Some say, “International reserves at the Central Bank (BC) are $8,000 million, and the government is using them to boost the economy.” Nice idea… but dangerous because almost all “easy to do” ideas are mostly unsustainable and end up worse.

1) Of the reserves, 6,000 million are banknotes and investments abroad, and 2,000 million are gold. And the owners are approximately 1,000 million central state and related, 1,000 million IESS, 2,000 million sectional governments, 2,000 million public companies and 6,700 million financial system (1,500 public, 5,200 private)… Summary: 5,200 million private and almost 8,000 million state. You will add 13,000 million. Surprise! How 13,000, if the reserve is only 8,000? That’s right, what is saved is not enough to cover everything that the owners “believe” they have. Reason? Basically, Correísmo took that money, taking it from everyone, and in recent years it has partially recovered. If the owners have less than the reserve, who has theirs and who doesn’t? Answer: banks/cooperatives have it because it is depositors’ money, and state companies come out “losers”: less than 3000 million to cover their 8000 million. We already see a serious problem: can we take something that even has a deficit?

We already see a serious problem: can we take something that even has a deficit?

2) Take money from banks/cooperatives? Let’s remember the financial process. Someone deposits $100 into an entity and it lends a portion (70%)… why not lend all, even though that would be better? Because there is a risk that, for example, many will not pay debts or withdraw funds en masse, and for that there is this liquidity (insurance), which is partly deposited in BC. A (bad) suggestion is for BC to say to the financial system: “Just as you lend some of your depositors’ money, I am lending some of the 5,200 million you have deposited here because (my name shows it) me and I am a bank”. Hence the fraud: BC is not a bank, only the custodian of these funds. By using them, the Government would say: “Clients trusted the bank/cooperative when delivering funds, they kept part of it for security and I decide that it is not healthy and I will borrow it.” Big misuse of your money and mine: if the bank wanted to lend that money, it would have done so, and if the client wanted the state to dispose of his funds (there are taxes for that), he would have bought government bonds or deposited them in the state financial system. Because they didn’t do something… Nothing to do? Yes, to create a better environment to encourage investment and for banks/cooperatives to have incentives to lend more freely and not save so much for security.

3) Take money from state entities? The government and the environment have 1,000 million and they can use it like other entities that have funds in BC. Or, at least, accelerate its use in really productive costs. Always be reasonable: you must maintain a “minimum working capital”.

Conclusion. To kill the bad temptations of private funds, change the name of BC to “Central Custodian” (better to eliminate BC of course) and have the financial system manage its reserves directly outside of BC. Both very doable. (OR)