Aspectos monetarios y financieros

[lectorhinfluyente1984]

http://globaleconomicanalysis.blogspot.com.es/2015/04/another-definition-of-deflation-antal.html

In an interview with the Daily Bell that just came my way, Antal Fekete writes about Blowing Up Modern Austrian Economics ... in a Good Way.

Background on Velocity

To understand the interview discussion, one must first understand velocity. I discussed velocity at length in Will Prices Rise Significantly When Velocity of Money Picks Up?

The simple definition V = GDP/M where V is velocity, M is money supply, and GDP is Gross Domestic Product.

Problems With Velocity

The first problem is how to measure money supply (Is Money M1, M2, or TMS? Each gives a different measure of velocity).

The second problem with velocity is that GDP is a pretty nebulous concept given that government spending (no matter how useless) adds to GDP.

Finally, I do not believe prices can be accurately measured.

Interview Snips

I post snips of the interview below, followed by my own comments. Sometimes I agree, and sometimes disagree with Fekete.

Daily Bell: Please define deflation and disinflation from both a monetary and price standpoint.

Antal Fekete: Deflation is clearly not the same as a falling price level. Technological improvements in production cause a gently falling price level under sound money that is no deflation. Defining deflation as a contraction of the stock of money is plainly wrong. We have a vastly expanding money supply, yet a lot of economists (including myself) hold that we are in the midst of deflation. I prefer the definition of deflation as a pathological slowing in the velocity of money.

Mish: I agree with Fekete that "price deflation" is a natural occurrence based on technology and productivity improvements. I also concur that deflationary forces are huge.  However, I disagree with his definition of deflation based on velocity. Given the clear and expanding bubbles in asset prices, I believe we are in a state of inflation. Nonetheless, I do expect another round of credit and asset deflation (my definition of deflation).   

Daily Bell: We think monetary deflation over a long period of time is difficult to accomplish in a central bank , money-printing economy. Comments?

Antal Fekete: "Accomplish" is not the word. No one wants deflation any more than wanting a pathological condition in one's own body. "Occur" may be a better word. I disagree with your assumption that central banks' money printing is antithetical to deflation. I am in a minority of one in suggesting that just the opposite is the case: expansion of the money supply through open market purchases of government bonds by the central bank is the direct cause of deflation. I know this is counter-intuitive, yet true nevertheless.

Mish: It's not counter-intuitive at all. The Fed prints more money than consumers and businesses want to borrow, so the money sits as excess reserves. Velocity drops. Fekete's definition states that falling velocity is deflation, so in that sense, the Fed does indeed "cause" deflation. It's simply a truism based on Fekete's definition. That said, he's not a minority of one. By sponsoring asset inflation, the Fed will indeed cause deflation. Our difference is he calls the present environment deflation, whereas I say a very destructive asset deflation will eventually result from current Fed policies.

Daily Bell: Along with Rothbard , as we understand it, asset inflation itself leads to what seems to be deflation and disinflation. Money volume must go up to go down. Truth to this?

Antal Fekete: I would modify language slightly: money velocity must go up first so that it could come down.

Mish: Velocity does not need to do anything. It can go up or down or sideways. Asset inflation to the point of creating bubbles is another thing. The busting of bubbles would be a deflation event in my model and I would expect velocity to drop constituting deflation in Fekete's model as well.

Daily Bell: If third-party credit facilities like American Express collapse, does this constitute monetary deflation?

Antal Fekete: The collapse of any firm is a symptom of deflation, with a vengeance. It activates the 'domino effect'. Deflation breeds more deflation. The velocity of money spirals down.

Mish: His symptom is part of my definition. My definition is part of his symptom. But we are not saying the same thing entirely. I would say it's clear we are in a state of inflation right now even though I believe deflationary forces will soon override that inflation.The reason I see inflation is simple: asset bubbles are expanding, and that is a clear symptom of inflation by any rational measure.

