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لا تزال البنوك المركزية تعاني من التضخم

Jun 9, 2022 Willem H. Buiter , Anne C. Sibert

نيويورك ـ تفقد البنوك المركزية الرئيسية السيطرة عندما يتعلق الأمر بالوفاء بتفويضاتها الخاصة باستقرار الأسعار. ففي شهر أبريل/نيسان الماضي، بلغ تضخم مؤشر أسعار المستهلك الأمريكي لمدة 12 شهرًا نسبة 8.3٪، بانخفاض طفيف عن 8.5٪ في مارس/آذار، وقد بلغ مقياس التضخم المفضل لمجلس الاحتياطي الفيدرالي الأمريكي، وهو مؤشر أسعار نفقات الاستهلاك الشخصي الأساسي (الذي يستبعد المواد الغذائية والطاقة)، نسبة 4.9٪ انخفاضًا من 5.2٪ في مارس/آذار. لكن ما يجب أن يفعله بنك الاحتياطي الفيدرالي هو عكس ما يفعله بالفعل.

بعد زيادة المنطقة المستهدفة لمعدل الفائدة على الأموال الفيدرالية بمقدار 50 نقطة أساس إلى 0.75 -1 ٪، أشارت اللجنة الفيدرالية للسوق المفتوحة في اجتماعها في مايو/أيار إلى أنها ستلتزم برفع السعر بمقدار 50 نقطة أساس خلال اجتماعاتها في يونيو/حزيران ويوليو/تموز. ووفقًا لمحضر اجتماع مايو/أيار، اتفق جميع المشاركين على أن الاقتصاد الأمريكي كان قويًا للغاية، وأن سوق العمل كان شديد الضيق، وأن معدل التضخم كان أعلى بكثير من الهدف. ومع ذلك، فقد قرروا أنه على لجنة السوق الفدرالية المفتوحة "أن تُغير بسرعة موقف السياسة النقدية نحو موقف محايد" (التشديد على موقفنا).

هناك مشكلتان أساسيتان تحولان دون تحقيق ذلك. أولاً، يجب أن يكون موقف بنك الاحتياطي الفيدرالي من السياسة النقدية مقيدًا وليس محايدًا. وبدلاً من ذلك، أشارت اللجنة الفيدرالية للسوق المفتوحة إلى أن "الموقف التقييدي للسياسة قد يصبح مناسبًا اعتمادًا على التوقعات الاقتصادية المتطورة والمخاطر على التوقعات". ثانيًا، لا يوجد شيء سريع بشأن زيادتين إضافيتين بمقدار 50 نقطة أساس. سيظل الحد الأعلى لسعر الفائدة المُحدد عند مستوى لا يتجاوز 2٪، وهو أقل من التقدير المُتفق عليه لسعر محايد بنسبة 2.5٪ (مجموع المعدل الحقيقي المُحايد 0.5٪ وهدف التضخم المُحدد في نسبة 2٪).

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Willem H. Buiter

Writing for PS since 2018
39 Commentaries

Willem H. Buiter, an adjunct professor at Columbia University, is a former member of the Bank of England’s Monetary Policy Committee and a former chief economist at Citigroup.

Anne C. Sibert

Writing for PS since 2020
7 Commentaries

Anne C. Sibert, Professor of Economics at Birkbeck, University of London, is a former member of the Central Bank of Iceland’s Monetary Policy Committee.

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0 Comments on this paragraph, 12 Comments on this article

