This is CBSI in the world. I'm John Bachel. Three countries in South America,

Bolivia, Brazil, and Argentina. Each of them deviled by inflation or inflation risks,

easy spending by central governments. Domination by a term of art called fiscal dominance.

I welcome Marianna Stasio, Grady of the Americas, columnist and editor of the Wall Street Journal,

because what goes wrong comes around, I learned from Mary, and fiscal dominance is a risk to all nations,

including the United States of America, now undergoing doubts about the banking system, doubts about the recession, doubts about inflation,

doubts in all general directions, including the markets watching for Jerome Powell and the Federal Reserve to continue to raise rates or not.

Mary, a very good evening to you. What is fiscal dominance? What does it mean to sovereign states? Good evening to you.

Good evening, John. Fiscal dominance is basically when the fiscal side of things overtakes the monetary side.

So you have monetary policy which should be done independently at the central bank, and you have fiscal policy which is done through the treasury.

And when fiscal policy becomes dominant, to the point where the monetary policy makers have to shape their policy based on what is going on on the fiscal side,

that means the fiscal, the treasury, the spenders, the politicians are calling the shots, they're dominating the picture.

And it's especially bad in, I mean, we know that it's gone on for years in Argentina, but it also happens in a different way in Brazil, which we can talk about in Bolivia.

And I suggest to my column that the United States is not immune to the economic laws that give you fiscal dominance, and that we actually could be on the same path.

And I'm not alone in, in worrying about this. I quote an economist in my column saying that if we don't get control of the fiscal spending side of the balance sheet, you know, we're going to run into the same set of problems.

Start with Brazil, recently elected Lula da Silva. He seems keen on being generous, on giving money away, on giving raises, on subsidizing people who are in need.

That, of course, is I suggestive of inflation. Is that what's going on in Brazil now?

Well, in Brazil, so far, the central bank has kept the overnight lending rate at 13.75%, which is quite high.

Because there are a lot of inflationary expectations, that is the expectation that the new government, which came in in January, Lula da Silva's government,

is going to start spending very aggressively. And in fact, they just released a plan where they claim that they're going to be moderating.

But if you dig down under, underneath the surface of it, you see that unless they get to doing some cutting, which they haven't explained how they're going to do, they will have this problem where the central bank has to keep overnight lending rates very high.

In order to contain the inflationary expectations, in other words, the worry that people have, that the central bank would start printing money to pay the bills of the government, which is exactly what you get in a place like Argentina, which no longer has a central bank that's willing to fight the inflation. They just go ahead and print the pesos that they need.

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