rer monetary policy by central banks in the twilight of Dr.
. publ. Werner Wüthrich
The citizens have long far too little attention to the issues of monetary, currency and Banking deals. This is one of the varied causes of the financial crisis, which by and by the first manager of the banking giants, the governments then and now has demystified the heads of the issuing banks. That has now changed. Not only politicians and organizations, but also many citizens meet, worrying and debating the question of the monetary system - public or private parties - as part of a mature civil society. This is a good thing. The following report is intended to contribute.
The most important economic organization of Switzerland, économiesuisse has recently completed a thesis paper, entitled "Return inflation back? "published. The two authors of the University of St. Gallen express their criticism of the current monetary policy of central banks. be given and illustrated with current events - Key messages from this study are here - somewhat simplified. The authors have chosen the form of the thesis paper, because reliable predictions difficult because of the complex relationships are.
"quantitative easing" 1 and 2
Previously we spoke of the money printing press, the politicians in collaboration with the central bank could use or if they were overwhelmed, not what else to, or if it just led war or were planning new wars. In order to conceal these facts, the money printing today is known as "quantitative easing" or translated as "quantitative easing". Fed Chairman Bernanke has demonstrated it. In November 2008 he announced the program QE1. He bought time with newly created dollars numerous securities: for 175 billion debt of the two mortgage finance companies Fannie Mae and Freddie Mac (both in the real estate crisis in the U.S. play a crucial role), for 300 billion U.S. government bonds and 1.25 trillion problematic mortgage securities. This policy was supposed to stabilize the property market.
This goal was not achieved. The financial markets have calmed down for various reasons. The property market is still not reassured, and still not restored.
A few weeks ago the Fed announced the program QE2. The scope is more modest. While QE1 was 1.75 trillion or nearly three times as large sized, QE2 is 600 billion dollars from a little lower.
Other central banks have joined. The Bank of England BoE also operates "quantitative easing", adding she bought for 200 billion pounds of government bonds neukreierte their own government. Other programs are announced in London already. Japan is treading the same path. The European Central Bank has also joined the policy of the FED. She leaves no doubt frankly that the "money machine jerk" (or its electronic equivalent) will come more fully deployed - in particular to buy ailing state bonds. The capital of the ECB is expected to double in the near future with new contributions of its members in order to cover the coming losses.
How did that come about?
In many countries, the policy of the central banks today, accompanied by record-high economic activity and bank bailouts by governments, the public debt can have a dramatic increase. This alone can not explain the current situation. The orgy of debt today following some four decades, ever-growing mountains of debt, which even before the crisis an alarming level had been reached. The debt of the U.S. government, for example, have doubled in the last five years and are almost in the weeks more than 14 trillion dollars. The sometimes also precarious debt of municipalities and states are not included.
If the monetary policy of central banks realistic?
In normal life, someone has to provide a service before it receives any money. In contrast to earlier times, central banks act now reversed: they create money from nothing, for which the beneficiary (who receives the money) can procure goods and services have to work hard for the other. Is this healthy? Who benefits? Who is disadvantaged? What are the goals of this policy?
Ben Bernanke, the Fed chief wants to revive with newly created, cheap money and reduce the economy, especially unemployment. The money will go to the banks, so grant such loans, that new jobs should be created. The U.S. unemployment - now slightly less than 10 percent - will be pressed to "normal" 5 percent.
Does this plan? In 2009 the U.S. banks have granted the previous year for $ 1,000,000,000,000 additional credit. 2010 the situation was different. Many Americans have become aware that they lived long beyond their means have. They have begun to pay back debt, which is pleasing in itself (and should be continued for many years). On balance, are paid back more this year as new loans have been claimed. The so-called "Deliverance", the exemption of debts, has started - at least for companies and individuals. However, this result hardly any new jobs. Altogether, since the crisis began in the United States lost 7.5 million jobs that have been created, not again. Unemployment continues
latest count between 9 and 10 percent. If you measure unemployment according to the method of the 1930s, it is above 20 per cent of the will to work Population. Today in the statistics only record those related daily allowance of the unemployment insurance. - What does that mean exactly? An army of millions of Americans now make no contribution to the economic development of the country, even though the economy has brightened somewhat modest dimensions and again jobs. The participation rate - the proportion of employed persons in total population - continues to fall and has never been as deep as today. The number of recipients of food stamps (Supplemental Nutrition Assistance Program) has increased by 43 million to a record high.
money by pressing a button as a charm? Today, though banks may
create new money by pushing a button. However, you can not really control how and what this money is used. The U.S. and other countries have in recent years, large parts of the productive apparatus moved abroad - to countries such as China, the Philippines, Korea, Indonesia and South America, where wages are much lower. The technology can "wonder device" from Apple, for example, bought around the world because you make calls as well play, watch TV, the Internet "surf" and still make some more. The U.S. company that achieved record profits, but creates few jobs, because these devices are manufactured in Asia to the United States. "Designed in California and produced in China," it is said from company headquarters.
are missing today, enormous economic areas that would be needed to really reduce the high unemployment. According to the theory, the lost jobs in the industry to create new services. Is this project realistic? Can this really millions of job seekers to be employed in addition? It shows itself more and more that non-structural problems such as the consistently high unemployment, with newly printed money can be solved.
