Economics

La “nueva anormalidad” de la política monetaria

Jul 10, 2017 Nouriel Roubini

NUEVA YORK – Los mercados financieros comienzan a sentir los efectos del desarme de las políticas monetarias no convencionales en muchas economías avanzadas. Pronto, el Banco de Japón (BJ) y el Banco Nacional Suizo (BNS) serán los únicos bancos centrales que sigan manteniendo esa clase de políticas para el largo plazo.

La Reserva Federal de los Estados Unidos empezó a retirar su programa de compra de activos (la flexibilización cuantitativa, o FC) en 2014, y a normalizar los tipos de interés a fines de 2015. Y el Banco Central Europeo (BCE) está analizando con cuánta rapidez reducir su propia política de FC en 2018, y cuándo comenzar a eliminar también los tipos de interés negativos.

En esa misma dirección, el Banco de Inglaterra puso fin a su última ronda de FC (que había iniciado tras el referendo por el Brexit de junio del año pasado) y analiza subir los tipos de interés. También están anunciando subas de las tasas el Banco de Canadá y el Banco de la Reserva de Australia.

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Nouriel Roubini

Writing for PS since 2007
183 Commentaries

Nouriel Roubini, Professor Emeritus of Economics at New York University’s Stern School of Business, is Chief Economist at Atlas Capital Team, CEO of Roubini Macro Associates, Co-Founder of TheBoomBust.com, and author of Megathreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them (Little, Brown and Company, 2022). He is a former senior economist for international affairs in the White House’s Council of Economic Advisers during the Clinton Administration and has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. His website is NourielRoubini.com, and he is the host of NourielToday.com.

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0 Comments on this paragraph, 18 Comments on this article

Alexandros Aslanidis Jul 21, 2017

Here's another option: bring forth controlled trade. Then we can finally throw inflation targeting to the garbage bin and revert to good ol' full employment policies again.
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Barry Rosenfeld Jul 19, 2017

The "Great [Price] Recession" 1873-1896 saw the greatest spurt of growth the western world had experienced up to that time. Why then is it necessary to raise current inflation in order to arbitrarily raise interest rates in anticipation of another recession? Maybe by that time, austerity will be a bad word and fiscal policy will be used to stimulate the economy.

The use of QE flooded the markets with cash and drove up the price of bonds, one way to reduce interest rates and to keep them down. Now contractions of the central banks balance sheets has had the opposite result. There is really no paramount economic reason to raise the Bank Rate; such action is political. Rely on open market operations and stop the ongoing obsession with the Bank Rate. The recent Fed actions have just promoted cost-push inflation.
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Douglas Costello Jul 17, 2017

Abnormal monetary policy has amply demonstrated its incapacity to generate economic growth. Any further deviations into abnormal should see those same CB managers incarcerated for stupidity and dereliction of duties.

What in the past generated inflation. Demand? wage increases, increased discretionary expenditures, population growth.Traditional it was consumer demand and population growth that triggered inflation.
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Mauricio Duran-Loriga Jul 17, 2017

Currently, not a single central bank out of the big six is able to mean revert to historic levels, nor in interest rates, neither in balance sheet size. But as we are witnessing today, they can pretend !

In any case, it is against history that Roubini has the audacity to avoid two probable events. One is that financial crisis could happen under war time. Second is that central bank policies then could be either catastrophic, either totally useless.

The inflation target is a mere distraction. The BIS made absolutely clear that as a result of increasing the global labor supply with 2 billion Asian workers, labor cost arbitrage is rampant, and until such imbalance is erased, there is no wage inflation on the horizon, whatsoever.

European and American overindebtedness is another deflationary whale unable to exit the door. No central bank could raise rates beyond the IOER.

European and American unfunded welfare state is a killer whale stranded in our coming future, looking pretty furious.

If next financial crisis occurs during peacetime, historic social unrest will dictate "new" central bank monetary (opiate) policy, calling them for unfathomable "wealth creation". It will reinvigorate all the deflationary forces described above. A seemingly never ending Japanese-like deflationary blackhole.

But hey, if next financial crisis flares during a major (regional level is enough) conflict, it will get much more interesting. Think about a real shooting conflict in the Middle East between the rival blocks currently under formation. Today's situation is strikingly similar to what led to WW I. And back in 1913, nobody in his sane mind would have bet the farm on the advent of a European war.

The global bond market would go totally bidless, as no central bank would dare to buy bonds held by foreigners. Hence the market would cease to exist as we know it. Massive debt writedown.
Most foreign assets will be seized by local governments.
Internal savings will be channeled towards patriotic bonds, mandatory.
Ex-war and ex-basic goods related equities' multiples would reach very low single digits in weeks.
Most commodities will be priceless, backwardation almost permanent, courtesy of globalization.

Currencies will disorderly adjust to their pairs. Max volatility and little liquidity. Today's convexity killers will be slaughtered.
Asset price depression. Basic goods hyperinflation due to scarcity.
Billions back to unemployment.

Today's central banking is about managing to make the good part of the cycle longer in duration, and to soften the bad part of the cycle. Pretty directional stuff, with most of the inputs of each cycle pretty well known beforehand.

But in a conflict like the abovementioned, the inputs may vary from hour-to-hour by 180 degrees. No central bank has the skills needed to fight such a beast. They will concentrate on saving their own issued currency whatever it takes.

Oil Sheiks are totally sleepless. They fear personal ruin and extinction. That is probably the greatest tail risk since the early 1970's.