Daily Bell: When central banks keep interest rates low, does this lead to disinflation and deflation? How so?

Antal Fekete: The word "disinflation," which suggests that the Fed can turn the spigot on and off, is not in my dictionary. In fact, the Fed has no such power. It can certainly turn the spigot on, but we have never seen the Fed turning it off. Worse still, it has absolutely no control over how people will be using the extra money spewed from spigots or dropped from helicopters. Well, the smart ones would buy bonds, not commodities as the Fed hoped. They knew they could always dump them on the Fed in the open market with a hefty markup. Risk free. To answer your question, the central bank does not "keep" interest rates low. In fact, it "pushes" them low through open market purchases of government debt, which increases the bond price. The other side of the coin is the simultaneous decrease of the rate of interest. Of course, the purpose of the exercise, on a Quantity Theory argument, is the fomenting of inflation, not deflation. The trouble is that the central bank does not know what it is doing. It sows inflation but reaps deflation. Its monetary policy is counterproductive, to put it politely.

Mish: I disagree with Fekete's notion the Fed wants to push commodity prices higher. I would say the Fed wants businesses to expand, wages to rise, credit to expand, and consumer prices to rise, most likely in that order. Higher commodity prices would be a very distant 5th, at best. However, I do like Fekete's explanation that the Fed does not keep rates low, it pushes them low with asset purchases. And I concur that the Fed has no idea what it is doing. Specifically, the Fed can print money but has no control over how it is spent (or if it is spent at all). Right now money sits as excess reserves and not spent. That is deflation in Fekete's book, but not mine. Fekete ignores asset prices (stocks, junk bonds, housing prices). While bubbles are inflating, we have inflation. In simple terms, expansion of asset bubbles is sufficient proof of inflation. The bursting of asset bubbles would typically lead to deflation, but I look at asset prices and the implied value of credit marked to market to make a determination.

Daily Bell: If central banks are keeping interest rates artificially low, how does this contribute to monetary deflation? What do the bond traders do that makes monetary inflation into a deflationary phenomenon?

Antal Fekete: It is not low interest rates that creates deflation but falling interest rates. The process is triggered by the central bank's open market purchases of bonds in an effort to pursue its inane policy of QE, eliciting the copycat action of bond speculators. A chain reaction is activated: bond purchases of the central bank alternating with bond purchases of the speculators. The central bank announces its time table for its bond buying program. Speculators preempt the central bank in buying first, dumping the bonds into the lap of the central bank while pocketing risk free profits afterwards. The expectation of the central bank, price inflation, does not materialize. It is frustrated by the bond speculators who hijack the freshly printed money on its way to the commodity market. Not to be deterred, the central bank prints more. To do that it has to go to the open market and buy more bonds, prompting speculators to preempt. The cycle now repeats and a vicious spiral is engaged. The upshot is a prolonged fall of interest rates that destroys capital across the board.

Mish: I agree with Fekete's front-running of bonds thesis. To that I would add "realization" that capital was destroyed happens during the bust. It cannot be prevented.

Daily Bell: Do you believe in the Misesian business cycle ? Does it have validity, in your view?

Antal Fekete: Certainly, with some reservations. It does not assign a very high IQ to businessmen in the field. Why don't they learn from experience and factor into their calculations the distortion in the rate of interest due to monetary policy? I improve on the business cycle of Mises, pointing an accusing finger to bond speculation motivated by risk free profits. Businessmen are the brightest people we have. They are being victimized through the insane monetary policy of the Fed.

Mish: Banks take risk-free profits for three reasons: They are capital impaired and cannot lend,  creditworthy businesses do not want to expand, risk-free profits exceed expected profits from risk-taking. As far as victims go, everyone but those with first access to money are victimized by the monetary policies of the Fed.

Daily Bell: Was the Great Depression a deflationary depression? We note that junior mining prices apparently went UP during the Great Depression.

