, successes or failures, productivity and other particularities of each country or group. This will influence not only its internal economic performance, but also the consequent global trade. It is likely that the first impact shall be on the owners of such currency used as a world reference. Wow! And how did we not realize that? You wouldn’t believe me, dear reader... Do you know why I did not invite you in this chapter with my vilified and non-existent time machine to move us further back in history? It might seem incredible, but due to the irrational and even primitive sociological position that we have suffered —as I described in past chapters—, this produced, among other drawbacks, the following effect: The extraordinary human —as well as the economic and monetary— potential underlying in most of our fellow human beings has not come out as it should, and I assure you that we need it much even if we do not even realize it. The author is giving us the spiel again! This explains, my patient reader, the serious lack of many more advances not only in economic matters, but also in other sciences, and there is a sense of absence, emptiness or "gap". Hold on, author! Before we go in another direction, tell us... What did we need and why? Perhaps within that so limited human sector of which you speak about, which has developed in economic and political matter, you are suggesting that others didn’t notice such failure in the monetary question? Of course there were limited but valuable advances, and we need the transcendental contribution of the majority, I insist. But I will quote what was said about it, specifically about the relevance of a supranational currency, or common denominator of all currencies of the world that 141

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would have avoided distortions like the ones described. Below, you’ll find four opinions about the subject. The very prominent and already mentioned liberal president of the United States Franklin Delano Roosevelt tried to create a kind of global single currency, and even called it "Unitas".115* No such supranational currency was implanted in the Bretton Woods agreements of 1944 perhaps, in part — although difficult to know—, due to its increasingly limiting physical suffering, the minor technological, financial and operative advances of the time, or maybe just following the most "simple" or "safest" route.116 However, John Maynard Kenes, another prominent economist who attended the Bretton Woods agreements in 1944 on behalf of England proposed the convenience of a supranational currency and also suggested a possible name: Bancor. In 1960, Robert Triffin, a very notable Belgian-American economist117, presented before the United States Senate the inconvenience —even for that nation— of using that 115

https://es.wikipedia.org/wiki/Bancor

* Another reason why the author admires Franklin Delano Roosevelt is that, in his fourth re-election (1944), he already had very poor health. He was almost disabled, which made it very difficult for him to carry out all his activities. Nevertheless, he continued in office, which benefited his country and the world, until his death in April of the following year. “Finance & Development”. Quarterly journal of the International Monetary Fund, September 1998, volume 35, number 3. http://www.imf.org/external/ pubs/ft/fandd/1998/09/boughton.htm 116

Robert Triffin (Belgian-American, 1911-1993). He held positions in the Federal Reserve of the United States (1942-1946), the International Monetary Fund (1946-1948) and the Organization for European Economic Cooperation (1948-1951), today the OECD. Since 1951 he taught economics at the Universities of Yale and Berkeley. In 1960, he testified before the US Congress about the serious deficiencies in the Bretton Woods financial system, as it... 117

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currency as a means of payment worldwide. Since 1960, Triffin considered that the amount of dollars circulating abroad was excessive, which led to a curious paradox that was known worldwide as the "Triffin dilemma". Among other things, this dilemma forced the dollar to be maintained as a "solid" currency —too much, in the author's opinion— and, on the other hand, such solidity damaged its own foreign trade since it made its exports "more expensive" and “cheapened” imports. If that situation had not existed, I believe that once the nation's trade deficit had been presented and increased, it would have pressed naturally the dollar down, a fact that would have automatically placed it in a more competitive international position. The question is where was this process artificially interfered with? From an abnormal income (or say acquisition) of US dollars for its current role that represents a kind of "global currency", and the respectability or credibility it still holds. The excessive entry of other currencies in the world not only raises their value, but actually —a currency a little higher than the "normal"— impacts in terms of their international competitiveness. In addition, this abnormal entry of resources allows the financing of its astronomical trade deficit. In other words, they are not only decreasing their enormous internal productive capacity with this huge influx of goods from all over that are generating jobs and benefits ...caused an excess of US dollars abroad, whose number exceeded the amount of gold that was supposed to support it. He resumed his Belgian nationality in 1977 and returned to Europe, where he became a strong supporter of European integration, collaborating in the formation of the European monetary system and supporting the creation of a European Central Bank. Macroeconomics, Dornbusch, Rudiger and Fischer, Stanley; Mc Graw Hill. “III Conference on Political Economy”, Roberto J.A. Kalauz, Buenos Aires. http://www.ungs.edu. ar/ms_idh/wp-