"hot money"
neukreierten What happens to the money or not does not circulate as it should? It "Migrated" to the world and produced in other parts of the world growth and prosperity. - Is this really so? The authors of the économiesuisse study speak in their theories of "hot money" that flows in particular countries, which promise investors high returns because they prosper, have made no real estate crisis and affected by the financial crisis on its edge are.
For example, Brazil is in a boom. In August alone 242 000 new jobs have been created. Wages, inflation and interest rates rise. The car sales reached records. New houses are built in large numbers. Unemployment is as low as never before in history Brazil. At first glance, this is all very gratifying.
At second glance, doubts arise. The foreign speculative funds to artificially heat up the economy and lead to unhealthy, unsustainable structures. There are already signs of overheating, a construction boom and a so-called housing bubble. Rising interest rates could make the economy collapse soon - especially since the homeowner afford the mortgage or not, consumers do not repay their loans taken to lightly. - All this sounds very familiar. The Americans, the Spaniards, Irishmen and many others could tell it. Another
Point is this: The foreign speculative funds are each quickly removed when the "economic sky" becoming tougher. In the Asian crisis ten years, many countries have made this painful experience. Above all, foreign hedge funds, these countries have brought in massive financial trouble when they use their money to the economy artificially fueled first and then quickly withdrew their investments when their expectations are not met.
Many Asian and South American countries in particular take measures now to the dangerous, to ward off excessive influx of U.S. dollars. Thus South Korea has already adopted laws to foreign to reduce capital inflows. Indonesia restricts capital inflows on as well. Brazil has increased the tax on foreigners who buy securities in this country. Thailand has also taken such measures.
Why is no inflation in sight yet?
économiesuisse attacks in their theses to a more central question: Why is the "quantitative easing" or the doubling and tripling of the money supply in many states out not long ago for inflation?
The authors give several reasons: First, there is a "time lag" that is, take it from experience about 3 to 4 years before the inflated money supply effect in higher prices. Certain factors slow down this process, others speed it up:
price-dampening effect as the progressive automation of production. It has meant that the industrial capacity in many places today are not busy. One could produce with today's production system even more - in other words, the potential supply is greater than demand.
acts similar to the global competition. Also an example: When would increase the car company VW's prices by 10 percent, then many people would resort to the world and perhaps buy cars from France or Japan, whose factories are not fully utilized and who are happy to sell their cars at the old prices. The
many neukreierte money, the central bank is ready, to create crisis in the Western countries, an additional demand. But this happens in the moment enough. U.S. citizens, for example, consume less, despite the low interest rates have begun to save and pay back their debts. The new money looking for a use and begins to "wander," as the authors describe the économiesuisse study. It flows from the securities and commodities exchanges, some of which have already reached record highs. Or it flows - as explained above - in Asian or South American countries, which are less affected by the crisis and where the foreign investors expect their investments high yield.
Inflation is back
The ultra-expansionary monetary policy today extends the circulating money supply massively. This effect, however, the prices of a significant time lag. "The current monetary policy determines the inflation rate from the day after." (Économiesuisse study). The managers of the banks but affirm today that inflation in western countries, within limits, and they will be mindful. But beware forecasts leave for the next few years.
A recent example: On 3 February, the Governing Council decided Despite the pickup in inflation to the expansionary monetary policy to hold and leave the key rate at 1 percent. ECB chief Trichet said that he saw no threat to price stability and the ECB have no reason to change its monetary policy. There are not only factors that delay the emergence of inflation. There are also those that they speed up:
first The prices for raw materials, energy and food rise sharply on the world market. The oil costs back to $ 100, the price of iron ore has almost doubled, energy such as gas and electricity have become more expensive as in Germany by a quarter, the price of grain on the commodity exchanges have risen by almost half, the price of cotton has doubled, etc. As so often reinforce this trend speculative transactions.
second China, Brazil, India and other emerging economies are booming. You have already experienced strong inflation and have taken rigorous measures. Banks must hold reserves and much more restraint in their lending. The Chinese central bank raised interest rates for the second time. South Korea and Thailand have joined. - The Western countries derive substantial part of the manufactured goods from Asian and South American countries. The economic overheating and the rapidly rising inflation in these Countries increase the price of goods we import. We are, are affected in the near future when shopping.
third A currency war is emerging: While in the Great Depression of the 1930s protected the individual countries with their economic duties, now something similar is in progress on currencies. An example: The United States weaken the dollar by printing money, so that their companies can offer products and services on the world market at the expense of other less expensive. At the same time the Fed stuffed with the newly created money, the "holes" in the state budget and canceled the long-term accumulated over many decades, have become unaffordable Debt.
