#ElPerúQueQueremos

CUANDO EL ROL DE LOS CENTRALES

LOS PONEN EN EL CANDELERO 

Publicado: 2016-08-25


POR : DENNIS FALVY

Coincidiendo con la reunión anual de la FED y sus gobernadores en Jackson Hole, Wyoming, que atrae banqueros centrales y especialistas del mundo entero a un simposio para discutir políticas monetarias y presentar ponencias y trabajos de investigación, un grupo de ocho de los mandamases de las FED regionales atenderá una conferencia convocada por la Kansas City FED, anfitriona tradicional del evento, para responder preguntas de 120 activistas de la campaña Campaign for Popular Democracy’s Fed Up, un grupo zurdo que viene trabajando para cambiar la forma en que los poderosos bancos centrales trabaja. No perdamos de vista que la Reserva Federal o FED es absolutamente privada y la noción de que hacen los banqueros centrales está plagada de críticas, así como de interrogantes de base, como aquella de sí sólo deben velar celosamente por el tema inflacionario y el empleo o algún otro aspecto. En anticipación al evento que se inicia hoy y mañana viernes se espera con cierta ansiedad el discurso de la Yellen , y que muchos consideran tan dramático como aquel del recordado discurso de Ben Bernanke en 2012, al que no asistió Draghi y el BCE con muchas papas calientes en la mano, The Economist, la prestigiosa revista inglesa nos entrega este interesante artículo sobre el rol de la banca central y además adjuntamos los interesantes comentarios de sus blogueros, al mismo. Como de costumbre en su idioma original.

MONETARY POLICY

When 2% is not enough

The rich world’s central banks need a new target

Aug 27th 2016 | From the print edition(The Economist)

Like other areas of public policy, central banking is prone to fads and fashions. From limits on money-supply growth to pegging exchange rates, orthodoxies wax and wane. Yet the practice of inflation-targeting has proved remarkably long-lived. For almost three decades, central bankers have agreed that their best route to stabilising an economy is to aim for a specific target for inflation, usually 2% in advanced economies and a little higher in emerging ones.

This orthodoxy is still intact in many emerging economies where inflation is yet to be tamed (see article). But in the rich world the consensus is beginning to fracture. As central bankers gather this weekend for their annual shindig in Jackson Hole, Wyoming, John Williams, head of the San Francisco Fed, has caused a stir by suggesting it is time for a rethink on what central banks should aim for. He is right.

The reason is that the rich world’s central banks are working in a different context from the 1990s, when today’s inflation-targeting doctrine was formed. Then, it seemed that inflation would spend as much time above target as below it. And the “natural real rate of interest”—the inflation-adjusted price that balances the supply of, and demand for, savings in a full-strength economy—was as high as 3.5%. But inflation has been below the central bankers’ target for years. And the underlying real natural rate of interest has fallen to 1% or lower, probably because population ageing has boosted saving even as lower expectations of growth have cut investment (see article).

This matters because low inflation and a low natural interest rate limit the effectiveness of central bankers’ traditional policy lever: setting short-term interest rates. Since nominal interest rates are the sum of real rates and inflation, the rich-world central banks cannot, under today’s regime, expect their policy rates to rise much higher than 3% (the 2% inflation target plus a 1% real rate). That leaves very little room to cut when the next recession strikes. In the three most recent recessions the Fed slashed rates by 675 basis points (hundredths of a percentage point), 550 basis points, and 512 basis points.

Fear of future impotence is the main cause of today’s misgivings over a low inflation target. But there are other drawbacks with the current regime. First, a target for annual inflation gives the central bank no leeway to make up for periods during which inflation has been too high or too low. If central bankers could credibly promise that they would allow a burst of catch-up inflation, they might be more successful at boosting too-low inflation today. Second, when supply shocks such as a sudden rise or fall in the oil price send inflation and economic growth in opposing directions, central bankers face a tricky choice of which to respond to.

How might these problems be fixed? One possibility is simply to raise the inflation target to, say, 4%. Credibly enacted, that ought to alleviate the risk of impotence. If investors and consumers believe inflation will reach 4%, nominal interest rates should eventually rise to 5% or so even if real rates stay low. But rich-world central banks have undershot their targets for so long they may struggle to persuade the public to expect higher inflation. And a higher target would still leave central banks with a dilemma when economic growth and inflation diverge. Neither would it make up for big misses.

WHO ATE ALL THE PI?

A more radical option is to move away from targeting inflation altogether. Many economists (and this newspaper) see advantages in targeting the level of nominal GDP, the total amount of spending in the economy before adjusting for inflation. A nominal-GDP target would allow for temporary variations in inflation. Downturns would be tempered by an expectation of protracted stimulus later on to make up lost ground. In better times, a rise in real GDP would provide the lion’s share of the required nominal-GDP growth and inflation could drift lower.

Changing targets is not something policymakers should do lightly; their credibility depends on stability. And, like every regime, a nominal-GDP target has its drawbacks, not least that few non-economists have ever heard of the concept. It will not be easy to build a consensus for it. But it is right to start doing so. A 2% inflation target is ill-suited to the rich world today. Doubling it would be an improvement, but targeting nominal GDP would be better still. Time for a new era.