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in other latitudes. The downside of the matter is that they are doing it by throwing a big snowball —called debt— that is getting bigger everyday. Another analyst who also explained the advisability of replacing the US dollar through the Special Drawing Rights (SDR)118 was Dominique Strauss Kahn.119 This position did not catch on due mainly to its untimely exit from the International Monetary Fund (IMF). Given the magnitude of the problem, some important reflections could be made. The first question would be: were the Bretton Woods agreements wrong? At the time and given the environment and inherent limitations of Special Drawing Rights (SDR) are a method of payment or financial exchange between the member countries of the International Monetary Fund (IMF). At this time the amount of SDR is made up of 42% US dollars, 31% euros, 8% Japanese yen, 8% British sterling and 11% Chinese yuan. During the management of Straus-Kahn in the IMF, the volume of SDR increased substantially since, due to the 2008 global financial crisis, SDRs were intended to play a much more active role in international transactions, decreasing the large dependence on the dollar after his resignation in March 2011 due to a personal accusation. At a subsequent IMF meeting in October of that same year, the proposal was reversed considering that the size of SDR should not be increased in order to avoid excessive costs and possible confusion. It is important to note that although the American economist Henry Dexter White (1892-1948), who represented the US at Bretton Woods, initially insisted on placing the dollar as a world reference, he later rectified his position by means of an internal letter in the IMF and two decades later the first amendment was made in the IMF and the inclusion of other currencies in the SDRs was allowed. However, the use of the US dollar in world trade is used for practical purposes at a higher level than desired, which impacts —according to the author of the book— its own competitiveness for the reasons given. "Finance & Development", Quarterly Journal of the International Monetary Fund, September 1998, volume 35, number 3. 118

Dominique Strauss-Kahn, (French, 1949). Director of the International Monetary Fund (IMF) from 2007 to May 19, 2011 (the date he abruptly terminated his administration due to a sexual accusation at a hotel in New York, USA). He was Professor of Economics at the University of Nancy, Secretary of Foreign Trade and Secretary of Economy in France. http://www.imf.org/external/pubs/ ft/fandd/1998/09/boughton.htm 119

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the time, I think they were an excellent progress for international trade, which led to a real and effective development. But those agreements should have been perfected since the fifties or, at most, the sixties. Was John Maynard Keynes' proposal good? No doubt it was visionary and worthy of recognition, although there are some points I do not fully agree completely. His suggestion to establish a certain tax or collection to the "surplus" countries (in terms of their balance of payments), along with other surpluses should be channeled to the "deficit" countries.120 Triffin's signaling was correct. Perhaps he did not have the proper answer given that the US balance in those years was surplus. As for Mr. Strauss’ proposal, then director of the International Monetary Fund to increasingly use the Special Drawing Rights as a means of global exchange alternative to the US dollar, it would not have been bad, although perhaps there would be better alternatives. Another reflection would be if an eventual elimination or reduction of the US dollar as a reference in international trade would harm the US. As I am sure you understand, there will hardly be a single science where all experts on the subject agree. There are surely those who believe that such a decrease Even if their intentions have been excellent, I think it would not have been the best option to "punish" the productive countries and "reward" those who are not, there is another way to help them. Imagine the professor of a university who, since he considers that the current way of grading is unfair and "regressive", he won’t use it anymore. He is progressive and fair —he says proudly—, therefore, he will remove points from students with good grades, and will assign them to those who are not trying harder. What effects will this so just teacher produce? Exactly. Neither, the students with good grades nor those with bad grades will make any effort. I assure you that if in a family, business, national or global context we do not try to work hard and make an effort, the final result shall revert in many and very different ways. 120

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would be detrimental since a lower global demand for US dollars would substantially reduce its value by decreasing the foreign currency entry. It would reduce as well the important global financial flow that is currently channeled to its Treasury Bonds, investments in the Stock Exchange and other important assets. They would also say that if the current capital inflow is reduced, it would be more difficult to cover the current trade deficit, which would force them to stabilize their trade balance in the medium term. A perception like that would not be far from reality. There would also be, however, another perspective: a substantial decrease in the relative value of the US dollar â&#x20AC;&#x201D;derived from the aforementionedâ&#x20AC;&#x201D; would make its imports more expensive. This in turn would diminish imports and make exports more competitive, which would increase the latter, favoring thus their internal productivity in a remarkable way and, among other things, it would facilitate the tourism that enters the US and would make it more expensive for them to go abroad. All the above would occur in the same proportion to the oscillation of their currency. That, in my opinion, would not only increase its economic potential, but also its employment and development in a substantial way, influencing thus its trade balance more than any protectionist measure pretended. Someone might think... Fortunately this meddlesome author is not a doctor because his prescriptions are too bitter! I can assure you that there are measures that are worse when they are not applied than the supposed sacrifice of applying them. Bear in mind also that the corrections not taken in the past decades, may have to be carried out now. Furthermore, take into account that there is no artificial 146

