Economics

重写货币政策的范式

Mar 2, 2017 Michael Heise

发自慕尼黑——各大国中央银行继续盲目依靠僵硬规则来控制通胀和刺激增长的做法还要持续多久？鉴于灵活货币政策的好处如此明显，中央银行家们需要开阔自己的视野，拥抱灵活所带来的可能性。

一直以来，货币政策制定者的黄金法则都是一旦发现通货膨胀低于官方目标范围，就立刻将短期利率设定为一定水平来促进支出和投资。但这种做法意味着一旦利率达到或接近零，央行立马无路可走，只能靠激活大规模资产购买计划以寄望能刺激需求。当形势需要时，决策者只得默认选择新凯恩斯主义经济模式的预定脚本。

但在许多情况下这些脚本会让我们走了弯路，因为它们认为货币政策会对需求和通货膨胀产生可衡量的和可预见的影响，而我们却有许多理由去怀疑这一假设。

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0 Comments on this paragraph, 21 Comments on this article

Mauricio Duran-Loriga Mar 6, 2017

@ Jose

From now on try to quote honorable people only, please.
For the respect of our fellow readers.

He who said "gold is not money" and "gold is held at central banks because of tradition" needs to be mentally evaluated before it is too late. By a vet, mind you.

Ditto for he who said "the 500 Euro note is a good store of value".

Store! Value! WOW!
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G. A. Pakela Mar 6, 2017

Dear Jose, a couple of points regarding your apologetic on unconventional monetary policy. First, did the Fed really succeed in accommodating the severe decline in velocity when M2 money supply growth remained at trend, while the monetary base exploded? That suggests to me the contention that the quantity theory of money really works. Maybe it does some of the time, but Bernanke's experiment didn't pan out as perhaps he had hoped, otherwise perhaps we would have seen M2 growth in the double digits for a sustained period. Instead, the Fed's bond purchases ended up back at the Fed. like money in stuffed in a mattress. I would agree with you that there was no inflation, but if creating an inflationary expectation was the goal of QE, then that didn't exactly work either as the Fed's "preferred measure" of inflation still hasn't reached the Fed's 2% goal. I also agree with you that there was and is a huge demand for riskless assets, a demand that may exceed the need for the U.S. Treasury to issue debt related to government fiscal policy. I am not sure that allowing securities across the yield curve to find their price through supply and demand could be characterized as "tightening" and the lack of liquidity was more related to the unwillingness of banks to lend to any but the most credit-worthy borrowers. I am not so sanguine about the ultimate effects of QE. There is a lot of money earning interest at the Fed, and should the banks start to pull that money into the real economy, money creation and inflation could start to rise. The Fed might end up inducing the next recession in response. That is the going forward risk.
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Mauricio Duran-Loriga Mar 6, 2017

@ Jose

Fed's QE 1,2,3 were truly launched to alleviate the acute mismatch in dollar financing, mostly at European banks. The Fed justified QE to the public as a measure that would increase credit creation in order to foster aggregate demand (thus job creation and a virtuous economic cycle).

I have my doubts that labeling QE as "neutral" will buy you consideration for a Nobel Prize.

Welfare state is mandated by law, it is not a natural phenomenon. Contemporary welfare state was primarily designed after WW II, in an attempt to avoid resorting to cyclical wars after periods of economic duress.

Let me remind you that human evolution is made of both life and death. Current hedonistic society decided to no longer tolerate pain, illness, grievance, death. At any cost. That is why initial peacemaking welfare state has become an endless unsustainable machine of economic delusion.

If human evolution is keeping trillions of assets totally unused economically (currency, medical equipment, arms, commodities, et al) while at the same time hundreds of millions of children are starving worldwide, then it might be better to restart everything at least from the Apes, indeed.
- Jose araujo Mar 6, 2017
  
  Here are the explanations from Ben Bernankee himself:
  
  https://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm
  
  Just don't make up facts and explanations, where you can go to the source and read why they were doing what they were doing.
  