vic lai Jun 13, 2022

Today, thanks to the unfortunate massive-money-printing (MMT) experiment performed by "the US Government cum US Fed" after the outbreak of the Covid-19 pandemic, we are now one more step closer to truly discovering Richard Koo's "Holy Grail of Macroeconomics."
The Holy Grail does not lie in the ground directly below the famous pyramid at the entrance of the Louvre museum, as is asserted by Robert Langdon, but in whether the deficit-spending of the government at suitable time is pumped up or not, and, equally important, how the government's pumped-up deficit spending is financed.
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(A) During a balance-sheet recession in a country which usually follows a popping of her steaming asset market bubble, the usual endogenous increase in the country's money supply, through her banking system, is no longer strong enough to quickly propel the domestic economy back to both quick economic recovery and normal economic growth, because
(i) private corporations turn from profit maximization to debt repayment to clean up their balance sheets,
(ii) the private consumers are busy licking their wounds, through paying down their own debts and restoring their savings level.
Demand for funds evaporates even if the interest rate drops to zero or becomes negative, growth slumps, traditional monetary-policy efforts to bolster the economy fail, and the government's pumped-up deficit-spending fiscal policy is crucial at this time.
The government could finance her increased deficit spending simply by borrowing from both the private commercial banks and the private consumers and corporations, without causing or worsening domestic real-economy-inflation.
(Domestic deflation in the macroeconomy, or so-called "secular stagnation," can be avoided, if the government's pumped-up deficit-spending is also financed by enough "new money printing" through the help of the central bank's new QEs.)
(B) After the sudden outbreak of a global pandemic or an international war, both the global supply chain bottlenecks, and the energy, commodities, and food prices, will quickly crop up, daily business in a country can no longer be as usual, while many workers are also out of work and have less or no incomes.
The government should ALSO finance her pumped-up deficit spending simply by borrowing from both the private commercial banks and the private households and corporations, say through the issuance of much more new Treasury securities for them to buy, and should AVOID "printing new money" through the central bank's new-QE debt monetization to prevent wakening the real-economy-rising-inflation monster.
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Doing so in both (A) and (B), the government can have more money to deficit-spend to maintain or further increase the macroeconomy's aggregate demand, by quantity-crowding-out private consumption and private investments in a harmless manner (a zero-sum money game), without subjecting the domestic macroeconomy to the threat of the real-economy-rising-inflation monster.
If, in case (B), "new money printing" (massive exogenous money growth) is being used instead (a positive-sum money game), the end result will be the macroeconomy's facing the constant threat of the real-economy-rising-inflation monster 1 or 2 years later, because inflation is always and everywhere a monetary phenomenon.
---
Having eventually discovered the Holy Grail of Macroeconomics, most of us will sense that Fed-watching or macroeconomy-watching will become a very boring job in the coming years, due to the relative lack of macroeconomic crises from now on.
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- vic lai Jun 13, 2022
  
  The current widespread market expectation of a Volcker-like massive interest rate hikes by the US Fed, together with the QT cycle, has just led to another Dark Monday in the US stock market.
  ---
  Currently, the Fed's overnight reverse repo (RRP) facility serves as
  (a) the floor of the Fed's interest rate corridor, and
  (b) a tool to soak up the excess liquidity in the US macroeconomy, but these overnight cash, mainly deposited in the money market funds and redeposited in the Fed, can easily be taken out by both the households and the corporations to become liquid spending power once again, feeding further the ongoing inflation monster.
  The Fed can consider issuing its own bill (Fed bill or central bank bill), at an interest rate equal to the RRP rate, to supplement the RRP facility, and to help lock up the macroeconomy's excess liquidity for a longer period of time through constant rolling over of those bills.
  Doing so won't affect the size of the Fed's balance sheet, only rearranging the items on the liability side of the balance sheet.
  ---
  In the past, as a result of China's persistent and massive trade account surpluses year-in and year-out, the Chinese exporters exchanged their earned US dollars for Chinese yuan to be spent in China later, and the yuan became new commercial bank deposits which were inflationary.
  China's central bank, the PBOC, once issued a lot of central bank bills, requiring the country's commercial banks to buy most of them, to mop up the excess yuan money supply in her domestic country.
  The idea is to prevent imported inflation under China's David-Hume-specie-flow-like mechanism to maintain a relatively fixed exchange rate between the yuan and the US dollars in those years.
  ---
  If enough Fed bills are issued, then hopefully, both the frequency and intensity of the Fed's coming interest rate hikes and QTs can be reduced, and the resulting change in people's expectation and behavior can help reduce the chance of both a stock market landslide and an eventual bursting of the country's everything asset bubble.
  ---
  - vic lai Jun 14, 2022
    
    Combination I : Loose Central Bank Liquidity + Loose Private Sector Liquidity (inflationary)
    Combination II : Tight Central Bank Liquidity + Loose Private Sector Liquidity
    (2% inflation rate)
    Combination III : Loose Central Bank Liquidity + Tight Private Sector Liquidity (stagflationary)
    Combination IV : Tight Central Bank Liquidity + Tight Private Sector Liquidity
    (deflationary)
    ---
    The above is an adapted inflation version of the yield-curve-forex-market matrix from Michael Howell.
    The US economy is now at combination I, and is, due to the Fed's interest-rate and QT cycles, moving toward combination III.
    The correct move should be to combination II, through either the issuance of central bank bill or more new Treasury securities to absorb the excessive market liquidity, thereby making the total money supply in the macroeconomy once again dominated by healthy endogenous non-inflationary commercial bank credit growth, and no longer by the Fed's exogenous and inflationary "money printing" through overt monetary financing of the federal government's pumped-up deficit spending.
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Elizabeth Pula Jun 12, 2022

Well, if Arora Report is correct, looks like the ECB has had a change of heart as of July 1, 2022, looks like they're doing an about face. But since the ECB really is heartless, and really doesn't have a face, it still looks like that money game is getting plugged, Now, what it does to any real person time will tell. Sooner probably than later.
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vic lai Jun 10, 2022