Antal Fekete: Most certainly it was. It is axiomatic that gold mining shares go up during a depression. Depression is just another name for capital destruction, and gold is the only form of capital that is immune to destruction. If you consolidate all balance sheets in a country (including that of the national treasury), then all liquid assets will be wiped out, with the sole exception of gold. Gold is the only asset that is not duplicated as a liability in the balance sheet of someone else.

Mish: Actually, a stockpile of any valuable commodity owned free and clear is an asset with no liability elsewhere. I do not believe it is axiomatic that gold mining shares rise in deflation, but I would expect gold to do well.

Daily Bell: Are we in a deflationary depression? Or are we in a kind of stagflation?

Antal Fekete: We are in a deflation that is metastasizing into a depression. The monster word "stagflation" does not appear in my dictionary.

Mish: Stagflation should have ended Keynesian theory right then and there. Keynes believed it was impossible to have a recession and inflation at the same time. The 1980s is a testament to the absurdity of Keynesian theory.

Daily Bell: Has money volume increased in the US and Europe? Have prices increased in response?

Antal Fekete: As I hinted a while ago, increasing the volume of money does not necessarily cause an increase in the price level. The Quantity Theory of Money is a false theory. In spite of an eightfold increase in the stock of money in America the price of crude oil was cut in half and the price of iron, copper and a number of other metals showed steep declines, thought impossible only a few months ago. If this is not deflation, then let me ask: How much farther do prices have to fall before we are allowed to use the D-word?

Mish: The Quantity Theory of Money says "money supply has a direct, proportional relationship with the price level." Fekete points to falling prices and says "If this is not deflation, then let me ask: How much farther do prices have to fall before we are allowed to use the D-word?" By Fekete's own definition, falling prices do not constitute deflation. I believe he is speaking from the reference of what most economists believe (that falling prices constitutes deflation). Unfortunately, most believe that constitutes deflation. I call it brainwashing by the Fed and academia. Regardless, Fekete also misses the boat on the theory. Prices have gone up, just not commodities. The bubble is in assets (equities, housing, junk bonds), things that are impossible to measure precisely. I call that inflation. Fekete calls it deflation. But we both seem to agree that a big deflationary bust is coming.

Daily Bell: Oil has apparently been manipulated down. Does this constitute price deflation nonetheless, or is it simply a kind of manipulation?

Antal Fekete: The manipulation theory was invented by those who are afraid to face the facts squarely. We should know better: no valorization scheme ever works for any significant length of time for any commodity. It is another matter that foreign policy makers in Washington may have stolen a ride on the back of spontaneously collapsing crude oil to punish Putin.

Mish: I am in perfect agreement on this point. Commodity price declines are about the slowing global economy, not oil price manipulation.

There is more to the interview, and inquiring minds may wish to read further. Let's stop here and look at a few charts of velocity.





As you can see, velocity depends on how one measures money, and even Austrians do not agree how to do that.

Mish Definition

My definition of inflation is expansion of money supply and credit with credit marked to market. My definition of deflation is contraction of money supply and credit, with credit marked to market.

Both Fekete and I have definitions that differ from the pure Austrian concept of expansion of money. And we have been in the same boat in one sense. Neither of us thought the expansion of money would lead to huge "price inflation" and it didn't.


The problem with defining inflation as an increase in consumer prices is that it ignores asset bubbles. Fekete's definition also ignores expanding asset bubbles.

Judging inflation solely on the basis of money supply would cause one to believe we were nearly always in a state of inflation, even in states where banks, asset prices, and consumer prices simultaneously collapsed.

Numerous Austrians who relied on money supply alone believed for years on end we were on the verge of high inflation or even hyperinflation. It did not happen. Fekete and I both got that correct.

From a practical standpoint, I believe my definition explains the real world better than other definitions.

In my model, and called for in advance, the US experienced deflation from late 2007 until March of 2009. At that point Bernanke managed to reignite demand for credit and the stock market took off.

