An independent central bank is a crime against the people.

In February 2021, shortly before the Chamber of Deputies approved the Bolsonaro government's proposal to legally establish the autonomy of the Central Bank, I published an article here in this very space that sought to warn everyone about the seriousness of the crime against the popular interests that was about to be committed.

Now, just over a month after the inauguration of the democratic-popular government that put an end to the Bolsonaro-style Nazi regime, we are witnessing the sad confirmation of the accuracy of the worrying observations raised at that time.

An independent Central Bank, under the command of a representative of financial capital appointed by the previous Bolsonaro-era Nazi government, seems determined to make life miserable for the newly elected authorities, who had the audacity to put an end to the plan to perpetuate the military-financial alliance grouped around Bolsonarism.

However, it is not only Bolsonaro's Nazi-like supporters who advocate for the Central Bank to operate independently of the authorities elected by the population. Most liberal columnists operating in the corporate media also embrace this idea. The most common argument they use is that this would prevent its use for political purposes. In other words, they seek to emphasize the positive importance of keeping the Central Bank functioning within strict technical parameters.

At this stage of history, it should no longer be necessary to say what I am about to express, but there is no way to avoid it: There is nothing more political and concerned with the interests of the whole society than the functioning of the Central Bank. And the more they try to present it as a merely technical and impartial instrument, the more evident it becomes that it is being used politically. And, in this case, in the worst sense in which politics can be used: for the manipulation and deception of the unwary.

With the aim of enabling even those who are not versed in economics to understand the core issue involving the determination of interest rates in a society and the class role played by a Central Bank, we will present and analyze some hypothetical theoretical examples that may allow for an assessment of who wins and who loses with the manipulation of interest rates.

To facilitate our understanding and reasoning, let's imagine that we have a country with the following characteristics:

- 100.000 economic agents, of which 90.000 are salaried workers and 10.000 are business employers;

- The total value of capital invested in productive activities is R$ 1.000.000.000,00;

The average rate of return is 10% of the invested capital.

The distribution of income between workers and employers is based on a 50/50 split.

As a result of the aforementioned data, we obtain the following overview:

- Total income generated: R$ 1.100.000.000,00 (1.000.000.000,00 x 1,10)

Average share of income by class:

Workers: R$ 6.111,11 (550.000.000,00/90.000)

Business owners: R$ 55.000,00 (550.000.000,00/10.000)

Let's suppose now that, maintaining the same percentage share of the classes in the appropriation of production income, the Central Bank intervenes and decides to raise the interest rate to 13,5%. Logically, this will serve as a strong incentive for some entrepreneurs to withdraw resources previously invested in production and apply them to the financial market. Being modest in our expectations, let's imagine that only 10% of the total resources shift to the field of speculation. We will thus have the following scenario:

- Amount invested in productive activities with 10% interest: R$ 900.000.000,00; 

 - Total result obtained in production: R$ 990.000.000,00 (900.000.000,00 x 1,1);

- Amount invested in the financial circuit at a rate of 13,5% interest: R$ 100.000.000,00;

- Total result of the financial investment: R$ 113.500.000,00 (100.000.000,00 x 1,135);

- Average income by class in the total income generated:

Workers: R$ 5.500,00 (495.000.000,00/90.000)

Business owners: R$ 60.850,00 [(495.000.000,00 + 113.500.000,00)/10.000]

As the examples shown clearly demonstrate, with the rise in interest rates, entrepreneurs obtain a significant increase in their income, while workers suffer a drastic loss. In other words, instead of growing by using their resources to create new wealth (with all the implications that entails), entrepreneurs increase their share of income through mere speculation in the financial market.

But, I warn those who are more sensitive, don't worry, the intention of these examples was not to frighten anyone. In fact, the reality is much worse than the hypotheses presented might suggest. We will try to explain why in the following lines.

First and foremost, we should never forget that the circulation of money alone is incapable of generating any wealth. Capital can only generate a real increase in wealth if it is employed in some truly productive activity. When an entrepreneur takes out a loan and uses the money obtained to create a new factory or expand an existing one, he will be able to increase the volume of wealth in society and, consequently, everyone tends to benefit from his actions.

However, if someone deposits their money at interest in a bank, which then lends it to another client at higher rates, and this client does the same, there will have been no increase in wealth. The gains in this case will only be apparent and numerical, never real. In fact, when the fraction of capital destined for productive activities is reduced for the benefit of financial speculation, there is effectively a deterioration in the living conditions of society as a whole.

Furthermore, we were very unrealistic in our assumptions that the relative share of workers and employers in the income generated would remain unchanged when the volume of resources dedicated to productive activities decreases. Logically, under these conditions, there is usually a sharp drop in the percentage of the pie that goes to workers. And it is not difficult to understand why this is so.

When money is diverted from production to financial speculation, far less labor is needed to operate the diminished productive machinery. Consequently, many workers will become unemployed. With rising unemployment, wage levels tend to fall significantly. The decrease in the supply of jobs results in greater competition among workers and, therefore, lower wages for those who manage to find employment.

On the other hand, for those who live off rent-seeking, the possibility of controlling the interest rate is always an invaluable tool. Those who hold this power can increase their share of total income by increasing the exploitation of others. Although the amount of existing wealth may decrease, the violent increase in the expropriation of the majority allows the groups that control rent-seeking to improve their share relative to the rest of society.

This is why the ruling classes demonstrate such a strong interest in the Central Bank being an independent body. Of course, what they understand by independent actually means "outside the control of the nation's popular majorities and entirely subservient to the designs of big capital."

Setting guidelines for the functioning of the Central Bank is not something that can be indifferent to the popular majority. Production and employment depend on decisions made by the authorities who run the Central Bank. Whether more or less resources are allocated to building housing for the needy, or used to ensure that bankers can become even more powerful, are alternatives that depend on who controls the functioning of this institution.

Supporting the Central Bank remaining an independent and strictly technical institution is like believing that there can be full conditions for the exercise of democracy between foxes and chickens. The foxes will always be in favor. And the chickens?