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Economics

Où est passé l'argent ?

Sep 15, 2021 Robert Skidelsky

LONDRES – Alors que l'on évoque souvent l'éventuelle interruption voire inversion de l'assouplissement quantitatif, une question n'est presque jamais soulevée : pourquoi les quantités massives d'achats d'obligations par les banques centrales en Europe et aux États-Unis depuis 2009 ont-elles eu si peu d'effet sur le niveau général des prix ?

Entre 2009 et 2019, la Banque d'Angleterre a injecté 425 milliards de livres sterling (588 milliards de dollars) – soit environ 22,5 % du PIB du Royaume-Uni en 2012 – dans l'économie britannique. Cette mesure visait à faire augmenter l'inflation jusqu'à l'objectif à moyen terme fixé par la BOE de 2 %, contre un minimum de 1,1 % en 2009. Mais après dix ans d'assouplissement quantitatif, l'inflation était inférieure à son niveau de 2009, malgré le fait que les prix de l'immobilier et du marché boursier étaient en plein essor, et que la croissance du PIB n'avait pas retrouvé son taux tendanciel d'avant la crise.

Depuis le début de la pandémie de COVID-19 en mars 2020, la BOE a acheté 450 milliards de livres supplémentaires d'obligations d'État britanniques, ce qui porte le total à 875 milliards de livres sterling, soit 40 % du PIB actuel. On ne connait pas encore à ce jour les effets de ce deuxième cycle d'assouplissement quantitatif sur l'inflation et la production. Mais le prix des actifs a encore fortement augmenté.

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Robert Skidelsky

Writing for PS since 2003
204 Commentaries

Robert Skidelsky, a member of the British House of Lords and Professor Emeritus of Political Economy at Warwick University, was a non-executive director of the private Russian oil company PJSC Russneft from 2016 to 2021. The author of a three-volume biography of John Maynard Keynes, he began his political career in the Labour party, became the Conservative Party’s spokesman for Treasury affairs in the House of Lords, and was eventually forced out of the Conservative Party for his opposition to NATO’s intervention in Kosovo in 1999.

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0 Comments on this paragraph, 17 Comments on this article

Ken MacNeal Dec 27, 2021

The answer is simple and much simpler that these informed comments. In 2012, Ben Bernanke, gave a famous speech that heralded the need and new Fed policies to stimulate the 'Wealth Effect." Research had shown that 3% of additional wealth would be spent in the economy. Until that speech, the Fed had never mentioned the stock market but the GOP shutdown of Obama's government fiscal spending when consumers were still unwinding their debts post GFC and real estate collapse, left the Fed to carry the stimulus ball. Bernanke and Yellen both vocally frustrated by the lack of needed fiscal spending.

QE simply keeps real interest rates artificially low by buying vast quantities of bonds from the marketplace. Low real interest rates lift the prices most of two assets, stocks and home prices. Bingo! That is where the money went, to stock holders and home owners. From the beginning of 2020 pre-Covid to June 2021, wealth in America went up $23 Trillion. Stocks for the top 50% went up 40% and Real Estate 16% (understated). Did they all become Warren Buffets for stocks or did they landscape and renovate their homes? No they got the Fed's gift of the wealth effect.

Even Ben Bernanke must marvel at the extent the huge 2020 QE Wealth Effect led to a boom in asset prices during a recession/depression. Janet Yellen must be frustrated that the receivers of this gift don't want to return a small portion in taxes to pay for support for their fellow citizens that don't own houses and stocks.
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Per Kurowski Dec 26, 2021

Bank credit is a fundamental transmitter of central banks’ monetary policy.
But, since the risk weighted bank capital requirements distorts the allocation of credit to the real economy, any QE liquidity injection is only bound to make matters worse.
https://subprimeregulations.blogspot.com/2021/08/zero-dividends-buy-backs-and-big.html
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Mirek Fatyga Dec 18, 2021

you don't say.
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Ben Leet Sep 22, 2021

Pushing on a string -- the goal is to send resources to all citizens, a shared prosperity. Can you do so by sending money first to a bank? No. You have to send it to a consumer who will pull the string through. Government job creation. QE bolsters and stabilizes financial asset prices, it does not filter down to general prosperity. QE is not the only villain in the piece, corporations paying low wages and allocating profits solely to shareholders is a stronger factor in asset inflation. PS should ask professor Wm. Lazonick to contribute an essay, he has documented the allocation of S&P 500 corporations over a 10 year period, about 92% of profits have gone to dividends and stock buybacks. Look it up on the web. Plus corporate profits in the US have doubled since year 2000 relative to GDP. In Jan 2009, at the low trough of the recession, "household net worth" had declined by a quarter, from $62 trillion to $48 trillion. In 2021 it stands at $136 trillion. Adjusting for inflation HNW has more than doubled, up by 126%. -- a trillion is quite a large amount. The US annual GDP now is around $21 trillion.
The wage income of half of US workers, 84 million, is $1.36 trillion (in 2019 according to the Social Security Administration report on wage income). The average wage income for 84 million is less than $16,000 per year. In other words, wages are rather low. Low purchasing power, inability to pull the string. To quote Marriner Eccles (head of the Fed. Reserve 1936 to 1948) "As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth . . . [currently produced, meaning income] . . to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery." In short, wages are much too low, and income distribution is out of balance, the incentive for capital to create added productive machinery is zilch. And wealth distribution is very unhealthy, to put it mildly. I should add: my blog is http://benL88.blogspot.com, Economics Without Greed, Part Two.
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Dallas Weaver, Ph.D. Sep 19, 2021