  You can find the Draghi speech on the monetary cannon and the BoJ...
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Marco Antoniotti Mar 4, 2017

Define "structural reforms".
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ron smith Mar 4, 2017

I wonder if I am reading the same article as most of the commenters. What I read is that the Central Banks need to retain flexible attitudes and that the CBs cannot alone end depressions, even "little" ones like the most recent. The Republicans made impossible a change in fiscal policy which is the "2" in the "1-2" punch used to end the great depression.

One must agree that Keynes would, were he alive to do so, endorse those ideas. Keynes and even Adam Smith would find most unwise the current Republican effort to make interest rate changes wholly predictable. In line with what I infer from most of the comments, the world's economy is a complex system; a simple, clockwork-like mechanism will most likely serve to exacerbate rather than buffer swings.
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Victor Morris Mar 3, 2017

Has any one considered the impact of instant electronic world currency movement on the old economic models. Perhaps the notion that inflation will solve the debt crises (albeit eventually) is flawed because a highly efficient global market will always fill the opportunity created by rising wages, commodoties and tangiables to provide cheaper and cheaper solutions. A new model for fiscal reality could be developed by "Watson" for our future global world economy if truly accurate data could be provided and reasonable expectations be asked.
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Mauricio Duran-Loriga Mar 3, 2017

First ZIRP. Failure to stimulate growth, aggregate demand & savings.
Second, QE Expansion. Same failure in all three categories.
Third, Fiscal Expansion. Will fail miserably either. Popcorn anyone?

At least they are trying different things. But as they do not address the real causes, I wonder why they expect positive outcomes.

The striking difference between now and ever before is that a huge % of GDP is nowadays mandatory, and has nothing to do with the economy. Welfare state.

Welfare state is an unprofitable expenditure who crowds out all available savings in every economy, dollar for dollar, to get financed.

Get that shot down. Outright. And aggregate demand would fly high. With the current reserves as a % of GDP, inflation would need a Volcker 2.0 phenomenon.

But to get that done, the world needs a gutted politician several sigma more politically incorrect that Trump.

Until that advent, we will keep snoozing at each new Central Bank's below but close to "finetunned policy".
- Jose araujo Mar 3, 2017
  
  Monetary expansion was never aimed at fuel demand growth, only ignorants say such things.
  
  QE probably didn't work, but it caused no arm either. It was basically neutral.
  
  Welfare state is a consequence of human evolution. Unfortunately some like you persist in wanting to stay apes.
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G. A. Pakela Mar 2, 2017

Unconventional monetary policy did not exist in practice prior to the financial crisis in 2008. Long after the threat of a financial collapse had receded, Chairman Bernanke decided to play the role of a monetary Dr. Frankenstein and experiment with radical, unproven unconventional monetary policy. It would seem unlikely that the QEs saved the country from a depression because the economy was already stabilizing by that point. Lower interest rates can be a zero sum game if the retirement savers, pension funds and retirees all found themselves stuck in a zero return world. I'm not so certain that the trillion dollar plus deficits would have resulted in the same bond yields had the Treasury actually conducted the auctions necessary to pay for them. And, at least the interest payments would have flowed back into the economy just as they did in the 1980s. Et tu Jose?
- Jose araujo Mar 3, 2017
  
  Mr. Pakela, I don't know if your are versed in economics, but if you are just compare what hapenned immediatly post the great recession and the great depression with the known cases of monetary tightening.
  
  The symptoms are the same, in fact post crisis we had a severe lack of liquidity which could have ended badly (like it did in the 20's).
  
  I know its hard to swallow for the neo-classic, but they were proven wrong twice...
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- Jose araujo Mar 3, 2017
  
  IMHO the absence of inflation tell us that the Fed did theire work which was to accomodate the reduction in money velocity.
  
  Fed and other central banks tried to hike rates with no success and were hindering the recovery.
  
  By the way, no matter what was done, yelds were flat, so clearly there was an huge demand for liquidity and riskless assets, that's why interest rates were low in the first place.
  