I expect another round of deflation when various asset bubbles pop. Meanwhile, and as long as asset bubbles are expanding, I do not believe deflation is the best word to describe current events. However, I would describe the current setup as highly deflationary looking ahead.

Y más en:

http://www.professorfekete.com/articles/AEFDailyBell01112015.pdf

[JENOFONTE10]

Solo he leído por encima, pero en algo estoy de acuerdo al aplicarlo al caso español presente:

"The problem with defining inflation as an increase in consumer prices is that it ignores asset bubbles."

El tabú innombrable del 'pisito caro', tiende a camuflarse con eufemismos como 'burbujas de activos'. Es 'marca' del gremio.

Pero es cierto lo de la inflación incompleta al medirla solo con los bienes de consumo. Sustituyendo tras 'burbujas de', 'activos' por 'viviendas en propiedad', sabemos que en una deflación inmobiliaria (como la española) los precios que mas bajan son los de los bienes inmuebles, y el IPC solo recoge los alquileres, no las compraventas, por lo que está dando una información sesgada, con apariencia de menos deflación de la 'real' (la que debería incluir el 'real estate' ).

Es muy conveniente para tranquilizar a los paga-hipotecas mas o menos 'underguater': ojos que no ven lo underguater que estás, pues pagan cuota sin sentir.

Sobre si la 'enfermedad' es la inflación de inmuebles o la deflación por pinchazo burbujil descomunal, podemos relativizar: basta ponerse del lado del que compra o vende (inmuebles). Este Fekete parece un artista de la 'flauta con un agujero solo': el bancocentralculpismo.

Saludos.

[Mad Men]

Siempre me he planteado de la idoneidad de que todo el mundo (o gran parte de él sea inversor), porque  a veces el los recursos mal invertidos crean monstruos como el inmobiliario, sin duda, y casi debido al desconocimiento o la ignorancia de la mayoría, su inversión predilecta es el ladrillo.


Esto me plantea que el Estado, ser Omnipresente hoy en día, que gestiona tanto económicamente, como legalmente un  país, debería acotar ciertas prácticas del libre albedrío. En cualquier caso la libertad se tiene que acotar en cosas que afectan al común de las personas, y la vivienda, como  cosa básica para una vida digna es una de ellas.

Ya no se trata de viabilidad económica, sino de decencia para poder tener una vida digna.

[saturno]

Siempre me he planteado de la idoneidad de que todo el mundo (o gran parte de él sea inversor), porque  a veces el los recursos mal invertidos crean monstruos como el inmobiliario, sin duda, y casi debido al desconocimiento o la ignorancia de la mayoría, su inversión predilecta es el ladrillo.

Sin pretender reanimar viejas disputas, ¿eh?
Me parece que el desconocimiento o la ignorancia no es causa, sino motor del ladrillo.
La "causa" está en la ideología subyaciente, en la inteligencia y previsión que diseñó las cosas de tal forma que el ladrillo fuera rentable.

¿Alguien se ha parado a pensar en el absurdo de organizar las cosas de tal forma que apilar un montón de ladrillos pueda rentar más que 30 Meuros en el banco?

NO, y aquí sí se puede decir:  -- si nadie se percata de semejante absurdo, efectivamente, es por desconocimiento o ignoracia.  Entonces sí, el desconocimiento y la ignoranacia se pusieron al servicio servil de quien diseñó la economía del ladrillos.

Pero esa ignorancia y desconocimiento no explican por sí solas por qué el ladrillo pudo rentar tanto. Es que además termina siendo contradictorio en los términos: con mucha ignorancia y con mucho desconocimiento ¡no se puede hacer rentar nada!

Dejémonos de tópicos o de moral : lo que necesitamos es usar la cabeza, y hacerlo mejor que quienes usaron la suya hasta ahora.

