Introduction

Since Bernácer’s first work Society and Happiness, written in his early years in 1916, it has been clear that he is highly ethical in his approach to economic sciences. The book’s title evokes utopian ideas, which economists may instinctively reject. This comment is for readers who have never read its pages. Unlike other economists, like utopian socialists and even socialistic economists like Marx, economic issues are not approached as a predatory fight for one class to gain ground over another, the cause of all evils. This book reveals an economist who breaks with utopian and sentimental notions, aiming to equip economic science with its own set of rules. He implicitly criticises classical and neoclassical economics, believing that they confuse logic and hyper-logic with reality ².

Notorious and sombre science generates economic imbalances, unemployment and misery. This is not good for the system. Given that it is not good, it is not fair and will have to be corrected. The analytical style of Bernácer is very similar to what will come later and that future economic science will deal with: macroeconomics, tax policy, monetary policy, etc. As you will see, the social and economic critical style of economists like Keynes and Robertson will also be different than the style of Marx and other socialists.

Ethical and economic criticism demands prior knowledge of economic reality, especially its concepts. In those years (1916), the world of economic science was not imprisoned in the marble tower of classical and neoclassical economics. It is doubtful that many economists of that time implicitly believed the theories of Smith, Ricardo and Mili first and then those of Jevons, Menger and Walras later. It may have been Malthus, the theorist of the logic of misery who sowed interest through dynamic effective demand, as well as Marshall in his monetary renewal of quantitative theory.

Bernácer is one of the economists who are midway between the certainty that the world is not the magical world of classical economists, where everything is in balance due to production and full employment objectives, and the reality that common sense explains as the economics of unemployment. The truth is that there was no other theory to take its place. Economists would urgently and desperately look for one thirteen years later (1929) when the world sunk into a depression after the collapse of the New York Stock Exchange.

The search was on. Indeed, Society and Happiness is an intrepid book that head on, suddenly and lucidly deals with the basic subjects of macroeconomics. It is worth mentioning that knowing what would be ahead is already an important scientific finding, because it entails having selected the key variables with masterly intuition. These variables are: money, interest, the financial market, criticism of the gold standard, the search for what is called capital, etc.

His selection of ideas is so important that every one of these issues or scientific areas would become the subject of separate and joint works, which would occupy a good part of his long life. These would all terminate in his crowning work A Free Market Economy without Crisis or Unemployment, published 39 years later (1955). Readers will understand his first book in light of modern developments (1916), but at that time macroeconomic science was still very young to explain the entire analytical range it dealt with using comprehensive scientific rigour, despite Wicksell’s contributions. Thus, Society and Happiness represented a first building block in the enormous Bernacerian construction, as well as for macroeconomics.

Precisely, the Theory of Disposable Funds, written six years later in 1922, would be the first scientifically pure work about money by Bernácer. He intuitively knew it in 1916, although it would take him six years to explain it concisely. This work would be the original master that would generate all subsequent work ³. I believe that Bernácer’s work is almost complete in the book Society and Happiness. It was developed in great precision in close to eighty articles and three books for the final coherent culmination in 1955. This is so true that it could be said that Bernácer had an original treatise on macroeconomics, parallel to the Keynesian treatise that would become much better known.

A summary will be given here of Bernacerian macroeconomics to provide a series of keys that will help understand what I will present hereafter. This will make overall understanding easier of the issues that will be explained analytically and step-by-step in the main body of the present work. First then, this introduction will give a general overview that will then be filled in with greater detail.

Summary of the work

1) Bernácer’s primary concern is money and other related issues will arise from it such as: its functionality, its scarcity and interest, its location, etc.

Money comes from production and, originally and theoretically, money is a faithful reflection of production, representing production as a whole but none in particular. Money is used to acquire factors of production and consumer goods. It is the suitable instrument for distributing wealth. He optimistically stated that money is the merchandise that is universally wanted by everyone and for everyone. Money enormously facilitates the fulfilment of Say’s Law, but also makes its non-fulfilment possible. Money makes it possible for demand to calibrate exactly what is wanted through monetary magnitudes and money can also be understood through supply. A precise understanding between supply and demand is possible owing to the existence of money. An important statement opened his work and the same statement ended it. This statement removed a series of obtuse economic concepts that he believed needlessly complicated understanding the market. The statement is: The demand for goods is nothing but a supply of money and the supply of goods is a demand for money. The two halves explain and complement each other. Money is offered to acquire goods and money is requested for selling goods. Thus, the goods market hides the money market and vice-versa. This is what Walras would explain later when speaking of his encaisse désirée, or desired cash balance, and Keynes would explain in his theory of liquidity preference.

