Burial, interest and orthodoxy – 02/23/2023 – Reinaldo Azevedo

The real Brazil insists on challenging some “thin and severe” ideas (Musil) about the budget, interest rates and other economic rules that decide the fate of the poor’s meat. I remember one case. In the press, I felt almost like an ET when defending the Transitional PEC. Orlando’s Homizied Bilter Budget had set aside, for example, R$ 34.1 million for Minha Casa, Minha Vida this year. The PEC, which I called “the Budgetary Reality”, defined R$ 9.5 billion for the program. Negotiations in Congress, within the scope of this text, raised the budget for disaster prevention from BRL 671.54 million to BRL 1.2 billion — even so, the lowest since 2010.

This all happened before the north coast of São Paulo collapsed under the weight of iniquity. A lot of people suffered and suffer from it. But it was the poor, again, who died buried. To reserve resources for the program, it was necessary to overcome the, shall we say, exotic thesis —which was sold as orthodox— that that crazy Bolsonaro-Paulo Guedes budget was feasible. Last year, rains killed nearly 500 people. There are 40,000 risk areas, where 10 million live. Every year, the waters displace more than 300,000 people from their homes. Then they return, with an indigo sky. The debate, for some, should never leave the world as an idea, disregarding reality, so as not to cloud the clarity of principles with these dark people.

Want to see? Never before has losing a debate earned so much support, applause and praise, in certain niches at least, as happened, for example, with Roberto Campos Neto, president of the Central Bank, in the case of stellar interest rates. Enthusiasts of him decided to found no longer a theory, but a theorem. Whatever the nature of inflation, the cavalry rate is the inescapable hypotenuse because it corresponds to the sum of the squares of the legs. But what about the hypothesis that the factors that contribute to the rise in prices do not reflect this sum? If so, so much the worse for the facts.

Daring to dissent makes the dissenter a dragon of evil against holy warriors. Or, of course!, a “populist”, a word that serves to curse the divergence. At these times, I always remember the preamble of AI-5. How is it? The regime sought to combat “ideologies contrary to the traditions of our people”. And what if leaving the village to the humor of the hills or maintaining the highest interest on Earth are “traditions of our people”? By the way: this Wednesday’s (22nd) Focus bulletin predicts a worsening in inflation expectations —that which is not derived from the sum of squares of the demand legs. And? Disputing the hypotenuse would mean challenging geometry. Criticizing the BC would be an attack on institutions, like those perpetrated by Bolsonaro against the STF.

In these little more than three weeks, it became evident that the Central Bank is managed by market expectations — and it is said to be heresy to act to manage them. Therefore, the limit of its autonomy is known. Thus, Focus already leads to the conjecture that a possible fall in the Selic should only occur in the second quarter of next year. If the medicine is killing the patient, increase the dose. The important thing is to demonstrate conviction to face “ideologies contrary to the traditions of our people”.

These considerations, I am not unaware, carry the brimstone smell of heterodoxy. They would also be an attempt to repeat what has already gone wrong in other Carnivals. In line, therefore, with what is liquid and certain, do I dare ask when real interest rates of 8% have already proved to be effective in combating inflation resulting from a supply shock? Never. Thus, in the field of influential metaphors, I force myself to conclude that the Selic at 13.75% is for ongoing inflation what chloroquine was for the fight against Covid. It’s not science. It does not cure and has side effects. It seems pretty unorthodox.

What if the facts indicate that, in these matters, there is an error not in the theorem, but in the theorem? Well, it would be up to its defenders to appeal to a brilliant quip by Nelson Rodrigues in a 1963 chronicle: “Friends, I know that the facts did not confirm the prophecy. To which the prophet could reply: ‘Worse for the facts!’.” Until the next catastrophe.

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