Monetary policies are intimately linked, almost forming a single entity, to fiscal and tax policies.

In other words, reciprocal relationships exist between the various public choices (fiscal, tax and monetary ones), which generate persistent action-and-reaction, as well as cause-and-effect, economic phenomena.

Trying to understand these phenomena is important also in order to better grasp and contextualize the tax habitat, which, necessarily and unceasingly, finds the reason for its existence in the wider social and economic scenario it applies to.

The reciprocal influences are not difficult to imagine:

the economic and financial crisis that originate, mainly, from market deregulation and from aggressive trade policies, and the resulting austerity measures contribute to create public deficit and to increase total debt.

The financial needs of a State, which result from the above situation, prompt the State to implement solutions that amount, on the one hand, to cuts to public social spending and, on the other hand, to the increase (either undisguised or creeping) in taxes.

Tax revenue, thus constrained by public budget ties, would very unlikely turn into a tax lever that can be effectively used, by lessening it, in economic recession periods.

There is simply no room for such policies, which would be really necessary.

In addition to the important and founding rationalization of public spending, using the monetary lever in a “new way”, other than the way it is presently used, as it will be explained hereinafter, can be a third way[1], which is a "must-have" in order to solve the following dilemma: lessening the tax revenue = increase in public debt, on the one hand, and decrease in public debt = increase in tax revenue, on the other.

Indeed, it is today quite obvious that the issue of money by the central banks (also within “Quantitative Easing” programmes) leads, as it will be shown, to an increase in State debt, with clear cascade effects on fiscal and tax policies, with no certainty of the hoped-for recovery effects.

Therefore a “political use of money”, which is here proposed, would allow (exactly at the conditions that are set forth below), an escape from the “trap of debt logic only”, which, today, seems to be controlling the life of States, Communities and of the people living in them with an iron grip.





[1] Game theory effectively explains that, when the choice is limited to two possibilities, we are dealing with a dilemma. The only way to be able to actually choose is proposing a third way.