All systems with feedbacks, like supply/demand markets, or physical control systems from simple to as complex as ecologies can and do create their own instabilities. Take for example your house thermostat as a simple feedback system where if it gets too cold the heater turns on then off again when it warms up. If you put a blanket over the thermostat slowing the heating of the sensor relative to the house, the system will fail as the house overheats then gets too cold. Decision delays will create instability and in an economy full of delays it will be unstable. Every bureaucratic increase is more delays and more serious instabilities in the system.
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Sep 19, 2021

This comment was removed by a moderator. Replies to this comment may also be deleted. Please note that we moderate comments to ensure the conversation remains topically relevant. We appreciate well-informed comments and welcome your criticism and insight. Please be civil and avoid name-calling and ad hominem remarks.
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Alexandros Aslanidis Sep 19, 2021

The money that central banks create through quantitative easing enter the system as reserves, and mostly stay in the system as reserves because commercial banks aren't lending. Simple as that.
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Avraam Dectis Sep 19, 2021

.
Wonderful article by Dr. Skidelsky, as usual.

Perhaps a quibble, but instability is an expected state in economies.

Economies are inherently chaotic systems. Chaotic systems require frequent adjustment.

Stability and equilibrium are the holy grails of economics — desired and fictional.

Whatever is done to address today’s deficiency will lead to another instability.

We should always be preparing the next adjustment.

Which brings up the most important point: we should not limit ourselves to existing solutions.

QE and government spending on jobs are only two dimension in a space of infinite dimensions.

We should be crafting additional solutions at all points in time.

Here are a few suggestions: https://trillionstrillions.medium.com/nine-ways-to-increase-the-size-of-the-economy-and-make-everyone-better-off-turbo-economics-3-0-8d8167a67a75
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Procyon Mukherjee Sep 19, 2021

The miracle drug to keep the patient just alive with a lingering illness is such an apt argument, the current research in Oncology, where billions of dollars are being spent, is just to do that, not find a prevention but make it more expensive to survive year on year till you are bankrupt. The same argument pervades the financial system, print money to keep the music going; eventually the system will implode to correct.
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Thaomas H Sep 19, 2021

Quantitative easing has only since 2020 pushed inflation expectations above 2% with no sign of "instability."
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Ariel Tejera Sep 19, 2021

So, we have the tricky reality that central banks are performing magic, inflating the economy with new money that cause no inflation on goods, no inflation on labor pay ... mmm ... where's the trick ? Can we call inflation the increase on valuations of homes and financial assets ? No, that's not inflation, those are mere bubbles. Silly me.
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Michael Harrington Sep 18, 2021

“So, the reason why QE has had hardly any effect on the general price level may be that a large part of the new money has fueled asset speculation, thus creating financial bubbles, while prices and output as a whole remained stable.”

You think?

Finance is centripetal. I’ll go with Minsky. Our policy conundrum is that the Fed can’t allow real asset price corrections because of the debt leverage.
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Killian Denny Sep 17, 2021

Where did the money go.....A stock market valuation is the last price a company's stock sold for multiplied by number of stock that have been issued, you can apply this to the price of anything, houses, it's just the last price by the number of stock........What is the actual reality...If the last average house sold, sold for $50,000 more than the previous average house, then it could be said, the average home owner just "earned" $50,000 or is $50,000 richer....Are they really wealthier......If the average home owner suddenly got an increase in their wages by $50,000 and that $50,000 retained the same purchasing power, we'd see an explosion of wealth heretofore unseen in human history....as nothing like this has visibly happened, we can say these "wealth" increases are massively illusory at best........And as far as genuine economic wealth, there are dribbles at most.......And as these resources don't really exist, they can't be redirected.......Even the very rich, are not really that rich.......Increasing real incomes, real wealth, is absolutely dependent in creativity outpacing destruction, for example a nurse being able to deliver greater care in a shorter period of time, will mean the possibility of a greater real income for the nurse and patient. There needs to be a greater collective generation of real wealth, before that wealth can be redistributed among the collective......Pumping zillions into steel mills, in some antiquated view that manliness plus furnaces creates wealth, simply leads to greater deprivation. And, if Keynesian economics worked, why aren't we rolling in dosh after Iraq and Afghanistan have had trillions dropped on them......
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vic lai Sep 17, 2021

