Either Brazil ends the Selic rate, or the Selic rate ends Brazil.

Either Brazil gets rid of the Selic rate, or it will be destroyed by it. This arbitrary and subjective rate, operated by the Central Bank, which today indexes the financial market and practically the entire Brazilian economy, has become a weed containing all the elements to cause the country's financial market to explode at some point in the not-too-distant future, dragging the entire economy down with it.

The Selic rate is doubly harmful. First, when the Central Bank raises it under the pretext of combating inflation. In this case, it actually indicates future inflation to economic agents, and they try to raise their prices in order to protect themselves from it in advance. On the other hand, the Selic rate is the most powerful instrument for transferring income from the poor to the rich in our society, in an absolutely unproductive way.

This instrument takes the form of "financial money," or interest-bearing currency, available only to the wealthy and millionaires. They deposit their billions of reais in cash balances at the Central Bank through so-called "repurchase agreements," with daily liquidity, and receive interest for the elapsed term. To adjust the term to the announced Selic target, set every 45 days, the bank increments the rate daily in the overnight market.

"Financial money" is, today, the main means of financial transactions for the ruling classes. Naturally, it is beyond the reach of the dominated classes and the common man, who hardly have cash balances to leave earning interest in banks. Not only that, "financial money" pushes the money circulating in the economy out of the productive system, in favor of the parasitic rentier sector.

And that's not all. The Selic rate is the index used to calculate public debt, which is costing the country approximately R$ 1 trillion annually in interest alone. When other financial services, such as monetary correction and amortization, are considered, the final figure reaches almost R$ 2 trillion. This amount is close to the primary budget, which accounts for expenses of real public interest, such as education, health, social security, and others.

At the rate the Selic rate is rising against the primary budget, which is already crushed by the financial budget (which is sacred and must be paid no matter what), it won't be long before Brazil literally goes bankrupt. There won't be enough money to service the public debt. In that case, I'm inclined to recommend the Donald Trump solution: default on the public debt and pay it with long-term debt securities.

For that to happen, President Lula would simply need the courage to freeze the Central Bank's repurchase agreements and resort to court-ordered payments. Brazil, which has no external debt to complicate negotiations with international banks, can afford to call on domestic bankers for an agreement. If they refuse, then we must invoke the imperative of national security, since, soon, we will have no other option anyway.

It's clear that eliminating the Selic rate isn't enough to fix the economy. It needs to be replaced by some interest rate that isn't an inflationary fetish, supposedly to control inflation. What matters is balancing global supply and demand in the market, since inflation results from an imbalance between these two variables, and not from a public deficit or a low basic interest rate.

The solution is to convince the Central Bank to operate a basic interest rate in the open market compatible with the level of liquidity in the economy, necessary to stimulate production and supply at high rates, in order to counterbalance a possible increase in demand resulting from a public deficit. Incidentally, a public deficit of 3% of GDP, as admitted in the euro area countries by the European Central Bank – which is not exactly an irresponsible bank – would be a tremendous stimulus to increased demand, production (supply), and GDP in Brazil.

A deficit of 3% of GDP, which totaled R$ 11,655 trillion in February, would mean putting approximately R$ 340 billion in the government's hands for additional net investments in infrastructure and social budget expenditures this year. If we were to add to this the financial reform suggested above, we would escape the noose toward which the Selic rate is pushing us – under the complicit acquiescence of the financial market and the indifference of academic economists, whose coldness regarding this perverse rate I cannot understand!