TITLE:
The Sustainability Issue at the Time of the Epidemic. The Abnormal Cycle of Finance
AUTHORS:
Giovanni Antonio Cossiga
KEYWORDS:
Deflation, Sustainability, Abnormal Cycle, Development Equilibrium, Corrective Mechanism
JOURNAL NAME:
Theoretical Economics Letters,
Vol.10 No.4,
August
31,
2020
ABSTRACT: The sustainability principle explains the economic
situation and its alterations according to the basic view of continuity, in the
view of life preservation for future generations. From this perspective, the
troubles affecting the economy, including those caused by the COVID 19, must be
interpreted under the sign of the instability of systems, while following the
natural tendency to recover the compatibility with nature. Even the cycle of
the economy is accompanied by the recession and involution of the economy,
which are to be interpreted as natural tools for the return to development
equilibrium. According to this approach, the financial crises of the 2000s are
symptoms of the serious gap separating us from the balanced development and
from the irrevocable obligation to systems stability. On this issue, we will
try to understand whether the possibility that the financial tsunami caused by
financial crises is the result of an ambiguous and abnormal secondary financial
cycle, which overlaps with the economic cycle. Therefore, it doesn’t seem unlikely
that the breakdown imposed by the pandemic on the global economy could have the
effect of blocking, but only temporarily, the development of the secondary
financial cycle. It’s therefore not surprising at all that a few months after
the outbreak of the pandemic, the financial market, after the fall of last
March, is now raising again (see the US Stock exchanges) despite the collapsed
employment. The hypothesis we propose is that it’s the serious phenomenon of
the unusual concentration of wealth and income to the detriment of the rest of
the community, the improper engine of the adverse financial cycle. It is Adverse
because it falls on the economy and once again is inflicting a heavy damage on
the weaker part of the community. It should be noted that also this fearful
wave in the financial market would be caused by a natural reaction. The natural
goal of the financial cycle would be, indeed, to periodically demolish wealth,
through the collapse of stock exchange values and related assets. At the same time,
the increasing unemployment and corporate crises would be contrasted with
Keynesian policies, which can be seen as means for a more equitable
distribution of wealth and income. However, the natural goal is partially
disregarded for the enormous low-cost liquidity available on the market, and
this will finally allow the financial part to prevail over the market. What to
do, then? It’s necessary and advisable to promote a greater equity in the
distribution of income and wealth.