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interference in the natural forces of the market or world monetary flow, but rather the opposite: remove the undue interference of something that was wrongly introduced into the global financial scenario so that the commercial concert international works as it should for the benefit not only of the whole, but even of the US. There will be those who consider that removing, or rather, locating the dollar in its correct position would affect the "pre-eminence" of such an important nation. With your permission not only do I differ from such a position, but I also insist that perhaps a scenario like the current one could affect in the opposite direction, since making the necessary adjustments would not create a bubble that could have unintended consequences. The downside of reconsidering the matter dear reader is that it led to another of the atrocious reflections of this so unreflective author. The human being has always made the mistake of seeking a supposed â&#x20AC;&#x201D;and undueâ&#x20AC;&#x201D; preeminence (some even call it "greatness") either from a person or a people when a more realistic approach would make us broaden the perspective and aim to achieve it, but under a universal or generalized context, as all members of a team called the world. Henry Dexter White said,121 "Only through international cooperation will it be possible for countries to successfully implement measures aimed at achieving and maintaining a high level of employment and real prosperity, so that has to be the goal of all economic policy." I think we not only side with that, but we agree that only with a common vision, and a sociological approach, let alone right, even "realistic", we can reach that much-desired global development Henry Dexter White (1892-1948) was the US representative in the Bretton Woods agreements. 121

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as described in previous chapters. And since the author of this unbearable book is nosy, let's see, what the hell would you suggest? As I am sure you understand, the dimension of the problem requires the participation of many experts in the economic, monetary and financial issues. I could not fail, however, to include my humble opinion: It would definitely be essential to create a supranational currency, which should be limited only to the field of international trade especially in its early stages, managed at the beginning and roughly, and subject to perfection by experts as follows: 1) Management by WTO personnel highly specialized in financial and monetary matters, 2) Flexible value of each "national" currency with respect to it, depending basically —according to WTO specialists— on the behavior of each country’s balance (or by abnormal occasional movements in its payment balance, should other undesired variables intervened), 3) The currency of a "surplus" country would have to be "appreciated" with respect to said world currency, while a "deficit" currency should be "depreciated". 4) International equitable distribution of global financial reserves that, ultimately, shall provide the real support and sustainability to the world currency122 depending on several factors: A) Its importance in the global context and depending on The creation of a world currency would not eliminate the financial flow to the US given that the real or support reserves of such international payment means has to be distributed in all the reliable economies of the world. As the US is one of the most reliable countries in terms of finance —fortunately for them and others— and even with its current problems, this flow would decrease for but would not be "eliminated" and distributed equally among all "reliable" economies of the world. Therefore, such a measure benefits even the US itself for the reasons explained above. 122

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its proportion or relative importance in terms of world trade, B) Correct financial and political soundness of its institutions according to the opinion of a recognized panel of experts, C) Respectful socio-democratic situation for rights human rights and press freedom, since that would become a contributing factor that could affect a greater human development for each town; as well as other conditions that may arise at the time and depending on the good judgment of the financial authorities in charge. Now, as for the "appreciation" or "depreciation" of each currency with respect to that hypothetical supranational currency, in my opinion the following beneficial effect would be produced: If country "A" has a repeated trade surplus, when the currency is appreciated with respect to the currency that serves as a global exchange, it would make its exports more expensive and its imports more accessible, which would gradually lead to an increase in the standard of living due to the aggregate access of goods imported from their own people. On the other hand, if country "B" is usually deficient, and year after year its currency is depreciated with respect to that projected global currency, its own exports become increasingly competitive. At the same time, imports become more expensive, which will naturally and automatically tend not only to global equilibrium, but also to avoid the irrational draining of financial resources and sources of employment from some countries towards others. This author is really out of his mind! Some may say. The currency "appreciation" of a surplus country would represent a kind of implicit "punishment" for every highly efficient and organized nation in the world! How do you think of such a thing? It would not necessarily have to happen: if country "C" 149

