The Real Economy the real solution to the crisis

At Inversa, we are staunch defenders of the real economy. In fact, crowdfactoring is a model of collective financing that directly impacts the productive fabric of the community, contributing to its growth.

In this sense, we want to highlight an article by Esteban Hernández published in El Confidencial, which reflects very well the urgent need to promote the Real Economy as a "Real Solution" to the current crisis (The Economic Crisis Explained to Everyone).

Esteban takes a look back to understand the present and poses the danger of not learning from history. It's a six-point X-ray that aims to reach everyone. Here are some paragraphs as a summary:

1. Two worlds, two economies.

"The response of central banks, which has been decisive, has helped a lot in restoring investor confidence quickly. They promised to do enough for long enough to close the big hole in today's economy, the situation of companies too strategic to fail"

"By flooding the economy with cash and supporting the future trajectory of these companies by guaranteeing the purchase of their bonds, investors have been reassured, causing stocks to rise".

2. The big turn.

"The financialized economy, with its privileged access to money, separated from the real economy decades ago".

"The current situation is the result of a systemic change, not just better or worse management by current leaders".

3. Forward flight.

"In the 2008 crisis, the tricks to continue generating income from the bottom had generated so many problems that they threatened to throw the economy into the abyss. 

" The public sector intervened to prevent a total crisis and did so by introducing huge amounts of money through central banks, which stabilized the big banks, and with them the financial system. But it also generated a lot of state debt, and citizens had to make additional sacrifices to repay what was borrowed".

"This way out was a leap forward. That money could not generate growth in the real economy, as pressure to reduce government deficits, as well as the trend to cut costs and increase profits in big companies, weakened the income and options of the Western middle and working classes".

4. Excessive savings.

"The richest 11 percent of the world's population owns more than 80% of the wealth. The underlying problem is that all that enormous capital circulating in virtual spheres rarely lands in the productive economy".

5. The encounter with the virtual.

"The current leverage through institutional rescue of big companies (and the financial sector benefiting from them) is advisable and necessary, as long as economic growth occurs afterward".

"The fundamental issue is structural: the only reasonable way out is to force the productive and financial economy to reconnect"

6. Sense of history.

"Palliative amounts have been provided to the real economy, just enough to keep it from suffocating, but insufficient to recover and enhance it. However, this is the only meaningful solution to this crisis".

"This shift towards the real economy ......, would underscore that there is a sense of the

historical moment....."

But there are many more voices these days alerting to the disconnect between the real economy and financial markets, including the IMF itself, which has just issued a report warning of the danger of this disconnect.

 We want to be optimistic; we believe that a deep and global crisis like Covid can and should also be an opportunity for change above ideologies or individual actions. We are talking about a change in the global economic model. The IMF itself is telling us this.