2) The value of the good spawns the money required to make the purchase possible. This means two things: That the economic system continually requires the means necessary to establish existing values, in accordance with the motivations and needs of supply and demand. When these needs and motivations change, the value also changes. The second is that the cost is not fixed, not due to what was stated about variations of supply and demand, but due to monetary circumstances owing to the quantity of money that make monetary votes change. In short, the value or price floats in a sea of relativity.

The relativity is double because the price of a consumer good will depend on the amount of money in the system, which is generally explained by the broadest version of quantitative theory. It will also depend on the saving-investment alternative that consumers always can and do decide on. This means that part of the money flows towards the demand for consumer goods, its natural preference, and the other part flows towards savings, demanding capital goods. The price of capital goods will be determined in the same way by the amount of money and by the alternative, which is always possible by acquiring consumer goods. Thus, the conclusion is that the quantity of money and preference for it by consumers and producers in turn determine two things, which are actually the same: the price of consumer goods and the price of capital goods and, even a third thing, the relative price between consumer and capital goods (that an economist like Hayeck would profit from).

3) Bringing merchandise to the market increases supply, but bringing money to the market increases demand. Both concepts are required and shall be expanded upon here ⁴.

Merchandise will be the flow produced by the system in a time unit, which is called national product. To make it possible, payments are made to production agents, the whole of which is called national income, or Y, where:

Y = PNN_cf

This income includes profits and therefore the value of what is supplied, or PNN_cf (net national production at the cost of factors) is equal to the value of the income generated or potential demand. The fact that everything produced is supplied is very natural and this is certainly what normally takes place. What is not always true is that all income returns in the form of total demand. The reason is that this demand is made up of money and makes market progress possible. The nature of money makes it suitable for hoarding and, therefore, makes it possible for Say’s Law to fail.

But hoarding is not Bernácer’s emphasis, but rather disposable funds (a term coined by Bernácer that will be denoted by D). These, along with hoarding, will be the part of income that does not demand the national product from which they came. Taking a greater quantity of merchandise to the market means that a greater quantity has been produced and consequently, the merchandise has generated more income. This does not necessarily equate to taking more money to the market for the simple reason that savings have detoured along other routes or economic circuits. This circuit does not exist for part of savings, since it will be found under the mattress or behind a brick. Disposable funds will be found on the financial market.

4) Many things can be done with liquid income that goes to an economic agent. The most prudent and necessary thing is to heed the most urgent requests demanded by the nature of the economic agent itself, which is consumption for consumers and production for producers. The main business is survival itself and, due to this, this income is normally spent on survival goods. This is what producers think. As a whole, economic agents, even speculators and pensioners, allocate part of their income to consumption C and part to savings S.

Y = C + S

Or in other words:

S = Y – C⁵

If economic agents find that part of their income adequately covers their consumption needs, the rest is saved if there is something left over. Savings do not abandon the economic circuit, but rather return via the demand for capital goods. In other words, savings finance capital goods and this operation is called investment.

Bernácer claims that not all savings returns to the economic circuit, but rather circulates along other paths. This part is disposable funds and the circuit is the financial market. Disposable funds are the part of income that does not demand capital goods due to not being consumed and thus being saved.

That is:

S – I = D

These disposable funds are not hoarded, since what is hoarded does not demand anything, but is rather created for speculation. Disposable funds are created to acquire financial assets and actual secondary assets with the aim of holding onto the total value of liquid savings (not liquid capital) and earning profits.

It is yet to be explained why the acquisition of actual secondary financial assets means that savings leave the production circuit. It will be explained later.

Primary financial assets and the construction of actual assets such as housing mean that savings return to the production circuit, but this is not true of secondary assets.

Income is a flow and savings born from income will also be a flow and, therefore, disposable funds will also be a flow. I could add here that the idea of flow intensifies more in buying and selling activities, which are basically dynamic. Thus, savings finance the acquisition of capital goods and disposable funds finance actual and financial assets. They come from a flow and go towards another flow. In principle, total disposable funds are formed by the income received (not accrued) and then they end up successively going towards consumption, investment (ordinary market) and the funds that remain will be the maximum or third-degree disposable funds, the object of this study.