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is repeatedly "surplus", and smart enough not to want to be "punished" with a possible "appreciation" of its currency, its way forward would be very simple: buy more from abroad in search of a "balance". Thus, it would raise the standard of living and wellbeing of its own people (with a greater added volume of imported goods), and it can perfectly continue with its high level of efficiency, while remaining productive and efficient. I cannot find the "punishment", do you? However, in terms of operational mechanics, practical instrumentation and other specific aspects of a monetary system such as the one described, the rules and procedures to be followed could not be established —and it would not be convenient—, according to the indications or standards established by a small group. Actually, two of the most prominent economists who at that time took part in the Bretton Woods agreements —John Maynard Keynes and Henry Dexter White (England and the US, respectively)— incurred in some unintentional inaccuracies.123 Therefore, once the origin of a reform in the global monHenry Dexter White, PhD in Economics, despite being one of the most capable people on monetary theme of the time —which is why he was the representative in such agreements— originally estimated that the US dollar should be established as a world reference. A short time later, however, he reconsidered his position through a letter that only circulated in-house within the IMF as already indicated. Personally, I believe that his brief life (55 years) prevented him from making many more contributions on the monetary, development and international trade issues. "The Battle of Bretton Woods", Benn Steil, Princeton University Press. Paradoxically, Henry Dexter White, was accused of "communist" during the witch hunt, similar to the later macarthist in 1950-56, supported by IMF members, as with James M. Boughton in his article "The Case against Harry Dexter White: Still Not Proven "on June 1st, 2001 of journal History of Political Economy (2001) 33 (2): pp. 219-239. https://doi. org/10.1215/00182702-33-2-219. Under the limited perspective of the author —excuse me, I do not have access to all the vital information in order to issue a better judgment—, I consider that his successful internationalist and inclusive position made him look for approaches with Soviet authorities to attract them towards the organism that would be created (IMF). The inclusion of the... 123

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etary system has been analyzed and well defined, it might be advisable to proceed as follows: First of all establish the specific and crucial bases of that intended. The best thing would be to submit its practical and concrete operation to a kind of global contest towards all specialists that are related to the subject, offering a kind of important recognition and a certain financial remuneration to the best prepared, functional and practical operation... Do you want to know the result? We will be surprised not only by the breadth and variety of the proposals —many of them extremely valuable— but also by the enormous thinking potential that the members of this great team called the world could have, when we decide in a wise way. In addition, it would make us see the absurdity of the limited way we have to make decisions that could be far-reaching —as in this case— only for a small group regardless of their capacity when we have to be open to practically all specialists in the matter, although the final decision should only be taken by the panel of experts on the subject that have been in charge of such an important issue. As I can see how the reader wishes to put this annoying author in the time machine, knowing it has almost no batteries left, and making no batteries left, and making it go to the paleolithic era with the author inside, I believe the best thing I can do right now is to conclude this frustrating book. Since I have no doubt that this single currency would be a

...Russians anyway was rejected in those years due to the incompetence, disinformation and stubbornness of a dictator like Stalin. However, this unleashed a huge mistrust of US ultraconservative groups.

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measure that sooner or later will have to be implemented and given that I trust that its name will be chosen by the majority my last will as it is granted to the condemned would be to name it "denarius". First, for the role it played in history for being the basis of the monetary system in the Roman Empire, and its meaning, "ten aces”. There is no doubt that the author is out of his mind! What the hell does that have to do? I confess that the true development of a great team —ours, the world— cannot come about simply by the development or growth of a single element, the economic issue. If we were only to get that element, you wouldn’t believe how many problems would arise.124 A real growth in the economic issue must be accompanied by other no less valuable "aces", that is, the important growth in the educational, sociological, research, human and even spiritual values for those who believe in them, population stabilization,125 adequate civic sense, environmental sense and other significant key factors. I truly appreciate that you allowed me to torment you with this book.

Among them, drugs. Have you observed, my dear and so patient reader, the areas where consumption grows? The answer is in countries or regions with the highest income. A greater development in the economic aspect only, without a parallel growth in human and moral values, would have unfortunate results in different social aspects. 124

125

For the importance of population stabilization, I recommend the Appendix.

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Epilogue

I’ll make the most of this last space for one more brief reflection... Unbelievable! Another nonsense from the author? Well, guess what? Yes, and the worst part is that I will pose it through a personal anecdote: When Hugo Chávez ascended to power in 1999 * (who remained in office until his death, which occurred in 2013), a friend writer I had the pleasure of meeting126 — he died—, expressed the following in a daily newspaper column: — Finally... Someone came to power for their people and the poor! I could not avoid getting in touch with him —as you may have realized, dear reader, I am a bit nosy. Upon greeting him, I remember very well that I mentioned a witty and well-known popular saying: —Calmantes montes, alicantes pintos, pájaros cantantes… (Statement of the popular Mexican jargon referring to the convenience of not anticipating judgments, but rather waiting for the results… Calm down, be cool) and I added:

* He remained in power in Venezuela for 13 years, until his death, which occurred in 2013. He intended to stay longer. I prefer not to mention his name because he had important achievements in many other aspects; I do not think it is appropriate. Besides, he has no way of expressing himself. I must confess that I did not take the precaution of preserving the newspaper clippings where he indicated the aforementioned. However, I think it is irrelevant. 126

