Sustainability And Long Term Growth in the Financial Market System

Abstract

This paper dis usse the implicati ns of an unequal growth rate of the internationa l finan ial market o n the o ne hand and the growth of the real eco no my o n the other. Based on balance sheet equilibrium as a po int of departure fo r a sustainable economic growth , a disc u,sio n is presented of an optimal level of interest rates depending o n th e natural real eco nomic growth of the eco nomy. In th e final sectio n, two pro po-itio ns are presented and m tivated. The fi r t propo itio n i that the average interest race should vary with the growth rate of the real economy, wh ich is an estimacor fo r organic growth in the economi c procc s. L we r interest rates arc not desi rable from an ec n m ic idea of opp rtun ity. Higher interest rate are rejected because of the implicit additional positive time prefere nce that this entail . The second propositio n is about the accumu lation of wealth. Under the a sumptio n of a positive interest rate, the ab ence of financial tax and the absence of bankruptcie , financial capital grow exponentially and thercfi re need to be managed institutionally, in a po itive way. A structural imba lance between the mo neta ry ector on the one hand and the real economy o n the other, leads to an illusion of purcha ing power in the hands of the public.