5) Financial assets, shares, bonds… are used to transfer savings to investments. Instead of this statement making it impossible for Say’s Law to be invalid, they make it easier. These are primary financial assets. A house that is built creates an actual asset that is part of national product. To create this asset, the exact amount of income needed to be generated to match its supply value (plus profits).

The same thing will not happen when this same financial asset fulfils its honest function of moving savings to investment but then does not die but stays alive and what is more important, continues being the object of buying and selling transactions. The same will occur when a home is repeatedly sold and bought. The financial asset and the home are acquired for two reasons: one, because having it earns rental income and, two, because its monetary value increases through speculation.

The essential question rests in that they no longer form part of national product and that a monetary mass is needed for buying and selling, specifically the disposable fund, D, arising from income, like everything. This means that the income must return to acquire current production, either in consumer or capital goods, but if they are allocated to another activity, specifically for acquiring assets that are not wealth, it is obvious that demand is depressed to the same degree as speculative demand is strengthened. This can be represented in a formula as:

Y = C + S_k + D

Where S_k is the savings invested and (S_k + D) is total savings. Logically:

S_k < S

and if the disposable funds are equal to zero (D = 0) then:

S_k = S

6) V will be the value of financial assets and N is the number of them. The value of our financial assets will thus be NV. Since they are financed with the period disposable funds, D:

D = NV

while primary financial assets, supposing that all savings are transmitted to investment through them and only by them, will be acquired with S_k. This case will be abandoned immediately due to being unrealistic and quite forced. The case above was mentioned to highlight the difference between actual primary assets and secondary assets, as well as capitalised saving S_k and disposable funds D that are not capitalised.

7) There is no doubt that sales transactions on actual secondary financial assets continually take place, which can go either to consumption or to investment through economic agents, returning to the consumption and production circuit. The opposite transactions also take place. Part of the income leaves or escapes in the form of disposable funds to buy these assets.

Thus, for disposable funds to be generated, more disposable funds must come in than go out. These will be called net disposable funds, which in the end are what are of interest here.

Accounting doesn’t lie and it has clearly proven that savings is equal to investment, S = I. However, it would actually be more precise to say:

S_k = I

This clarification does little to explain what was already agreed by deciding that S_k is the part of savings that is capitalised, but it is a small methodological trick.

But how can all savings and all destinations of savings be put into a mathematical equality? Perhaps as follows:

S_k + D = I + NV

And even more broadly:

C + S_k + D = C + I + NV

This means that part of the income flow is allocated to acquiring consumer goods, capital goods and our financial assets.

But if speaking of net disposable funds and these are fed, like parasites, by income, this potential demand or income does not return to the market and, since it does not return, there will be unsold products.

Are there unsold products on the market? Yes. Macroeconomics calls them inventory investments, further breaking them down into planned and unplanned. For Bernácer, whether planned or unplanned, they exist and they exist because they have not been demanded. For planned ones, it is believed that they will return, while the opposite is said of unplanned inventory investments. It remains to be explained where the savings, or income if you like, is located that has been demanded. For Benácer, the answer is clear. Inventory investments, I_u, are found in the part of income called disposable funds D that finance the speculative financial market (NV). In other words, since these disposable funds finance these securities, they do not finance inventory investments or create them or demand them. Thus, inventory investments are formed due to market frustration.

The macroeconomic equation places inventory investments next to investment in capital goods, adding them together. This is something that Bernácer could not understand because if investment is a financial transaction that involves spending savings on capital goods, why is it added to something different that exists precisely due to the absence of spending? He does not concern himself with whether the inventories are planned or unplanned, or what the mental or psychic process is that happens in the brain of the producer. What he is interested in is what really happens on the market. What happens is that, planned or not, this production still has not been rescued by demand from shop display cases.