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—Anyone can claim the best intentions or even the most impressive phrases and desires. Moreover, perhaps there will not be a single politician who, to a greater or lesser extent, has not done so... However, I believe that the key to citizenship is somewhere else. Instead of "qualifying" or comparing candidates for the loftiness of their goals, we must evaluate the feasibility of their statements, or better yet, analyze the specific means they will use to meet them. If we do not do so, in many cases the remedy could be worse than the disease itself. —I think —he said— that you are very pessimistic… —I would be the first one —I continued— to want everything to turn out as that man offered. But even when things go well and things are planned and evaluated as they should, there is no absolute guarantee that everything will turn out as expected. We will have to be very cautious in terms of its execution and surrounding circumstances. What would happen if things are badly structured from the start? —If this man applies, as everything seems to indicate, his already well-known recipe for nationalizing companies, exacerbating bureaucracy, governmental corporatism and similar measures, among other things, will lower the production of goods and services, which will first be reflected in inflation, followed by a long sequel of serious inconveniences. And believe me, there will be no resources to afford them. If you do not believe it, just wait and see. Although my friend made no more comments on the subject in his column, he could no longer appreciate127 He died of cancer in 2010 after a bright, fruitful life and extraordinary social participation. I will always appreciate his patience and understanding towards me, and my limited opinion. 127

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the disastrous —although logical— results. These results took a little longer because during the first decade of the new 21st century hydrocarbon prices remained unusually high, which allowed them —as long as they could— to replace their growing production gap with large imports of goods and services, but the collapse finally came. I am sorry to insist, my patient reader, but I think that their oil would have never been enough. I can assure you that with an economic policy such as the one described, even Hugo Chavez himself, his descendants, successors, one of the apostles128 or the most successful and qualified official brought from some region of the world129 would have continued, the result would have been the same, or worse, should the country didn’t have the tens of billions of dollars from oil. You can bet on that. Oh! So do you intend that we do not try to improve the people’s wellness? Of course, but in the right way, and what would that be? First, based on economic, sociological, educational laws and many others that affect human actions. Subsequently, focus on the root causes that in turn are projected in certain external manifestations, same effects or consequences that unfortunately are what some bad leaders try to address in a superficial manner.

For purposes of this book, this word is not associated with any religion or belief. This term comes from the Greek word (apostles) and includes the prefix (apo) "far" and "stelló" which means "sent". It was translated from Greek into Latin "apostōlus". Etymological Dictionary of the Spanish Language, Joan Corominas, Editorial Gredos. 128

Note: before the hypothetical "importation" of a capable official, I consider that such a person would not have accepted such a "secret recipe". Well, in fact it is not that secret anymore, it is globally known and would have conditioned his work to the implementation of a more realistic economic policy. 129

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For example, if an engineer prepares to build a very important bridge... Good Lord, now an analogy from the author! When will this book end? As I was saying... What would that engineer require to do this work? First, based on the laws of physics, develop a good project, consider reliable studies of the factors involved, pay special attention to the materials used, monitor costs, handle the source and destination of the economic resources in an flawless, transparent and clear way, monitor everything, and surround himself by trained personnel... Do not you think? Furthermore, in the unfortunate possibility that a crack appeared in the structure... Imagine! Should it only be necessary to address the external manifestation — as populists do, orienting themselves to the effects rather than to their real causes — that is, to "repair" and paint the crack, or to go down to the bottom of the matter to analyze the cause and to correct the true origin of the problem? If, for example, we assume that things are not carried out as they should, tell me... Would the most eloquent speech help? The answer is obvious. That hypothetical professional —who I hope there were none like this— will not only put workers and future users at serious risk, but also waste resources, time, incur in responsibilities and harm his personal credibility. Don’t you think? It is also essential to analyze the other extreme. If we realize that the person in charge of the work does everything as he should, the least we should do is fully support him so that he can do his job well regardless of who is in charge, since divisionism is one of the worst things that can happen to any family, company, project, organization, country or the world itself. 156

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Back again in the economic and monetary field, this annoying author has only intended to make his very humble and little contribution in the construction of a kind of symbolic bridge, which I hope can provide us access to a better stay where there would be more possibilities of an integral development for you and the other members of that great team we all make up. Let me tell you: with your help and that of everyone else, we can make it. Before the author goes on with his nonsense, and more than one of you comes up with the malevolent idea of sending him to prehistoric times, I have two possible solutions. One of them is to dismantle and transform my naughty and so hated time machine into a blender, or maybe, in a microwave oven, after all, itâ&#x20AC;&#x2122;s imaginary. The second option is to finish this most dreadful text. â&#x20AC;&#x192;

