What is the mainstream of world economic policies, which specify the largest regulators — the fed, the ECB and the Central banks of England and Japan, could lead to a dead end, no longer a secret. If the global crisis 2008 is primarily a debt crisis, anti-crisis policy of the regulators with the rate of price credits, at a minimum, in some cases, negative interest rates obviously leads to a new buildup of “bubbles” of the debt.
photo: Gennady Cherkasov
The expectation that debts will retreat before the growth of the economy, could not be justified. Because the new monetary situation distorts the landmarks of the economic behavior of market entities. In other words, it’s anti-crisis policy can directly lead to a new crisis.
Such positions were expressed almost immediately after the crisis. There was a time when (in January 2009) behind the scenes of the world economic forum in Davos a number of theoretical economists talking about the need for a more thorough examination of the Chinese experience in economic policy. Then the severity of some sleep. The fed has embarked on tightening monetary policy. The world economy began to pick up speed (according to the latest forecasts of international financial institutions, the pace of growth in 2017 will exceed 3%). On the other hand, deteriorated the growth rate of the Chinese economy, which in the fully extended “debt growth.”
But debt the clouds dissipated. And there was another very important, although a quiet event. On September 26, fed chair Janet Yellen admitted that it is not necessary to expect acceleration of inflation to 2% in order to raise rates.
A new twist here. Still, the fed acted on the principle: the dog barks — the caravan goes. In the sense that all sorts of commentators and theorists can criticize policy, but the policy itself will be steadily carried out. And then the fetish acknowledges the traditional target, in which the first inflation of 2%, then the rise rate.
If it does not panic at the headquarters of the economic regulation, the apparent confusion. You should pay attention to what and when this recognition is made. Janet Yellen is not just another fed Chairman. In her family, two Nobel laureates in Economics. To some extent we can say that this recognition is the lack of adequate response to the challenges from the economic science. Moreover, the first term in the chair of the fed Yellen have expires in February 2018. The President is Donald trump, not excluding that it may keep the post for themselves, is in talks with other candidates. His statement that Yellen is hardly consolidated their positions, although this does not mean that other candidates are new economic knowledge.
What are the traps of low inflation? Firstly, Janet Yellen, is that the traditional approach of the us regulator, comes from the fact that low inflation — an indicator of lack of employment. But this approach, as stressed, for instance, Neil McKinnon from “VTB the Capital” does not take into account the new situation in the labour market, with flows of migrants, whose labour is cheap. It is not only the last mass Exodus from the countries of the Middle East and Africa, MacKinnon recalls that after China’s accession to WTO, the supply of labour on the global market increased by a billion people. This means that employment growth does not necessarily lead to higher wages and increased inflation.
Secondly, the chief economist of the Bank for international settlements (BIS) Claudio Borio (a BIS — a longstanding theoretical opponent of the Federal reserve) notes the paradox that the ultra-loose monetary policy may not lead to growth and reduce inflation. Very low interest rates, on the one hand, inhibit savings, and hence investment; on the other hand, is zero, and the more negative interest rates eventually lead to lower inflation expectations.
What happens? The way out of the debt crisis through ultra-loose monetary policy may lead to a new crisis. How else to get out of the debt crisis? More rigid variant — clearing debt crisis may worsen (this was the collapse of Lehman Brothers). So where is the exit?
It is clear that in each situation the important is the exact dosage of the tools. As it is also clear that the global economic science is in debt to the economy. And the award of another Nobel prize situation is unlikely to fix.