  Just read what B.B, Draghi and the governor of BoJ had to say about the exotic monetary expansion. No need to make up facts and explanations, expansionary monetary policy was aimed at increasing the expectation on inflation and get us out of liquidity trap conditions.
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- G. A. Pakela Mar 3, 2017
  
  Jose, thank you for your thoughtful comments. I agree with you that interest rates would have been low in the aftermath of the financial crisis and the subsequent deep recession. The problem is the Fed's massive purchases obscured where interest rates would have settled in a Treasury auction without the intervention. I have a proposal: why not allow the Fed to gradually sell its portfolio into the market and hand the money to the Treasury to support the increased defense and infrastructure spending?
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- Jose araujo Mar 3, 2017
  
  You are starting withthe WRONG assumption that FED was responsible for the low rates.
  
  Ask yourself, if low rates are caused by the FED, then why didn't investment pick up? So if there isn't any demand for funds wouldn't the rates stay low either way?
  
  Rates are low because of the preference for liquidity that makes money velocity decrease and acts like monetary tightening.
  
  If the Fed and other Banks didn't pursue expansionary monetary policies you would have a big skock, like you did in the great depression.
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Tobias Krahnke Mar 2, 2017

"[T]he model simulations underpinning central banks’ decisions have become so complex...". Why? Take the most simple New Keynesian model and assume that the nominal rate is fixed at the ZLB. The only way to lift inflation is by raising inflation expcectations! This is what unconventional measures are trying to achieve.
- Jose araujo Mar 2, 2017
  
  Mr. Heise is playing dumb... Following El-Erian steps unfortunatly
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Paul Daley Mar 2, 2017

First of all, central banks are "fiscal agents" because they dispose of a public good, the gains from seigniorage. So far, they have channeled those gains exclusively into asset markets and the pockets of property owners. Secondly, "flexibilty" is not going to restore health and vigor to a policy that has itself become distortionary by driving a wedge between asset values and underlying income flows. To fix that, you need a second channel for monetary action that will allow central banks to lend against and supplement income directly whenever it seeks to support an expansion. In the United States, the obvious channel for this is the IRS withholding system.

Central banks, in short, do not need more "flexibility." They need to become more complete banks, able to lend against income as well as assets. Until then -- as now -- they will be as apt to do harm as good.
- Jose araujo Mar 2, 2017
  
  Can you please elaborate on how the FED in channeling the gains into asset markets?
  
  I really don't know of a direct link between monetary policy and asset demand, so maybe you can explain how it is done.
  
  Is the Fed lending to the banks so they can buy assets?
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Jose araujo Mar 2, 2017

By the way, Mr. Heise you should be familiar with Fisher equality, the one that states that MxV=PxY

So if we have been experiencing extraordinary monetary expansion and no inflation, the conslusion you have to reach is that Central Banks are just accomodating the decrease in money velocity associated with the change in liquidity preferences.

If you took the time to think, you could see that in fact on the start of both the Great Recession and the Great Depression what happened with our economies is explained with a sudden contraction of the monetary base triggred by the sudden decrease in money velocity.
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Jose araujo Mar 2, 2017

How ignorant can one be, and still old titles of Chief Economist.

So let’s start with a basic question: Why did Central Banks lower the interest rates no near zero?

Mr. Heise says its to stimulate demand, for him there is a direct connection between interest rates and household demand, but the most common link is through investment, not consumption.

So ask yourself, why with zero interest rates the investment is low? Why is the demand for funds so low? Maybe because people don't want to lose money and prefer liquidity?

So now ask yourself, if there is very litle demand for funds to invest, wouldn't the interest rates be low anyway? Off course they would, that's why we say we are in a liquidity trap.

So you see, Central Banks didn't expand the monetary base to increase demand (don't know where you have ever heard that), Central Bank policies were aimed at changing the expectation of inflation, and hopefully to get us out of liquidity trap conditions.

Now if Mr. Heise, Chie Economist, instead of regurgitating stupidities and making up facts, took the time to read Ben Bernakbe or Mr. Draghi or the Governor of the BoJ, would already know this.
- Jose araujo Mar 2, 2017
  
  I don't think Mr. Heise is stupid, he just thinks we are stupid.
  
  Its a thing with chief economists of insurance companies....
  
  Now I understand that you want the interest rates to go up no matter what, but please make join El Erian and make up a better argument...
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