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Appendix Final thoughts on population If it had not been enough suffering for the reader, I will afflict him/her with a last but very brief final though on population. Not you again! Thinking about it, if we have already tolerated so many silliness of the author, let’s read it taking advantage that we have not thrown the book since the bin is a bit far... Why has he chosen that particular topic? You wouldn’t believe it, but there are still those who consider that the demography and human wellness are not related. That is why I would like to refer briefly to the matter… Has this annoying author gone out of his mind again? Besides, why don’t we leave that matter to nature, and stop interfering on human procreation? This might seem incredible, but we have already interfered for some time. A proof of this and before explaining my point of view on the subject, I’ll refer to something we did from the beginning of the 20th century up to date. You must be dreaming! When did we do that, if a century ago almost nobody addressed the subject? Through the successful and advantageous use of medicine, the high infant mortality rate that existed throughout history decreased drastically. Therefore, for purposes of the human procreation process, our influence is overwhelming. After this intervention, the infant mortality rate was gradually reduced, and life expectancy increased, which influenced and leveled procreation. 159

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Such a somewhat "artificial" intervention achieved that the high infant mortality rate until about a century ago of 700 child deaths130 per 1,000 births decreased to 32 deaths per 1,000 births on average in the world.131 But we must keep on forward in order to get to barely 5 deaths around the world.132 Paradoxically, many did not perceive fully that this intervention in procreation generalized the methods of family planning.133 It should be recognized and emphasized that when a large number of specialists and researchers on the subject in the world realized the forced repercussion that would have the infant mortality rate decrease, as well as the beneficial elevation in "life expectancy", they not only anticipated, but also warned in a timely manner the social, economic and ecological consequences that would be projected on the global community and ecosystem. Ideally is to maintain a situation of balance or stabilization, as in almost everything that surrounds us. We can think on a slight modification or growth as long as we 130

â&#x20AC;&#x153;Isaac Asimovâ&#x20AC;&#x2122;s Book of Factsâ&#x20AC;? Lasser Press.

The current average infant mortality rate in the world is 32 infant deaths per 1 000 births, five of which occur in "developed" countries, and 35 in developing countries. Population Reference Bureau (PRB) Data Sheet 2017. 131

This seemingly harmless differential at this point still causes a high number of child deaths close to 4 million per year, a figure that in the 20th century exceeds by far the deaths occurred in all wars of the same period. Population Reference Bureu (PRB) Data Sheet 2015. Much of the responsibility that this entails rests in those who refuse to recognize the influence of the demographic aspect on socioeconomic wellness. 132

This does not mean that we should be at the other extreme, i.e., below the level of "generation substitution" as it happens in some countries. Only about 15 percent of the world is in such a condition while most countries still have a higher than desirable growth rate. However, it is almost certain that these countries consider migration as a setoff for this difference. 133

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can solve the aberrant and almost criminal deficits in so many different areas. Creating first the needs and shortcomings and then looking for someone to blame or find their solution is an irresponsible and unworthy behavior of any person who claims to have use of reason. As a result of such information and in open opposition to some ultraconservative groups, it was possible to partially avoid the socioeconomic, environmental and human deterioration were more serious by exposing the inconveniences all over the world. But we must emphasize that we still need to advance more in this regard and, I would like to tell you, if I may, why I consider it so. This is unbelievable! I am increasingly convinced that this author is out of his mind! What on earth has all this to do with the topic on wellness he has been boring us along this very annoying book? Has he already forgotten the subject? I do not blame those who consider that the population issue seems to be another specialty, but if we analyze the matter a little more carefully, we will find out that â&#x20AC;&#x201D;along with other key elementsâ&#x20AC;&#x201D; it is somehow linked to our subject. To make matters worse, I can assure you that this issue was completely introduced by itself in our socioeconomic environment, but what worries most is that many people did not realize it. If we go a little deeper in this process we will see it in a surprisingly clear way. When the infant mortality rate was lowered, the population growth rate rose substantially and automatically. And what the hell does that matter? This effect produced a shorter period of population doubling in most of the world.134 If specialists had not warned of the risk at the time, it would have been much worse and would have turned most countries into incredibly chaotic areas for the reasons explained below. 134

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But the most important thing is the human element! Have you already forgotten that? I totally agree, my dear reader but, I insist, if the human issue is precisely the most valuable thing, this makes us to be more careful about it. Let me show you why I consider it so: Anything in our world and the universe interacting in an unsynchronized way with other factors involved will have harmful effects, and the consequences shall be as harmful as there is an eventual phase-out of the factors that come into play. Damn! I think this stubborn author simply doesnâ&#x20AC;&#x2122;t get it... We are trying to make him understand that the population issue is not only "positive", but also something extremely valuable, as you acknowledged! Can someone explain it to this annoying writer? Well, guess what, my dear and patient reader? If elements considered as "beneficial" come about or interact at an inappropriate rate, its positive factor automatically causes adverse effects, for example: A person is diving and decides to come to the surface. If the diver rises faster than bubbles, that apparently harmless act could cost anyone's life...135 Wow! Why does that happen? Isnâ&#x20AC;&#x2122;t "air" beneficial? What's wrong with something as simple as rising to the surface? That's exactly what I mean. The dangerous part is to do it at a speed higher than recommended. No matter how good or even indispensable oxygen is anyone who rises incorrectly to the surface will suffer a decompression that can be fatal. The person would have a very high chance of developing decompression that could prove fatal. Phenomenon described in the Boyle-Mariotte Law. 135