8) Politicians and governors are interested in actual profitability, which is measured by greater production. However, ordinary savers are interested in monetary profitability and this may be found through speculative investment. Since savers are operating on the market, now investors, some will demand fictitious monetary wealth and others real wealth, but as a whole, the market is imbalanced by the demand route, which ends up being depressed. The result of this depression is measured by permanent I_u and more, if this I_u does not remain the same, but grows. Thus, effectively if this I_u is produced because our financial assets are offered next to it on the market (on the same side), demand has no means to acquire both of them. I will restate the above more precisely. If the market offers financial assets and real secondary assets along with current production measured by PNN_cf (comprised of consumer and capital goods) and if income is comprised of the value of this national product, then the market will be depressed. If these assets exist because they have been generated and sold, then unsold current production is called I_u and its value will be that of the NV acquired (our assets). And since the latter have been acquired with disposable funds, the result is that:

D = NV and therefore:

NV = I_u

And therefore also:

D = I_u

and mathematically (not economically):

S_k + D = I + I_u

This means that all savings from the period S = S_k + D is equal to investment properly speaking plus investment inventory, or:

S = I + I_u

which is a simple, traditional macroeconomic equation. Bernácer believed this mistaken interpretation from traditional macroeconomics, a formal inheritance from Keynes, was due to his not understanding that there are three markets: one is the current consumer goods market; the second is the capital goods market and the third is the actual secondary financial market.

I placed the phrase ‘not economically’ in parentheses above for the equality D = I_u. Answering this is the same as answering the question: Why is investment I not added to inventory investment I_u if they are equal and in the end have the value NV?

The reason is very simple. An equality doesn’t explain anything economically, although this equality is for savings and investment. He was really interested in its intermediate use, or its operation, which is financial. This financial operation is the purchase of capital goods in the case of investment and the acquisition of NV, which are wrongly called financial investments. In both cases, savings acquires something. In economic logic, it is absurd and twisted to add a purchase like I to that which exists due to something not being bought, which is inventory investment I_u.

It is obviously numerically equal, but nothing more. For this reason, Bernácer stated that this basic macroeconomic identity or equation does not exist. The most one could call it is a mathematical equality.

It would be logical to think that for a numeric equality to be an economic equality, in addition to the number, they would need to be homogeneously equivalent with respect to concepts. In this case, the operation they share would have to be equal, that is, in spending.

9) With the identities Y = C + S and PNN_cf = O, then O = C + I; and subtracting C from both equalities: S = I. Bernácer roundly criticised this equality. One thing is income that necessarily comes from production and another thing is production, which are real things or measurable quantities.

Thus, consumer spending and consumption must be separated, as well as investment savings. Sellers are interested in monetary values and thus sell, while buyers are interested in real magnitudes and thus buy. The fact that products are born through production by means of consumer and capital goods is obvious. However, it is not obvious that they are totally demanded through consumer spending and spending on capital goods or savings.

Production has actual numbers that are homogenised by multiplying them by prices and, since income is in itself a monetary flow that comes from production, Keynes and Samuelson confused the terms, believing that a simple mathematical equality is an economic identity, but they are not an identity and much less an economic identity. Five cars can be produced, which is a real statement and the equivalent value of two cars can be spent with part of the income, but if prices have increased, this value may equal the five cars from before. Everyone knows this. A quantity of money can be saved and this savings can help finance capital and/or acquire six times less capital than the year before. This means that the investment has not increased in real terms, although it has increased in monetary terms. The Keynesian identity would indicate that the savings, since it equals investment, has financed the formation of the same amount of capital, when the only thing it really says is that what was monetarily (mathematically) spent equals what was sold in money, and nothing more. It is self-evident that the real formation of capital is not equal.

One could argue by saying that if income comes from production and they have the same value, part of the income will demand consumer goods and part will demand capital goods through savings. This is true, I insist, only in monetary terms, not in real terms, where it does not hold up.

If the real term is converted into monetary terms, it may seem that this problem could be eliminated, but it is not so simple. Let’s see why.

Some economists confirm, using good logic, that Y = O, meaning that this income has arisen due to selling production, which is indeed true. R = the amount of total sales.

In this way, market valuation is accepted and one is working with homogeneous monetary magnitudes.

What is sold? Consumer and capital goods, the latter that I call investment. And, what is done with the income? Part is consumed and part is saved. Thus:

Consumer spending + savings = Consumer spending + investment

Then Savings = investment.

This equalisation operation starts with a simple error, which consists of income from current production sales (PNN_cf) being assimilated with the income originating from the creation of current production (payment of factors of production through income). Another way of expressing this mistake is to see that there is confusion existing between the sales leading to this income with the incomes that have been projected resulting from the previously spent income.

In order for Keynes and Samuelson to be right, how would the identity S = I be fulfilled? Provided that I in real terms is added to the inventory investment.

Savings in the world of Bernácer will entail the simultaneous explanation of several similar concepts: the financial market, the capitalisation process, the motivation for this saving and, above all, it will explain interest.