[lectorhinfluyente1984]

Phantom Liquidity

Last month we learned that some of the country’s largest fund managers (including Vanguard) have been busy lining up billions in emergency liquidity lines with banks to protect them in the event rising rates, shale defaults, or some unexpected exogenous shock leads to a sudden exodus from the high yield and other more esoteric ETFs that have become popular among today’s yield-starved investors.

Essentially, these liquidity lines would allow fund managers to cash out investors with borrowed money, while holding onto the underlying assets rather than selling into an illiquid secondary market where dealers are no longer willing to hold inventory, and where a wave of liquidations could become self-fulfilling.

The problem with this strategy is that it’s yet another example of delaying the inevitable. That is, if fund managers are forced to tap these liquidity lines it likely means investors have found a reason to sell en masse and if that reason turns out to be something that permanently impairs the value of the underlying bonds (as opposed to a transitory, irrational panic) then all they’re doing by borrowing to meet redemptions is employing leverage to stave off the recognition of losses, which is ironically the same thing (in principle anyway) that the companies whose bonds they’re holding have done to stay in business. It’s a delay-and-pray scheme designed to avoid selling the debt of companies whose similar delay-and-pray schemes have run their course.

All of this comes back to underlying liquidity. The reason all of the above is necessary is because fund managers are afraid that when they go to sell the assets behind their funds, the secondary market will be so illiquid that trading in size will have an exaggerated effect on prices which could then trigger more retail fund outflows, forcing more managers to sell into an illiquid market, and so on and so forth until a sell-off becomes a firesale and a firesale becomes an all out panic.

This wasn't the case in the pre-crisis world and as Barclays notes, fund managers are now using ETFs as a substitute for liquidity that would have previously been provided by dealer inventories. As you'll see below, this works as long as gross flows are appreciably different from net flows, but when the two begin to converge (i.e. when it's a one-way rush to the exits), trading the underlying assets and thus venturing into what is now a very thin secondary market for corporate bonds becomes unavoidable, which is precisely why ETF providers are arranging for liquidity lines — it's an attempt to forestall the inevitable.

* * *

Using ETFs To Mitigate Fund Flows

As asset managers continue to struggle to manage portfolios amid low corporate bond liquidity, we have seen a surge in the use of portfolio products, such as ETFs, CDX, and TRS on corporate bond indices. While some of these products – notably ETFs – are often lumped in with open-end mutual funds as a potential source of trouble in the event of concentrated retail selling, they are also being used by fund managers to mitigate the problems posed by poor liquidity. This raises the natural question: how much can portfolio products offset the decline in liquidity? Or, more colloquially: are ETFs good or bad for corporate bond liquidity?

Although fund flows have been a major focus of market participants over the past several years, the aggregate flows attract the most attention. This is particularly true in the high yield market, where retail ownership is relatively high and the price swings associated with contemporaneous fund flows have been well documented. Aggregate flows have effectively become a market signal.

From the perspective of an individual fund manager, the risk posed by fund flows and the strategies available to help mitigate that risk depend to a large extent on the correlation of flows across funds. If flows are highly correlated – i.e., if every fund experiences inflows at the same time – then the risk is relatively high. Funds will have a difficult time selling bonds when they experience an outflow, since other managers would similarly be selling. In this circumstance, managers have a relatively short list of strategies to deal with flows. They can keep increased cash on hand, or (less likely) they can hope that other non-retail buyers step into the market at a reasonable discount to market levels.

On the other hand, if flows are relatively uncorrelated they may, in principle, pose less of a risk – funds with outflows can sell to those with inflows. Funds can exchange bonds (or portfolio products, see below) with other funds, rather than draw down on or build cash. This process may be made more difficult by the decline in liquidity, but the price discount/premium faced by an individual fund with an inflow or outflow could, theoretically, be limited by the existence of investors looking to go in the opposite direction.