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Let's see another case. Few things are more valuable to existence than food, right? But even in this case, if any of us ingests it daily in an amount greater than its capacity and speed of absorption and assimilation a series of complications will develop. Furthermore, if this imbalance is repeated, the person will suffer serious health problems, regardless of how intrinsically good the food is. Let's look at the demographic issue from a slightly clearer perspective: As soon as a country grows too fast, the period of "population doubling" is shortened abnormally, which means that vital basic needs will not be met because they cannot be duplicated at the same period of time. This "desynchronization" will generate in an overlapping and silent way many deficiencies or deficits in most of the basic social areas... In view of the above, I bet that many will reach a conclusion like: The problem is that incompetent governments cannot do anything that obvious! I do not pretend to stand up for any government in the world they can defend themselves. Just take into account what is carried out in practice: If a country doubles its population in, say, only 35 years (the "developing" world doubled its population in little more than that), it must have the capacity to create, for practical purposes, all infrastructure they have made throughout their entire history in the same period, replace parts already exceeding its useful life or obsolete and, if it were not enough, work out the deficit accumulated for centuries. We do not know of any country that has been able to achieve such a goal, especially with a community that has been carrying many shortcomings in almost all orders. Now look at the scenario that citizens will see: 163

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Any city with such a situation will have shortage in drinking water supply and drainage; a large number of people will lack remunerative jobs; many others will not have the necessary education, training or the values required; the medical and hospital capacity will be exceeded by the needs of their community, and something similar will happen with the police, judges and crime investigation personnel; communication channels will be insufficient; the energy need, the arable land, forestry and green areas will increase, as well as many other important complications. If we interrelate these deficiencies, and add, to make thing worse, the drug use of some social sectors, not only will we have a pathetic image full of serious injustices but also even violence will grow to unacceptable levels.136 At this point there will be some additional risk: as soon as the aforementioned psychological issue comes into play â&#x20AC;&#x201D;a great citizen unrest before the authorities in turnâ&#x20AC;&#x201D;, things can worsen anywhere in the world for the following reason: Once a high percentage of the population "reaches the conclusion" or interprets that the underlying reason for the existing shortages is nothing but a palpable manifestation of governmental incompetence, the chances of political leaders emerging without sufficient information offering simplistic solutions will increase, which broad sectors often will not identify as inadequate precisely because of the pathetic condition in which they find themselves. The increase in the population growth rate will produce a long series of pitiful shortcomings, although it will not be enough to increase the violence. Other collateral negative elements shall appear such as inappropriate attitudes, drug use, lack of values and others that will cause an increase in the rate of intentional homicides. 136

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This author considers inconceivable that in certain social sectors, politicians, ultraconservative groups and others137 still prevails a slight perception of the topic of this appendix. It is even unforgivable that such a thought comes from the world segment considered as "more developed". Strangely, some of them will be the ones who will often complain about the drawbacks of "excessive migration" from regions with high growth rates. "The things you will see" would surely say Don Quixote almost immediately if he were with us, but he can’t, he is right now "undoing wrongs" in other dimensions. Let the figures themselves tell us briefly something more, because although they may seem so quiet and discreet, I think they are also capable of showing us things; and although their language is extremely silent, perhaps their judgment could be more solid than rocks. Figures say —quietly— that they regret not being able to show all they want. But even with the exposed limitation of not boring you anymore with this book... What could they tell us? There are areas that doubled their population in 63 years, as in fact happened in North America.138 During that period they were able to duplicate the satisfiers at the required rate. In Europe,139 the population doubled in a little over 200 years. However, the situation was different in most of the world. Many objections of such groups are answered by the author from another perspective and in a slightly broader way in the book VIOLENCE OR DEVELOPMENT, which is found in: www.juanmanuelochoat.blogspot.com 137

It is important to mention that a significant percentage of the population in North America came from immigration. 138

The accurate interval of population duplication in the European zone is unknown, given that (old) census of some countries in the area are not completely reliable, but population duplication was close to the indicated figure. 139