According to Fed Guy Joseph Wang, the US Fed has always had a certain real neutral rate in mind, of say 0.5%, and so the final highest nominal interest rate arrived at in the current interest-rate-hiking cycle depends on which nominal inflation rate figure the Fed chooses to use:
---
(i) if she simply chooses to use the latest CPI inflation figure, to be announced this Friday in the US, of say 7.7%, then the Fed will have to hike the nominal interest rate to as high as 0.5% (real interest rate) + 7.7% (nominal inflation rate) = 8.2% (by raising the interest rate corridor accordingly), a quite high figure relative to the past decade but which is still substantially less than the highest nominal interest rate achieved by Paul Volcker in the early 1980s,
(ii) if she chooses to use the five-year-forward expected average inflation rate of say 3.5%, then the Fed will have to arrive at a nominal interest rate of 0.5% + 3.5% = 4.0%, and stops hiking from there, signaling the end of the current interest-rate-hiking (and QT) cycle,
(iii) if she simply chooses to use the long term inflation rate of 2.0%, then the current rate hikes will quickly stop at the maximum level of only 0.5% + 2.0% = 2.5%, a level which perhaps is too low to fight the current rampaging inflation in the US.
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- vic lai Jun 10, 2022
  
  Which means, the current main monetary policy enacted by the US Fed has transformed into an inflation-rate-level guessing game, the Fed's correctness of which will continuously be randomly affected by the unpredictable length and seriousness of both the global pandemic and the Ukraine War.
  ---
  What's more important and complete is to control the probable arrival of stagflation in the US, and in doing so the US Fed's monetary policy needs the help of the fiscal policy of the country.
  Afterall, it always takes two to tango.
  ---
  (A) The FED's use of QTs, together with her interest-rate-hiking cycle, is not a good combination that should be chosen, since QT requires the private sector to hold more treasuries and less cash (less reserves for the commercial banks, and less bank deposits for the households and corporations).
  Nowadays, cash is king, and so the QT cycle means the persistent reduction of cash in the macroeconomy when it is most needed especially by the private households and corporations.
  (B) A simpler and perhaps more effective way to cope with coming stagflation is to transfer (not destroy) the currently unused bank deposits of the ordinary households and corporations (and the mapping commercial bank reserves) to the Federal Government's checking account at the Fed (the TGA account), such that
  (i) there will be less cash chasing goods and services in the real economy, and hopefully this will lower supply-pushed inflation to a lower level in the process,
  (ii) the federal government can give both consumption rebates to the citizens and subsidies to the US corporations using the extra cash in the TGA account, when the specter of recession starts to haunt the country.
  ---
  - vic lai Jun 10, 2022
    
    The current fast propping up of the FED's overnight RRP account shows that, as a result of the higher and higher RRP overnight interest rate (the floor of the Fed's interest rate corridor) now and in the coming quarters, more and more of the cash of both the people and the private corporations is now transferring from the bank deposit accounts to the money market funds (MMFs), to be invested in the Fed's RRP facility to earn more interests.
    The Federal government and the Fed can figure out a way to induce the cash stored in RRP to be transferred to the TGA account, to help finance the government's future increased deficit spending to cope with the coming recession, by
    (a) raising the MMF's qualifying entrance requirements into the FED's RRP facility, and/or
    (b) the Treasury's issuing more short-term bills and long-term notes, at rates (much) higher than the rising RRP rates, to induce the cash in the RRP account to be transferred to the FED's TGA account.
    ---
    With the excess cash in the macroeconomic bowl having been transferred to the federal government bowl at the FED's balance sheet, there will be less money chasing (more and more) goods and services, thereby tempering the coming real-economy inflationary pressure in the country.
    Also, without the quick drop in the cash level of the private sector caused by the FED's QTs, there will be less urgency of a fire sale in the country's steaming asset markets, and so the positive wealth effect from this virtual economy can be maintained, and so much reducing the chance of the eventual popping of the everything asset bubble ------ the main cause of the coming recession in the country.
    ---
    - vic lai Jun 10, 2022
      
      Ray Dalio once said that when the US economy runs into an economic recession, the US government should deficit spend more to help the domestic economy jump more quickly out of the trap of the recession.
      Well, we should instead more correctly put it this way ------ the US federal government needs to deficit-spend (by an appropriate amount) in ordinary times to help prevent the US domestic economy from falling into an economic recession.
      ---
      This is because, the Sectoral Balance Equation (S - I)/GDP = (G - T)/GDP + (X - M)/GDP dictates that, in the US, the federal government's deficit spending should be, like some of the US FED's stabilization tools, a "standing facility" that has to be budgeted by the Treasury and approved by the Congress year-in and year-out, and mostly realized in the coming financial year, rather than being used in an ad hoc manner suggested both by Ray Dalio and by myself upstairs.
      This is not to deny that, facing an unpreventable economic recession that has been realized, the Government shouldn't further prop up her deficit spending, because the already installed automatic stabilizers in the macroeconomy alone are no longer strong enough to do the job well.
      ---
      - vic lai Jun 11, 2022
        
