Nový makroekonomický realismus ECB

Jan 22, 2015 Jeffrey D. Sachs

NEW YORK – Evropská centrální banka konečně zavedla politiku kvantitativního uvolňování (QE). Klíčová otázka v tomto stadiu zní, zda Německo dá ECB manévrovací volnost potřebnou k uskutečnění této měnové expanze s dostatečnou smělostí.

QE sice nemůže zajistit dlouhodobý růst, ale může významně přispět k ukončení trvající recese, svírající eurozónu už od roku 2008. Rekordně vysoké hladiny cen akcií v Evropě během tohoto týdne, v očekávání QE, nejenže poukazují na narůstající důvěru, ale jsou i přímým kanálem, jímž měnové uvolnění může povzbudit investice a spotřebu.

Někteří pozorovatelé, například laureát Nobelovy ceny Paul Krugman a bývalý ministr financí USA Larry Summers, nadále pochybují, zda QE skutečně může být účinné. Jak se nedávno vyslovil Krugman, velkou část světové ekonomiky strhuje „deflační vír“ a padající ceny vyvolávají nevyhnutelné spirálovité ubývání poptávky. S tím patrně souhlasí i Světová banka a Mezinárodní měnový fond, neboť obě instituce nedávno o několik příček snížily prognózy růstu.

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Jeffrey D. Sachs

Writing for PS since 1995
329 Commentaries

Jeffrey D. Sachs, Professor of Sustainable Development and Professor of Health Policy and Management at Columbia University, is Director of Columbia’s Center for Sustainable Development and the UN Sustainable Development Solutions Network. He has served as Special Adviser to three UN Secretaries-General. His books include The End of Poverty, Common Wealth, The Age of Sustainable Development, Building the New American Economy, and most recently, A New Foreign Policy: Beyond American Exceptionalism.

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0 Comments on this paragraph, 22 Comments on this article

Pablo Klein-Bernard Jan 31, 2015

Yes. But this is Fiscal Policy in my book. The right kind of fiscal policy, that puts people to work and raises their expectations for the future. The collapse in aggregate demand is a problem of expectations as much as liquidity. Fiscal stimulus packages that are based on tax rebates don't have that positive effect on expectations. Giving households a little extra money will not make them spend it if their outlook for the future is gloomy. Don't rely too much on the private sector to provide this kind of infrastructure push, though. The public-private mix in the economy will change in the future in favour of the public sector. I am sure of this.
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Russell Taylor Jan 29, 2015

If Jeffrey Sachs believes that conflicts on a similar scale to those of the Russia-Ukraine war and the issues in the Middle East are related to anything other than economics he is an idiot of global proportions. Considering his significant involvement in the "Big Push" type MDG fiasco I have trouble understanding why his voice continues to be heard. Come to think of it, it is probably because his philosophies are so dangerous that people like myself who would normally ignore his comments feel a need to voice an opinion
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Michael Public Jan 26, 2015

edit- QE is a less bitter pill to swallow than austerity.
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Michael Public Jan 26, 2015

QE is obviously a less bitter pill to swallow than QE. Problem is QE's is not harmless. It flows to to the 1% via the banks driving up inequality. It rather be given out as vouchers to each person which can only be redeemed to pay wages or salaries or locally produced things (e.g. cars) in the relevant country.
- Mike Fellman Jan 28, 2015
  
  Not true. QE does not change the net value of the balance sheets of anybody. All it does is replace government bonds with central bank reserves. It is not free money for the banks.
  
  As Sachs points out, it acts mainly via the portfolio balance channel. As yields on government bonds fall because there prices rise as a results of central bank buying, investors shift into riskier, higher yielding asses.
  
  See http://www.fx-fusion.blogspot.com/
  A new reply to this comment has been posted.
- Mike Fellman Jan 28, 2015
  
  Not true. QE does not change the net value of the balance sheets of anybody. All it does is replace government bonds with central bank reserves. It is not free money for the banks.
  
  As Sachs points out, it acts mainly via the portfolio balance channel. As yields on government bonds fall because there prices rise as a results of central bank buying, investors shift into riskier, higher yielding asses.
  
  See http://www.fx-fusion.blogspot.com/
  A new reply to this comment has been posted.
- Mike Fellman Jan 28, 2015
  
  Not true. QE does not change the net value of the balance sheets of anybody. All it does is replace government bonds with central bank reserves. It is not free money for the banks.
  