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For example, Asia doubled its population in 43 years, Latin America in 41, and Africa in 27.140 But if you doubt that figures are capable of communicating things, look at the different results of a region with similar sociocultural characteristics: Latin America. For a better but concise analysis, let's look at four key aspects in ten countries of the region: a) Human Development Index (HDI),141 b) Population Growth Index, c) Domestic Product per Inhabitant, and d) Infant Mortality.142 Of these ten countries —from the same continent and with a similar sociocultural background— five of them have a faster population growth: Haiti, Guatemala, Bolivia, Honduras and El Salvador. And in Argentina, Brazil, Chile, Uruguay and Costa Rica population growth is more stable. As you can see, when the population growth is higher than recommended not only in these ten countries, but also in most of the world, its "human development index" (and its implication) falls significantly. This is intimately associated with the economic income and general wellbeing per person, and, at the same time, their infant mortality rate remains higher. These situations are often accompanied by a high and unusual level of violence.143 140

UN (population 2015).

Population Pyramids of the World from 1950 to 2100 IDH is a very important and revealing index on a country’s social and economic situation. This indicator was created by the UN to assess the level of socioeconomic development of each country. 141

142

Number of infant deaths per thousand births.

Economists like David Ricardo (1772-1823) observed the effect of an excessive labor “offer” (frequently undertrained) on salary. Others were only interested in the subject, like Karl Marx, so they did not perceive it that way. This fact is understandable given that, although Marx studied Philosophy, Literature and History in Bonn and Berlin, and some considered him a great economist, his understanding on the subject was scarce. His studies in Economics were self-taught during his exile in London, in the British Museum and, not only... 143

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All of this makes us think that, apart from giving priority to other aspects of educational, economic, monetary, sociological, political type, the population element must also be especially taken into account. However, for those who do not care about the opinions of experts on the subject, or are not convinced with the figures shown, perhaps they only have one third and regrettable option: they continue pretending that they do not know about the matter, or that there is no connection between the population issue and human wellness. But it is my duty to warn you that no one will believe that both those who will follow us in time, and who those in due course judge the human actions, did not learn of the damage they caused.

...he never got to study thoroughly Economics, but he disliked it. He once wrote to Engels: “... I have completed all the economic garbage in five weeks.” (Werner Blumenberg “Marx”, p.121 — work based on his own correspondence — Salvat 1962). In other letters he repeats “economic garbage” and “this crap”. Pretending, however, an enormous erudition —to the point of impressing many, including myself—, “forced” his so limited economic approach towards his also backward philosophical and sociological conceptualization, which led, as expected, to the results the world learned. I sincerely consider his good intentions but whoever intends to benefit others must first be based on solid laws and principles, don’t you think? In the social and economic area at least the stimuli that naturally, automatically and invisibly affect human behavior and productivity must be known. Sociological and philosophical perception of Marx was so anachronistic that he did not even conceptualize the community as what it is — an indivisible, interrelated and inclusive entity — but fragmented it into somewhat antagonistic “classes”. Relevant note: All human theses are perfectible, including of course the nonsense of this disrespectful author.

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Juan Manuel Ochoa Torres TABLE 1 LATIN AMERICAN COUNTRIES WITH HIGHEST POPULATION GROWTH144 % Population COUNTRY HDI Growth INH CHILD GNP DEATHS Haiti 0,493 1.5 1,790 48 Guatemala 0,640 1.9 7,750 26 Bolivia 0,674 1.7 7,050 39 Honduras 0,625 1.7 4,420 26 El Salvador 0,680 1.3 8,220 17 TABLE 2 FIVE LATIN AMERICAN COUNTRIES WITH SLOWER POPULATION GROWTH % Population COUNTRY HDI Growth INH CHILD GNP DEATHS Argentina Brazil145 Chile Uruguay Costa Rica

0,827 0.9 19,480 10 0,754 0.7 14,810 14 0,847 0.8 23,270 7 0,795 0.5 21,090 12 0,776 0.9 15,750 8

The data of the Population Growth Index, GDP per inhabitant, and infant mortality are obtained from the PRB Data Sheet (Population Reference Bureau) 2017, the HDI (Human Development Index) data were prepared by the United Nations Development Program ( UNDP). Something worth taking into account is that the favorable projection of a possible reduction in the population growth rate is not immediate, but over the following years, as can be observed in the particular case of Brazil, since its reduction in the "Growth rate" is relatively recent, and still had a higher population growth a few years ago. Population Reference Bureau (PRB) 2010. 144

It should also be mentioned that Argentina and Brazil have just emerged from unfortunate populist experiences. Had it not been so, their economic situation would be better. 145

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Acknowledgement I would like to thank the valuable collaboration of ANA SOFĂ?A OCHOA RICOUX in graphic design, JUAN GERARDO SALAZAR PARADA in statistical data collection and LUIS TOVAR CARRILLO in typography and layout. This book would have not been possible without their support.

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