10) People save for many reasons: because consumption has fulfilled appetites and needs and there is still income remaining. Added to this argument, some small marginal utilities derived from high consumption will let consumers transfer consumption to a later period, in which the starting time of their consumption will let them generate higher marginal utilities. People also save due to the presumed need of acquiring an asset at some time in the future whose monetary value exceeds their present income. Let’s say, for example, a leather coat. A producer also saves in order to acquire a production good that he currently doesn’t have. Fundamentally, people save because saving provides psychological peace of mind, which is the same as saying that they save to protect themselves against suffering the uncertainties derived from unknown future contingencies.

Savings logic implies the existence of a feeling about an unknown future that is grasped more intensely than the present. And present income is where savings is taken from. This savings can be born from a sufficient consumption already done detoured from a consumption that wasn’t made, due to not being as necessary.

One cannot conclude from any of the arguments above that people save because this savings must mean greater future consumption in real terms, as suggested by Austrian economist Böhm-Bawerk.

11) Bernácer destroyed classical and neoclassical theory about interest in two different ways: one, the same field of psychology that was the experimental laboratory of the Austrian school and the other in the field of macroeconomics.

The first has already been commented on. One saves although no greater future interests are derived from this savings, interests that will translate into greater future consumption. He would say that savings is one of the multiple manifestations of human preferences or choices.

If the economy is in full employment, the only way of forming savings to acquire capital would be via a prize that let it be rescued. If the economy is not in full employment, Bernácer’s assumption, what remains are inactive resources and then paradoxically savings does not become more urgent, given that there is excess savings. In times of depression, it is precisely real means that are unoccupied, lacking money to put them into operation. If this economy is unemployed, then one must wonder whether this is not due more to underconsumption or excess savings (classical economic thought).

Bernácer distinguishes two concepts: one made up of the monetary resources with which capital is acquired and the other that are the capital goods. Classical economics confuses the terms or at least expresses the same thing using the concept of money once and the concept of capital goods for the other.

12) TIf income is born of production and this income has not demanded, then there are free unoccupied resources since production is not of interest. There are also unsold products. But the most problematic situation may be the following: If income has not returned to the production circuit, then potential money supplied must be abundant, which is not true in times of crisis and is not so in those economies in which prices are or were moving downwards. And if money is not abundant but scarce, then interest is high, so high that investment is prevented. This is Keynes’ affirmation also, but does not explain what Bernácer said, which is to know where this fraction of income is that was not returned to consumption or investment. Interest for Keynes is the fruit of liquidity preference, driven or motivated by speculative demand. To Bernácer, who explained it much better and years before Keynes, interest would be the fruit of scarcity, like all prices. Money is in short supply because part of income is not being consumed or invested and is found speculating on the financial market. This fraction of incomes are disposable funds D or more concisely net disposable funds (net flow of disposable funds that remain from those that are input and output from the financial market).

13) The financial market NV is lubricated by disposable funds D. Without them, this market could not function. Disposable funds receive income R derived from the possession of dead assets or actual secondary financial assets.

D → R

This profitability R will be overall, derived from the possession of all these assets. In percentages, each unit of disposable funds will have its percentage of profitability. Calculating it is basic and is done by comparing what is invested and speculatively placed, which is D with respect to accrued profits.

i = R/D percentage profits from disposable funds

This is interest for both Bernácer and Keynes. In the book Capital Interest: the Problem of its Origins, he explained a conceptual theory about the origin of interest and then later gave a mathematical explanation. This theory, which is current and very original, was set forth years earlier than Keynes’ General Theory.

There is another calculation method: If a house or security with perpetual income perpetually produces ad infinitum R returns, the value of the security equals its updating through an interest i of the chain of returns over time. The security is worth what the total updated returns R are worth.

where a_n|i is the updating factor.

At the limit:

lim a_n|i = 1 / i
n → ∞

D = 1/i * R and after isolating i
i= R /D

14) Interest is thus born from speculative demands for money. For Böhm-Bawerk, interest is information that is needed to calculate the value of securities. For Bernácer, it is unnecessary whenever the market continually announces its market price. Thus, when the value, or the disposable funds that make it possible, is known, as well as the returns R, the percentage return is fixed, which is nothing but the interest rate.