  As Sachs points out, it acts mainly via the portfolio balance channel. As yields on government bonds fall because there prices rise as a results of central bank buying, investors shift into riskier, higher yielding asses.
  
  See http://www.fx-fusion.blogspot.com/
  A new reply to this comment has been posted.
A new reply to this comment has been posted.
John Brian Shannon Jan 25, 2015

Hi Jeffrey,

Another fine essay. Well said on all counts.

However, one piece of the puzzle is not discussed in your essay, nor in any others -- and that piece is -- HALF of the money in the world is missing, a.k.a. MIA, missing in action, 404, Not found, etc.

Half of the money in the world is not doing anything productive.

Half of the money in the world is serving only one purpose, and that is to make the rich, richer. It's not doing anything productive for 99% of the world population.

The 1% own more wealth and control more than half of the money in the world. (Control can be exercised in many ways)

Effectively, that means that half of the global wealth in the world is unproductive, MIA money.

For some context, if you have a whole ocean liner and you take away a full half of the ocean liner, you no longer have two halves of an ocean liner. You have two pieces of salvageable metal at the bottom of the ocean.

If you have half of a car, and you take away half of the car, you have expensive scrap metal.

When you (for all intents and purposes, by placing it with the 1%) remove half of the wealth from the global economy, you have deflation, lack of demand causing lower growth and you have severe and worsening under-performance of the economy in every other way -- eventually.

Some economists are looking at the symptoms (deflation, low demand, low growth) instead of the cause.

And with each passing day, it's getting worse as more money/wealth accrues to the 1% crowd.

As I said at the outset, half the money in the world is only serving to make the 1% richer. And that's unsustainable by any standard.

A flat income tax of 25% for anyone who earns more than $25,000. per year would have prevented this situation from occurring.

If implemented, even now, it could undo massive harm and inequality if some percentage of that tax revenue is used to fund shovel-ready infrastructure projects and other unemployment-reducing measures.

A flat 25% wealth tax (removing earned income taxes completely) for anyone with a total wealth of over $25,000. would be even better and infinitely healthier for the economy than the present inequality-inducing income/wealth and taxation regime.

Like global warming, the longer we wait -- the worse it will get.

Best regards, JBS
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Brent Beach Jan 25, 2015

Sachs declares victory! "The good news is that, even near the ZLB, monetary policy works. QE raises equity prices; lowers long-term interest rates; causes currencies to depreciate; and eases credit crunches, even when interest rates are near zero."
Mission accomplished! Now where have I heard that before?
QE has not one part, it has two parts.
After buying all the junk bonds, the FED has to someday sell that stuff back.
So, let's wait until the process finished to declare victory, even on this limited part of the economy.
For those for whom the economy is more than the financial sector - which Sachs seems to forget - who are still waiting for some relief of their plight, this article is no more than bluster on an aircraft carrier was.
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Robbie Jena Jan 25, 2015

---a “deflationary vortex” is dragging down much of the world economy, ---because Asia ONLY production and rest except Germany are enjoying it....
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dan baur Jan 24, 2015

After a run-up in leveraging we have a run-down - nothing wrong with that.

Perhaps if politicians stopped trying to micromanage the economy, we would be all better off.

The Soviets tried hard to micromanage and after seven decades gave up. How many decades do we need to try this? The Japanese already have tried for two.
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Francesco Scornavacca Jan 23, 2015

While I agree with most of the points in this article, I don't understand why Mr. Sachs focus so much on monetary policy. Monetary policies alone won't solve anything.
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Facundo Jorge Jan 23, 2015

I'm no expert, so there are things that I don't understand. Could please an economist assist me? Why go through the banks? I mean if you want to inject 1.1 trillion Euros wouldn't kill two birds with one stone if the ECB just deposits 3000 Euros into every Euro zone citizent? You boost inflation and increase aggregate demand. I'm talking about printing money here.. Out of thin air. What would be the arguments against it? I understand there is a moral hazard of giving money away. But I see it as a much more efficient way of boosting the economy and eliminating the threat of deflation. I'm not expert but QE seems like a dodgy scheme to gives banks several goes to a piece of the pie.
- dan baur Jan 24, 2015
  
  "let aside the Greek vs German" - I mean here should the Greek receive as much as the German?
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- dan baur Jan 24, 2015
  
