As he had done during his campaign, today’s President Gustavo Petro once again insisted on the need to redistribute the issue of banknotes that are printed in the country, so that instead of first reaching the banks, they are used with social purposes.
(How viable is it to issue more banknotes to get out of the crisis?).
This was stated by the president in the National Council for Peace, Reconciliation and Coexistence, where he assured that in order to compensate the victims the “The only option is that the issuance power of the State passes in the first place, instead of the banks, to the victims of violence” (watch video).
For the president, economically it is the same because money circulates, but politically and socially it is not the same.
It is not the first time that President Petro has requested the redistribution of the money issued by the Bank of the Republic. During his time as a senator and candidate, he sparked a controversy after saying that the issue of the Banco de la República was intended to finance government spending, caused by the covid-19 pandemic.
Among the proposals of the then senator was that the Bank of the Republic issue money to lend to the Government with a zero interest rate and that this, in turn, be distributed to the poorest.
The consequences of issuing more banknotes
Faced with proposals like these, on several occasions the Banco de la República has pointed out the consequences for the economy of issuing more banknotes.
As he explains, “The wealth of an economy does not depend on the amount of money in it but on its level of production. This means that no matter how much money circulates increases, an economy is not richer if it does not increase its production in sectors such as agriculture and industry..
In addition, he adds that when the amount of money increases without there being a growth in the production of a country, inflation is generated, since more money trying to buy the same amount of goods and services causes those who sell to charge more and generate a price increase. That is why the Banco de la República controls the amount of money it issues to avoid disasters in the Colombian economy.
BRIEFCASE