Future economics history books will record today's embarrassing misunderstanding of the actual working of our "central bank cum commercial bank system" by so many people under the sun.
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Quantitative easing (QE) merely involves the central bank buying bonds (or other bank assets) in exchange for deposits made (out of nothing) by the central bank in the commercial banking system – that is, crediting the banks' reserve accounts at the central bank --- but the bank reserves always stay there and could not be lent out to the non-bank public.
QE is based on the common but erroneous belief that
(i) the commercial banks need prior reserves before they can lend to the non-bank public, and that QE provides enough of those reserves,
(ii) a commercial bank is an institution that accepts deposits to build up reserves and then on-lends part of them at a margin to make money (so-called "indirect financing"), based on the misleading "banking multiplier model,"
(iii) if a bank does not have adequate reserves then it cannot lend.
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According to Richard Werner, bank lending is not a process of "money lending" or "loan", but actually one of credit creation, whereby new money is created ex nihilo --- this is genuine and de facto "direct financing."
Bank lending is not “reserve constrained”. Banks lend to any credit worthy customer they can find and then worry about their reserve positions afterwards.
According to Richard Koo, during a balance sheet recession, a bank can hardly find enough borrowers, because most of them are engaging in debt-minimization, in order to repair their balance sheets, and the last thing they want at that time is to incur ever more debts, thereby rendering monetary policy ineffective and fiscal policy much more effective.
Modern Monetary Theory (MMT) has perhaps given a most detailed and (so far) best description of all of the above arguments.
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David Punabantu Sep 16, 2021

The Keynesian model has another dimension to it on how money can "disappear" with respects to the set time parameters. Take a national budget. On budget day the Finance Minister or Secretary will say the present a budget. A budget which is meant to last 365 days represents an "X" percent value of the Gross Domestic Product (GDP) of anticipated production over 365 days.
If "X" is say 50 percent of the GDP then a tax rate per month becomes 4.16 percent leaving at the end of twelve months 50 percent of the GDP value for the economy for nationals and firms to thrive on.
If taxes are at 8.3 percent per month, this leave no value for a nation as the GDP is consumed by the budget that now represents 100 percent of the GDP. (8.3x12=100) Thus at this point even if you get paid physical money it buys next to nothing as its value has been already spent by the budget. In reality taxes are usually above 8.3 percent.
Taxes above 8.3 percent mean that government is able to collect the budget and spend it and recollect it and re-spend it in a cyclical pattern several times in 365 days. The higher the tax the higher the recycling. In effect, much like Keynesian economics government prints money by recycling it which in turn makes it lose value as it "disappears".
Therefore you may find that a budget may be recycled 21 times within a calender year, meaning every 17 days government collects and spends the budget and can be termed as an economic year. Thus what has to be done in a calendar year of 365 days now has to be done in 17 days. Thus management behavior has to replicate these time horizons. Originally in the fixed exchange rate area this "economic year" was 90 days that resonated with company board meeting every quarter to make or review company decisions.
There is a point when the recycling of the budget consumes all the GDP value before the 365 days which we can call point "Z". It is here that all the GDP value has been consumed and the economy enters the informal phase. This has created the informal sector hence its rise.
At each economic year, taxes become compounded much like Zeno's Paradox. As the first phase in the 17 days example, at 50 percent of the GDP value, at 34 days, the second economic year, the GDP value becomes "100 percent" as it is still 50 percent based on the 100 percent at the start of the first cycle. However at this new second point, the 50 percent of the GDP value has to face the remaining 50 percent which in effect places 50 percent of the GDP of the budget to be "100 percent" in respect of the budget representing the GDP value which is 50 percent. It is here that the tax is compounded. At the third economic year, being 51 days, it is a negative 50 percent and in the informal phase of the economy.
Therefore the notion to tax excessive liquidity of introduced physical money as a result of QE can create an additional "Keynesian condition of non-physical money" against which money disappears or rather it's VALUE.
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Jose Araújo Sep 15, 2021

Industrial vs Financial circulation is a Marxist argument, not Keynesian. JMK never questioned the efficiency of the financial markets, he knew that if he did he would be agreeing with the Marxist view. If financial markets are not efficient, there are no efficient markets and Capitalism makes no sense.

Liquidity preference and increased risk aversion determines the increase price of liquidity. QE provides liquidity, so the absence of QE would lead to higher stock prices, not lower.

Keynes argued for fiscal expansion, because he wasn't a Monetarist, there were no Monetarists at that time. He discovered the liquidity trap, has an extreme condition, but to my knowledge didn't expand its findings to what would happen in the Financial markets. Actually he has very little work on financial markets equilibrium.

Its completely absurd to say that JMK suggested that the increase supply of a good (liquidity) would more than increase the demand for such good. So no, JMK never said that under liquidity trap conditions, increasing money supply would lead to increases in liquidity prices, that is just an aberration.
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