  "if the ECB just deposits 3000 Euros into every Euro zone citizent" - let aside the Greek vs German, but to a saver, that is outright theft. If you invested in 100 000 in bonds, you would get 3000 but probably lose more than 3000 from the value of your bond. Guess who invested the 100 000, the German or the Greek?
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Tomas Kurian Jan 23, 2015

QE will just increase balance sheets of the same people, that through money hoarding got us into this mess.
http://www.genomofcapitalism.com/index.php/11-1-methods-of-capital-redistribution-inevitability-of-state-debt

What is needed is Periodic taxation of accumulated capital
http://www.genomofcapitalism.com/index.php/16-periodic-taxation-of-accumulated-capital-2
which will allow for increased demand through primary productivity subsidies.
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Stamatis Kavvadias Jan 23, 2015

Good ...market economist. Optimistic. Everything is a breath of being rosy.

There are no insolvent banks; only they are not in the mood to lend. The "real" problem is low demand for investment; there is no specific reason... Maybe it's that previously we lacked the "revolution in information technology" that is taking place now. Etc.

The essence is that capitalism can go on with the 1% and the richest countries. The rest are ...geopolitical issues. For sure, the rich can last the longest, but the economy?

Lets see. My take on this is that the globalization of ideas via the social media and the stress of the broad public by the crisis, results in the birth of a new consciousness that destroys the usual stories sold by plutocrats and the artifact of trust they had been able to create to "kick the can down the road". The lack of clarity in their thought surfaces as an effort to present a nice bedtime story. An economy like a morning show. Since we cannot understand the fundamentals of the economy, lets make people believe in auspicious prospects and they will act as expected. Very clever but you will need someone to buy the stuff and money to buy it with.
- Stamatis Kavvadias Jan 23, 2015
  
  If only those investors could ...put back in the economy the value the bankers took out and put in the stock market, the cycle would close!
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Paul Daley Jan 23, 2015

Why should those who sell bonds under a QE program do anything but buy other assets? It's a surefire bet, given QE's impact on real interest rates. When all i said and done QE is more a gift of unearned capital gains to the already rich than it is anything else.

Summers is closer to the truth about what ails the world. It is not a shortage of liquidity. Consumption is simply too low; savings too high. That should suggest a shift in incentives for savings and consumption, like higher taxes on capital income and lower taxes on consumption. But it will take some time for governments to recognize that private capital accumulation can be a problem, and to work out means to treat that problem.
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Jose araujo Jan 22, 2015

Portuguese and Irish housing buble... LOL Mr. Sachs knows his data.

The reference to Hayek is precious.... the old miss allocation of capital argument, ignoring that believing in this old tired and wrong theory is to go against any rational behaviour model. Not even Hayek believed in it.

Fiscal stimulus doen't work beacuse people will save.... what a load of BS, just create jobs for the unemployd people and presto no savings, all is fueled to demand like Keynes said it would.
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jagjeet sinha Jan 22, 2015

Perfect Storm if there was one in the predicament that 2014 ended with. It is the nature of the QE. QE Type 1 - indulges in existing financial assets to create liquidity. QE Type 2 - What Juncker wants - indulges in Public Infrastructure Assets. When the only good credit that exists is The State, it is indeed incumbent upon The State to use State Capitalism to nuclear growth - the limits to Private Sectors capacity to overcome challenged economic growth has been blatant for a while, notwithstanding supposedly higher efficiency. With Oil prices halved, liquidity taps opened and Interest costs at historic lowest, JS is spot on in predicting a 2015 when turnaround in Europe - the key to growth - finally replaces austerity. Thank you Greece. Brilliantly captured by our favorite Professor.
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Antigoni Aliki Jan 22, 2015

Mr Sacks, your article reveals that you know nothing about economics. What about the 55 million people who live on food stamps in the USA? What about the 120 million who live below poverty? What is actually the QE? Are you sure it was the Keynsians who talked about it? Keynes can't be takes seriously as an economist, not even as a..."philosopher"/ You may help us by mentioning what Murray Rothbard said about counterfeiting. The ECB is in the process of confiscating the property of the European citizens and even though they don't deserve this, I have to say that in the recent past Europe was laughing @ Greece. They stole everything they could from that country, because we won't allow them to steal more and now they are confiscating the property of their own people. Fair? I would say yes.
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