Portfolio Products Replace Dealer Inventory

While diversifiable flows limit the risks to portfolio managers in principle, the reality of the high yield market is more complicated. Managers have specific views on tenor, callability, sectors, covenants, and, most importantly, individual credits, such that actually finding buyers for specific bonds can be quite difficult. In the pre-crisis period, dealers ran large inventories that effectively facilitated the netting of flows across funds (Figure 1). A fund with an outflow would sell bonds into the dealer community, and funds with outflows would buy bonds out of the dealer inventory. When inventory is large, the fact that the specific bonds bought and sold did not match was largely irrelevant. Funds with outflows could sell the bonds of their choice, and the funds with inflows could pick investments from the large variety of inventory held by dealers.

The matching problem has become more acute as dealer inventories have declined. Even funds can net flows in principle, dealers are much less willing to warehouse bonds, and are much more likely to buy only when they believe they can quickly offload the risk. Under this scenario, the fact that flows can theoretically be netted is of little practical use to fund managers – actually netting individual bonds is extremely difficult, particularly in the short time frame required by funds offering daily liquidity to end investors.

This is where portfolio products come in. Investors can use portfolio products to fund outflows/invest inflows immediately and execute the necessary single-name bond trades over time as liquidity in the underlying bond market allows (Figure 2). In this scenario, funds with inflows and outflows simply exchange portfolio products, sidestepping (the immediate need to trade single-name corporate bonds.

To assess the extent to which flows are diversifiable across funds, we examine about two years of weekly flows at the individual fund level. We have data from Lipper on the flows of more than 800 dedicated high yield mutual funds. We separate the funds into those with inflows and those with outflows for the week, and sum the aggregate inflows and outflows.

The total volume of high yield ETFs has grown nearly seven-fold since 2009 (Figure . While the “net” portion of the volume must be satisfied by share creation or destruction (which leads to buying or selling of underlying corporate bonds), the remaining share captures risk transfer that takes place without tapping into the corporate bond market Figure 9 shows that the “net” portion of the volume was only 12% in 2014 and has declined meaningfully over the past few years. This suggests that ETFs are additive to liquidity,allowing mutual funds to manage daily liquidity requirements while circumventing the underlying bond markets where liquidity remains poor.

While portfolio products are clearly a useful tool for liquidity management, their use can exacerbate the problem they are meant to solve. Said another way, choosing to trade liquid portfolio products to avoid trading less liquid bonds makes the latter even harder to trade.

* * *

To summarize, fund managers are concerned primarily about the direction of flows into and out of their own funds versus the direction of flows into and out of other funds. Outflows from one fund can be matched with inflows to another, and ETFs can facilitate this, allowing managers to avoid tapping what is an increasingly illiquid corporate bond market. The fact that net flows (i.e. those that must be settled by buying or selling actual bonds) have declined as a percentage of gross volume amid the proliferation of bond ETFs suggests that ETFs have had a positive effect on liquidity. But there's a problem with this logic.

This only works when net flows are lower than gross flows. If the two converge in a sell-off (i.e. when trading becomes unidirectional) the underlying assets must necessarily be sold as there are no inflows to net against a wave of outflows.

In other words, if I'm a fund manager, the idea that ETFs provide liquidity rests on the assumption that when I experience outflows, someone else will be experiencing inflows and thus I can sell ETFs and avoid offloading my bonds into an illiquid corporate credit market. Put another way: I am depending on new money coming into the market to fund redemptions from previous investors who are exiting the market, all so that I can avoid liquidating assets that are declining in value and that I believe will be difficult to sell. There's a term for that kind of business. It's called a ponzi scheme and just like all other ponzi schemes, when the new money dries up (so, for example, when HY bond ETF flows are all headed in the wrong direction), the only way to meet redemptions is to get what I can for the assets I have and when the market for those assets is thin (as the secondary market for corporate credit most certainly is), I may incur substantial losses.

Note also that the more often ETFs are used as a way of avoiding the underlying bond market, the more illiquid that market becomes, making the situation still more precarious in the event of a panic.