LO QUE OPINAN LOS BLOGUEROS DEL THE ECONOMIST

GUEST-OIJWMMA

So, let me get this straight .... Nominal interest rates (%) are a real interest rate (%) with inflation (%) added whereas nominal GDP is a growth rate (%) without inflation (%) added. In my field, incredible precautions are taken to ensure that like is compared with like so we know what we are talking about. Glad to see economists nominally think likewise. Nominally, I could have misread the article, of course.

WILLIAM GAMBLE

Central banks don't need a new target. They are now the target.

ECOUTE SAUVAGE

The optimal rate of inflation is zero. The 2% fantasy was introduced as a corollary of the 2% estimate of the long run rate of economic growth - it's astounding that the author here never thought to look up where that number came from.

AUSTRIAN SMITH

We have had a credit expansion for the last 40+ years. This means we will have weak demand caused by too much debt for years to come. Central banks lowering interest rates to stimulate consumption and to mitigate the public sector debt repayment is not going to help. We are in a quagmire and the intellectual pygmies of the central banks are continuing to wade further in.  The solution? A slow rise in interest rates. Encourage savings and debt repayment and start to rebalance the economy. 

NICK_CTIN REPLY TO AUSTRIAN SMITH

Hear hear!

The idea of increasing the inflation target seems to be a thinly disguised excuse for allowing the monitomaniacs at the fed to print money even faster.

We've been pumping the economy full of cash for almost 10 years now. It's not working. Why not try shifting away from debt driven economies?

BLUE ASGARD

Surely there is another issue here. Globalisation in practice has meant a race to the bottom in real wages. If country X can undercut country Y country X gets the business. In time country X will not be able to hold the line and then country Z undercuts X and so on. Meanwhile the price of the commodity remains flat, and low. When that is spread over a lot of commodities and a long time (Y to X to Z to W to.. and so on) then inflation, the delta due to the rise in commodity prices is going to remain low. And, here we are!

. Meanwhile the victims of globalisation, those who used to provide the commodity in country Y (then X and so on..), will become angry and kick out against a system which gives them as consumers what they want - consistent low prices , but as producers not what they want (no jobs if not to-day already, then to-morrow). Without money to pay for even the low commodity prices, they end up valuing having jobs over the low prices and then the protectionist demagogue politicians move in. And, again, here we are! Small wonder that the EU, NAFTA, and no doubt TIP and TTIP are not as popular among the losers as among the winners. That, ultimately is why we now have Brexit and Trump is encouraged by it. Of course these aren't solutions, but what is? 

. Four % inflation is certainly a workable target (and makes sense in all sorts of other ways TE doesn't acknowledge) but it will do nothing to raise inflation to that level. Only when no-one is able to deliver the commodity at the rock-bottom price will inflation start to rise. But that would mean that wealth has finally spread round the globe and that all boats are rising, a wholly welcome development if achievable. It would also means that the gross corruption which keeps the commodity providers poor in inherently corrupt countries is defeated, which on a global scale seems unlikely. The capacity of the Global economy to keep commodities on rock bottom prices is in practice unlimited. 

. So what to do? The most important virtue of globalisation is achieved (with all its own beneficial knock-on effects like reducing population, raising standards of living etc. by laissez faire, but just try explaining that to a First World someone who has no job prospects as a result. They won't care, they'll still be angry! And vote for Farage/Trump/Le Pen/Putin, even, although he arrogates a different evil. And maybe 'rectify' the situation by trashing the World order so that no-one benefits while at least some do. 

. Part of the problem, as some have pointed out, is a degree of narcissism among the dispossessed. They think their solution is a solution because it returns them to some non-excistent golden age, which in reality it won't. They don't need to change their assumptions about the World because their old World will return to them. That is the stuff of out-moded religious belief, which can only be mitigated by life-long learning. You can stay at home and be bored, or you could learn something useful or helpful. MOOCs may not be the ideal platform to-day but if they were produced with the production values of, say, a Hollywood blockbuster then they might have a considerable effect on the population at large, not only on those who regard themselves as dispossessed. However that presumes that the narcissists don't also assume the World owes them a living, and is something which the MOOCs could reinforce, hopefully subtlely (it can be done). 

. However the article was about financial measures, arguably (as here) too narrow a focus on the problem. Perhaps the global community needs to make the playing field a bit more level, not by putting obstacles in the way of the race to the bottom, but by raising up that bottom by means demonstrated to work. 

. But this in turn could require interventions of a kind tainted by history, as they would not necessarily be fiscal measures. It's our choice. 

SPANIARDSPQRIN REPLY TO BLUE ASGARD

Agree with many of your comments here! There is a race to the bottom, worldwide and here in the US. Notice how much resistance and hang wringing there is when trying to raise the minimum wage, provide health care for the poor, or making education more affordable. This is communism, but giving billions to companies like Boeing and GE in tax breaks or subsidies, bailing out banks who destroyed the worldwide financial systems is just good business/capitalism. I encourage everyone to read the New Confessions of an Economic Hitman by John Perkins to learn more.


Escrito por

dennis falvy

Economista de la Universidad Católica con un master en administración en la Universidad de Harvard; periodista en economía .


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