Should shale efficiency continue to improve, unavoidable collision with Sheiks interests will occur sooner than anticipated. And strikers will replace academics at central banks. From monetary policy to patriotic policy ! Back to square one, we ain't learnt nothing.
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John Doyle Jul 17, 2017

The thing is, it's all self inflicted by the politicians economic ignorance. Ignorance rooted in mainstream nonsense that passes for action, such as monetarism and austerity. The central banks fault lies with their reluctance to disturb political ignorance and avoid setting them straight. Although they do understand reality they only let on when their guard is down, as did Ben B in his sixty minutes appearance saying Taxpayers do not pay for the big bail out funds sent to banks in 2008. The Fed just marked up the numbers in banks reserve accounts in the Fed.
Seeing that Congress has just seen fit to add nearly $100 billion to defence spending, someone there knows the government can never go broke. Pity they don't do when it comes down to pensions and health and education expenses!
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jean nutson Jul 14, 2017

Practically, decisions often taken by central banks such as lower or higher interest rates, inflation targets etc. does very little or nothing to alleviate the hardships that often accompany the periods that are generally branded as recession or financial crises, rather it's factors such as improvement in corporate earnings and activities ,innovations and rapid adaptations to the changing business climates that have much potential to provide some tangible solutions , also it's worth noting that individuals and businesses bear greater responsibility to enhance their own survival and progress during such periods than central banks.
- mike Tarasoff Jul 14, 2017
  
  Jean this is not correct in the USA case, this is serious do not muddy the waters with theory if you don't understand what is going on.. the decisions by the fed have everything to do with this fake recovery..
  
  And another thing to add is that probably we don't get to that hopeful 3%.. What if we are in recession now?
  
  There was 2 MSM articles today I saw, one where the fed was not sure if the the opiod crisis was causal or dependant on the financial situation and another one from BOA saying don't blame us for deflation blame the robots... As horribly dishonest as these stories are, could they be the usual junk that would start leaking out to explain some not so good news in the performance.. Maybe I am being too tin foil..
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Joe Bongiovanni Jul 13, 2017

But when the new abnormal is the same as the old normal with the same no-good options going forward ..... well why don't we throw out there that monetary policy, today, can do nothing more than deepen the crisis for next time.
If we did so, in agreement with Adair Turner's findings that he called "Between Debt and the Devil, then we should consider a more fiscal-monetary program of overt "monetary finance", where no more debt is created and the spending cannot be inflationary.
Just saying.
Why not?
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Philip Ralli Jul 12, 2017

This article is assuming that the inflation figure we see reported is correct: but what if the CPI is being gamed by various tactics, such as variable pricing (sometimes our gas station changes prices twice in one day!), replacing per-item billing with all-you-can-eat monthly subscriptions (good for power users, bad for majority), new regulations that cost money to implement (it will cost you $$$ to bring your fire arrangements up to standard…) ; even when an internet platform increases the frequency of adverts, it is in effect inflating its cost in terms of employee time wasted.
Perhaps Central Banks should start targeting nominal GDP which can be directly influenced by State fiscal expenditure.
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B Wilds Jul 12, 2017

Almost a decade ago Ben Bernanke as Fed Chairman, started us down the path of quantitative easing and artificially low-interest rates. A great deal was made of his having studied the great depression era and claims he knew how to avoid a great deal of financial pain.

Today we find we are still trapped in the box Ben Bernanke built with no way out, compounding our problems is the fact we never received the promised economic growth promised to flow from his financial remedy. The article below explores this situation.

http://brucewilds.blogspot.com/2017/06/america-is-still-trapped-in-box.html
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Anthony DeAngelis Jul 11, 2017

At what point do we all agree that the Fed exaggerates and causes these bubbles, as opposed to limit and alleviates them. Maybe we need to realize that a true correction is the only thing that will fix things.

Blows my mind that 15 years ago QE would have been considered radical and now we are talking about it as if it is a common Fed mechanism.
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Lukas Daalder Jul 11, 2017

Helicopter money? Certainly that would be option number 5?
- Joe Bongiovanni Jul 13, 2017
  
  Not sure who said it, but why would 'heli-money' properly deefined,not be otion no. 1 ?
  None of our Learned Seer's postulations show any real promise for success.... more of the same.
  Why number 5 ?
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Jeremiah Hartnett Jul 11, 2017

By not accepting market induced low inflation, and possibly deflation, the CB's have encourage a further debt buildup. The absolute worst outcome when the transitions taking place in the global economy is going to redefine asset values. Debt burdened industries like real estate and retailing will be the first to suffer reduced values. This problem will then spread throughout the economy. The the Federal budget deficit is going to explode. How will the Fed handle that occurrence?
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Paul Daley Jul 10, 2017

Roubini is right that you will rapidly run into trouble, If you only use price tools (like interest rates) for monetary policy, when governments drop the ball in regard to income supplements. But where is it written that Central Banks cannot provide income supplements by lending against earned income via the IRS withholding system.

To be effective, and to be able to act independently, central banks need tools to impact income flows directly. Absent such tools, they will rapidly find themselves nired in the dilemma that Roubini outlines.
- Greg Kramer Jul 11, 2017
  
  Paul Friesen,
  
  The FED cannot deposit money into a citizen's bank account. The FED is owned by banksters and industrialists. The FED is chartered to serve bankster's interests.
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- Paul Friesen Jul 10, 2017
  
  @Paul Daley
  Not quite sure what you mean, probably because I am not too sure how taxes work in the U.S. But if this is a way the central bank can put money directly into the hands of people who will spend it, as opposed to printing money that just goes into excess bank reserves as "quantitative easing" did, then I'm all for use of such a tool in a recession. I would be interested in a fuller explanation of your idea.
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