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Economy Minister Paulo Guedes said today that the country can issue foreign currency to deal with the economic crisis if there is a combination of mass unemployment, inflation close to zero, with interest “collapsing.” The statement was made during a public hearing in the National Congress.
“If you fall into a mass unemployment situation, from which inflation goes to 0% and interest collapses, technically there is a liquidity trap. The BC can issue foreign currency and can buy the internal debt. If the interest rate is too much Low nobody wants to buy long bonds and then they can monetize the debt without having an inflationary impact. We are aware of all the possibilities, “he said.
Guedes affirmed that the good economist does not have dogmas and that if he has a good background he is capable of making these changes. According to him, Brazil was undergoing structural reforms and changed economic policy to emergency reforms. Despite this, the minister said that it is not possible to transform the crisis into an environment for political opportunism.
“Now, we know that the world expects the reforms to continue and that we have austerity from the point of view of understanding that in a crisis there can be no shortage of money for health. But this cannot become an electoral spree.” This cannot become political opportunism, “he declared.