As we said last month, this is why fund managers are arranging emergency liquidity lines and on that point, we'll close by saying that no fund manager in the world will be able to line up enough emergency liquidity protection to avoid tapping the corporate credit market in the event of panic selling in the increasingly crowded market for bond funds.

[lectorhinfluyente1984]

Este Fekete parece un artista de la 'flauta con un agujero solo': el bancocentralculpismo.

Tienes razón, Jenofonte, Fekete es un erizo:

http://lapiedradesisifo.com/2014/01/16/seg%C3%BAn-isaiah-berlin-el-mundo-se-divide-en-erizos-y-zorros/

Saludos,

[mpt]

Este Fekete parece un artista de la 'flauta con un agujero solo': el bancocentralculpismo.

Tienes razón, Jenofonte, Fekete es un erizo:

http://lapiedradesisifo.com/2014/01/16/seg%C3%BAn-isaiah-berlin-el-mundo-se-divide-en-erizos-y-zorros/

Saludos,

al pelo me viene si se interpreta a los erizos en la linea de las lobotomias, incluida la ultramoderna aunque sempiterna de "inmediatez y resolucion"; asi que reivindico a los zorros, aun cuando se vean obligados a actuar de erizos, pero que mantengan pensamiento de zorro;

una exposicion algo mas elaborada que aquella que tan facil es tildar de cinica: "no hace falta hacer lo que piensas"; sigue pensando aunque hagas lo que acostumbrabas;

http://internacional.elpais.com/internacional/2015/06/14/actualidad/1434300283_486163.html

“El sublime y refinado punto de felicidad llamado engañarse bien a sí mismo”

[Lego]

Ya les vale a estos...

¿Cómo pueden estar tanto tiempo discutiendo sobre lo que es la deflación?  ¡Si sólo es una palabra!      Sólo tenían que ponerse de acuerdo en cómo llamar a la caída de precios, a la ralentización del dinero, o a cualquier índice que quieran y ya podrían por fin discutir de economía.

Las discusiones sobre lo que son las cosas ¿Qué es el aire? ¿Qué es el electromagnetismo? ¿Qué es el hombre?  La ciencia y la filosofía tratan de aportar respuestas, cada una según su método.  Pero, ¿Qué es la inflación?  Pues será lo que el que se inventa el palabro diga que es, y punto ¡joer!.

Precisamente la ciencia y la filosofía, para avanzar necesitan un vocabulario riguroso, si él no hay manera.  Hasta las proposiciones matemáticas, esencia de la razón pura, comienzan acotando los términos que se usarán en cada planteamiento; "Sean A y B números racionales mayores que..."

Pues eso. Cuando dos economistas, discutiendo de economía, se dan cuenta de que están usando la mismas palabras con significados diferentes, lo más normal sería que parasen un momento, se pusieran de acuerdo en medio minuto sobre la terminología a utilizar y, resuelta la cuestión de orden, replantear la discusión, ahora sin que cada uno entienda lo contrario de lo que el otro dice.    Si, en vez de eso, se quedan atascados discutiendo sobre nombres de índices, pues parece como un gag de Monty Python ¿no?

[saturno]

http://es.wikipedia.org/wiki/Polisemia

[lectorhinfluyente1984]

Ya les vale a estos...

¿Cómo pueden estar tanto tiempo discutiendo sobre lo que es la deflación?  ¡Si sólo es una palabra!      Sólo tenían que ponerse de acuerdo en cómo llamar a la caída de precios, a la ralentización del dinero, o a cualquier índice que quieran y ya podrían por fin discutir de economía.

Las discusiones sobre lo que son las cosas ¿Qué es el aire? ¿Qué es el electromagnetismo? ¿Qué es el hombre?  La ciencia y la filosofía tratan de aportar respuestas, cada una según su método.  Pero, ¿Qué es la inflación?  Pues será lo que el que se inventa el palabro diga que es, y punto ¡joer!.