This policy does not go unnoticed. Other central banks do the same and make the U.S. advantage in global trade pots. Thus, the ECB filled by printing money, the empty coffers of their crisis countries, tied its currency and its own debt. Japan and other countries do it as well, etc. What are the consequences?
confidence in the monetary authorities generally disappears. The authors of the study by économiesuisse come to the conclusion that a real "currency war" threatens the world is a "money glut" and trigger a global movement in a high probability of inflation - with devastating consequences for the population. Are there already signs? Who pays the bill?
The inflation rate has risen in England by more than 3 percent and the euro area by more than 2 percent. The trend continues this year, the official statistics is not without controversy. A professor at the University of Freiburg, the "perceived" inflation is calculated using a method that weighs the increase in prices of everyday goods more. It happened this way for Germany to an almost three times the control value as official statistics.
I refer collectively to the article in the Neue Zürcher Zeitung of 18.1.2011, entitled "The suffering of ordinary people - even low inflation reduced "The purchasing power of money dramatically in the long run. The author points out, inter alia, a calculation of the German Bundesbank, which the U.S. dollar since August 1973 when the current monetary regime was created incredible 86.6 per cent has lost purchasing power. (Http://www.nzz.ch/finanzen/nachrichten/das_leiden_der_kleinen_leute_1.9130923.html)
The central banks on a lead in policy?
Central banks could certainly end its ultra-expansionary monetary policy and raise interest rates. Technically, this would not be a problem. It would certainly cause for over-indebted States have high costs because the higher interest burden on the state budget and the economy would slow. An interest rate increase of 1 percent in the euro area would cause the interest costs would rise by 70 billion euros. Doubts are justified - the study of économiesuisse - whether the banks are strong and willing enough to resist the political and economic pressure from governments, the "quantitative easing" to continue this year and expand. The program "quantitative easing 2" ends on 30.6.2011. Tom Hoenig, president of the Federal Reserve of Kansas City and a member of the Federal Open Market Committee, has opposed in recent months against the official policy of the Federal Reserve. Today he reports that the Fed will consider "quantitative easing No. 3," if the economic data continue to disappoint.
Another factor is added: It is striking that the major central banks like the Fed, the Bank of England, the ECB, the Bank of Japan and the SNB's monetary policy rate one another. Although there are differences. The central banks make monetary policy in sync anyway, with the Fed, with its Chairman Ben Bernanke indicating the clock. This is led by the false notion: To end the crisis that "printing money" must be used quickly and aggressively, and this policy should not be ended too quickly. For a single central bank is therefore not easy to follow your own path. The coming inflation - so the authors conclude the study économiesuisse - Will therefore be global with high probability.
not all that bad?
"In the long run we are all dead." With this "argument" is the economist of the 1930s, John Maynard Keynes, challenged his critics who have pointed out that the funded debt by printing money long term policy would lead to a dead end. - The study therefore emphasizes the économiesuisse aptly: "Well, the long term will arrive anyway. Then we will not all be dead, but be busy with the cleanup of the current global monetary policy. "
Conclusion The authors of the study économiesuisse come together collectively to the following conclusion:
"Economic operators its inflation expectations for new information fits today much faster than in the 1970s and 1980s. The increase in the rate of inflation can thus be rapid. As a result, investors want the inflation loss by higher interest rates will be compensated. The reputation of the banks, ensure price stability and to want to be able to suffer and further increases inflation expectations. As a result, the economic agents come from consistently high inflation. Rising commodity prices create price continues to rise. The wage-price spiral, for which there is no evidence to date, provides not only for higher, but also for persistent inflation. "
" It speaks unfortunately much of this global inflation scenario. Accordingly, a restrictive monetary policy of central banks, which seeks a return to price stability would lead to a world recession. The giant global monetary overhang will not be built without great expense. is waited, the longer, the greater the overall economic consequences will be "
EU countries plunder the pensions of its citizens
EU. Five EU countries want parts or equal to the entire private pension plans of its citizens seized in order to reduce their public debt: Bulgaria , Poland, Ireland, France and Hungary. In Brussels, expects an overwhelming majority that the EU aid funds for bankrupt countries from 440 billion. Euro until the summer of 2011 is at least doubled. In addition, European governments, banks and companies have in this year's huge financing needs of 2.4 billion euros. The rescue of the Euro, if at all possible, will cost taxpayers much more than they are now fooled - not to "confuse" too.
Source: Inter-Info, February 2011, episode 386
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