        According to Joseph Wang, the US Treasury's coming issuance of more new treasuries to the private sector (but no longer to the Fed), if any, is equivalent to the coming QTs, so far as the effect on the private sector is concerned ------ more treasuries in the hands of the private sector and less cash in their wallets, which means the private sector is substituting treasuries for cash, which is the exact reverse of QE.
        My above suggestion (issuance of more Treasuries to sterilize the cash now circulating in the private real economy) is to use the Treasury's TGA account at the Fed to act as an "Inflation Stabilization Fund," which is both a store of future purchasing power of the private sector and a removal of the present purchasing power of the private sector, so as to
        (i) whip the current inflation by reducing the present purchasing power (cash) of the private sector, and
        (ii) whip the coming economic recession by increasing the future purchasing power (cash) of the private sector.
        ---
        When or if the future recession ensues, whether the general price level at that time will keep rising (i.e. stagflation), stabilize, or come down, depends much on the previous changes in the growth rates of the money stock in the US in the respective past quarters, since the only reasonable cause of today's inflation in the US is the too-fast increases in the country's money stock (M2) in the previous quarters.
        ---
        The concept is nothing new, it's just a derivative of many country's "Exchange Stabilization Fund (ESF)," now commonly used say in the Asian countries.
        When foreign capital are flowing into the country, China's PBOC (acting as the ESF) buys out the US dollars, and when the foreign capital is flowing out of the country the PBOC sells her US dollars, both at an exchange rate already fixed by the PBOC, and so stabilizing the currency's exchange rate in doing so.
        ---
        
        vic lai Jun 11, 2022
        
        To say the world's central banks are actively fueling this scourge of inflation is highly unfair to these central banks, even though with the benefit of hindsight they may seem a bit late to start whipping this inflation monster when they should have started doing so earlier.
        ---
        Take the US Fed.
        The decisions to end up expanding quickly and massively the Fed's balance sheet from around US$ 4.5 trillion in March 2020 to US$ 9 trillion in March 2022, an amount that is 10 times that in July 2007 before the outbreak of the GFC, were not made entirely by the Fed alone.
        The Fed was just doing its usual QE job of helping the US Presidents and the Congress to distribute free helicopter money to the citizens and corporations in need (the root cause of today's high inflation), to cope with the emergent aftermath of the outbreak of the Covid-19 pandemic in the country.
        If you want to find someone to blame for today's
        inflation then you should correctly point your finger at the executive and legislative branches of the country, not at the "independent central bank."
        But even these two well-intentioned branches shouldn't be (harshly) blamed because at that time they had no way of knowing that their "sincerity" would end up paving the path to "hell."
        ---
        
        vic lai Jun 12, 2022
        
        So, if you also understand Modern Money Theory (MMT) then you should know that the Fed's helicopter money drops in the previous 2 years were actually a "fiscal intervention" which injected new net financial assets into the US non-government sector that directly stimulated aggregate spending, at a time when most economic activities stopped and some workers stayed at home rather than went to work, and they mostly spent on internet and imported merchandizes and not on services, causing all those shipping-delay problems.
        When the pandemic subsided, people resumed their original spending habits and not all of them returned to their work places, and so, together with much more money now in their pockets, the real-economy inflation monster came back with a vengeance after a certain time-lagged period to keep haunting the US economy.
        The current pandemic-induced supply chain bottlenecks, the Ukraine War, and the China lockdowns in their major cities all just aggravate the symptom of the inflation disease (causing rising relative-prices), but are never the root-cause of the inflation disease (a persistent rise in the General price level).
        ---
        (A) Today, the pressure from the US supply-side bottlenecks has already eased a lot for a period of time, but the latest inflation figure shows no sign of abating.
        (B) Neither is the rise in energy prices, one result of the ongoing Ukraine War, a cause of the current inflation.
        According to Steve Hanke, in the 1970s, there were 2 oil crises, one in the early 1970s and another in the late 1970s.
        Japan, a major oil-importing country, only experienced inflationary pressure during the first crisis, but not in the second one. Why ?
        Because Japan didn't much increase her money supply in the second crisis, unlike what she did in the first one.
        (C) Both the supply-chain bottlenecks and the energy and food crises will of course change the expectations and hence behavior of both the US consumers and the producers (say, some consumers increase their buying frequency and intensity for precautionary purpose, and some producers with market power take the chance to raise their product prices more than usual) and hence lead to the widespread relative-price increases in their respective fields, but then again, those are just mostly relative-price changes aggravating the symptom of the inflation disease, not root-causing the inflation disease themselves.
        (D) It's the money supply, stupid !
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