Article from Martin Janssen, published by Weltwoche Nr. 13.20.

Once upon a time there was a small, rich country with 8 million inhabitants. It produced only potatoes. The other countries also produced only potatoes, but were less rich.

One day, out of the blue, a meteorite falls from the sky and destroys a third of the country’s potatoes for consumption and sowing. Fear of the future immediately spreads everywhere. The government of this small country promises the inhabitants immediate payments of over 15 percent of the annual potato production.

Immediately after the impact of the meteorite there is the same amount of money in the economy as before. But less potatoes are produced and bought. Measured in terms of goods, the money is nowOnce upon a time there was a small, rich country with 8 million inhabitants. It produced only potatoes. The other countries also produced only potatoes, but were less rich.

The small country needs urgently Potatoes for consumption and sowing. The foreign country is then ready to cut potatoes from its also reduced stock for sale when the price of potatoes is significantly higher than only recently and when the interest rate on the credit for the potatoes purchased increases significantly.

What do these thoughts tell us? The state can’t give real presents. Distributes he new money in this situation, the loss of purchasing power of money will only increase. Goods from abroad we receive only if the foreign country can be sure that the national and international credit markets will not to come to a standstill. And if the interest rate on the new loans are flexible and high can.

What can the state do in the current crisis do it at all? He can make an intelligent install credit mechanism (as he is currently trying to do), reduce his expenses and taxes by one third (of which so far nothing ) and the monetary and credit policy back into normal paths so that the Markets can perform their function (of which there was also nothing to hear). Anything else will damage the fight against the crisis and the situation is further aggravated.

Translated with deepl.com

Martin Janssen is professor emeritus for financial market economics and entrepreneurs and a Board Member of the Swiss Risk Association.

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