The functional mechanism of money is original to Bernácer, as well as his theory of the financial market and the origin of interest. Each one has ‘its complete theory’ and are intimately related. As a whole, they shape a complete theory written clearly and simply between 1916 and 1925. The understanding of economic cycles derives from understanding this theory.

15) Money makes Say’s Law possible and maximises it, but the same nature of money makes it possible to break his law. One example is seen in hoarding.

Since ancient times, it has been possible to earn money without working via speculation and hoarding money is seen as an exotic whim. As is known, speculative profitability lets a percentage profit be returned that is called market interest i. This money that has a yield is money that has fled from the production circuit and is made up of disposable funds. Let’s stop here for a moment to look at the following comment: speculators create their disposable funds, assuming that this is after meeting their urgent consumption and production needs. They seek both high interest and an increase in the prices of securities. An increase in security prices translates into lower interest and lower security prices translate into higher interest rates. They will not care if the interest drops if the speculative earning due to increased prices compensates for the former. Indeed, in speculative processes, money quickly flees the ordinary market to feed the bonfire of increased financial market prices. This is what happens in times of euphoria, which are the precursors of economic crises. During this period, interest margins do not go up that much, or even drop, but speculators are concerned about rising prices and not about interest.

Social revenue is earnings in goods and services or things that are useful in life. To earn, there must be production and factors of production, or capital, must be simultaneously added through work, where money is the elastic road that brings these factors towards the common production task.

16) Savings make it possible to acquire capital goods and these generate profitability. This profitability derived from the physical productiveness of capital goods, aided by all the other production agents, is what determines its monetary valuation when multiplied by their price. The system must seek this profitability and nothing more. Inspired by it, resources are diverted from consumption to produce more.

But economic agents also seek monetary profitability, which like the speculative case is not accompanied by greater production of goods and services, which is true wealth, thus generating more fluff than substance in the system.

Thus, there is constant rivalry between marginal profitability of capital (which Keynes would call ‘marginal efficiency of capital’) or general production and speculative profitability. Thus the system is always in tension. More profits or speculative earnings will attract more resources from the ordinary market and then the ordinary market will be depressed, leading to depression. On the contrary, when an invention increases productivity, the inverse phenomenon occurs, producing recovery. This ongoing difference between one market and another –the financial and ordinary– give rise to economic cycles.

17) If fiat money is used to trade gold, the creation of money would only make sense in parallel with the extraction of gold. But this is not true. What helps money change hands is wealth or national production, in other words, things that are useful in our lives. Money is a means and gold was also a means. In this way, if there was not enough gold production, authentic wealth in the system could not be generated. So gold was like an obstacle to production.

Bills were created because they knew that behind them there was gold. However, the desirable situation would be to think –as people generally think now– that behind the bill is real wealth, or national product.

It is necessary to freely create money and reject the gold standard. However, even economists with some sympathy towards some freedom in creating money, pontificate on the advantages of the gold standard as an automatic stabiliser of the system.

Bernácer stated that the gold standard is intrinsically destabilising. There are several reasons for this: the first and most important is that gold is simply another commodity, but it is almost useless as an instrument for consumption and production and very useful in speculation. It is an asset that lends itself to speculation like no other or, even better, to being hoarded. One hoards to wait for price increases and, due to hoarding, it becomes scarce in circulation. The process has double grounds since hoarding depresses the ordinary market of consumption and production, making it unprofitable, while simultaneously increasing market prices in the gold market.

Moreover, gold is added as another commodity in the supply of goods from current production. Gold is sold along with lamps and shoes, competing with them, something that has a depressive effect on the market. Gold, like any speculative good or asset that is hoarded, can be ‘unhoarded’ and indeed, its mission is to be unhoarded (and brusquely) to seek quick speculative profit. And since gold using the gold standard is simply money in the end, when it is no longer hoarded there is a violent eruption of money when it is least expected by the system, thus causing an inverse process to depression, without any increase in production. Inflation is basically what is generated.

In this regard, Keynes came before Bernácer. He also excellently explained the operation of the gold standard, criticising its most important aspects. Bernácer’s criticism of the gold standard melds perfectly with his monetary and financial theory. Thus, gold transforms itself, first as money and then as a financial asset, sometimes making increased wealth possible and other times freezing it. In the best of cases, King Midas does not create wealth, but is a mere symbol that could be used via institutional reforms that would change it (these are words from 1916) into a super pure symbol or super-sign: the bill not backed by metal.