Precisamente la ciencia y la filosofía, para avanzar necesitan un vocabulario riguroso, si él no hay manera.  Hasta las proposiciones matemáticas, esencia de la razón pura, comienzan acotando los términos que se usarán en cada planteamiento; "Sean A y B números racionales mayores que..."

Pues eso. Cuando dos economistas, discutiendo de economía, se dan cuenta de que están usando la mismas palabras con significados diferentes, lo más normal sería que parasen un momento, se pusieran de acuerdo en medio minuto sobre la terminología a utilizar y, resuelta la cuestión de orden, replantear la discusión, ahora sin que cada uno entienda lo contrario de lo que el otro dice.    Si, en vez de eso, se quedan atascados discutiendo sobre nombres de índices, pues parece como un gag de Monty Python ¿no?

Perfecto, Lego, no te falta razón en lo que dices... precisamente, si aquí traigo a colación conceptos teóricos y palabros, es porque resulta que influyen (hinfluyen?) en la realidad, y de ellos depende lo que estamos viendo...

...por ejemplo, inflación quería originalmente decir un aumento de la masa monetaria (otro palabro) que, efectivamente, se "infla"... luego, dado que esto durante un cierto periodo histórico siempre mostraba correlación con aumento de precios de bienes de consumo (IPC), el palabro inflación mutó su significado a aumento del IPC (otro palabro)...

- Inflación: mal definida, y aquí nadie miraba ya las masas de deuda en sentido amplio (que hubiesen mostrado una inflación galopante en España durante la burbuja, por ejemplo, dado que Alemania tenía los tipos bajos del BCE para recuperarse cuando era el enfermo de Uropa)
- IPC: mal definido por estrecho, incluyendo algunos precios de cesta de compra llenos de porquería deflacionaria traída de China pero sin incluir los Pisitos con inflación galopante.
- Multiplicador Bancario: otro concepto falaz, que sin embargo era aireado en discursos por Obama como justificación para sus rescates bancarios

Suma y sigue...

***

Nota General: al final, la causa de la crisis va a ser filológica 

Como se dijo en este hilo anteriormente, cuando se mencionó a Hannah Arendt, al final la crisis será del chico del carrito del helado, ya que el Sistema consiste en un montón de engranajes, normalmente al cargo de erizos ultraespecializados haciendo "su trabajo", que por supuesto, está mal o incorrectamente definido, todos diciendo "a mi que me registren, yo solo hice lo que me decían" - la banalidad del mal

Pero siempre habrá algún zorro que vea el Big Picture, y sepa beneficiarse. Los zorros pierden contra los erizos en enfrentamiento directo? Puede ser ... quizás no necesitan enfrentarse a los erizos, solo entender el Big Picture y posicionarse para beneficiarse de ello...

[lectorhinfluyente1984]

De aquí:

http://www.zerohedge.com/news/2015-06-14/what-comes-next-part-1-useful-history-20th-century

Mientras tanto, el 1% ya se ha construido su búnker "por si las moscas"*.

* Lo de tener un búnker no está mal... pero lo verdaderamente interesante son "los constructores de búnkeres", que tienen negocio para aburrir durante un rato 

[saturno]

Necesitamos un nuevo Orson Wells que organice un apocalipsis por el "Canal de noticias Bilderberg"

https://es.wikipedia.org/wiki/La_guerra_de_los_mundos_%28radio%29

Corren todos a encerrarse con sus títulos de propiedad de "activos".
Incomunicados (pues nadie queda en el exterior)

Esperas un mes a que empiecen a salir.

En la puerta, les recoge un inspector de Hacienda, Anticorrupción, etc. más un siquiatra para constatar oficialmente sur demencia y volver a encerrarlos (en el mismo bunker si quieren)

Fin de la Historia.

[lectorhinfluyente1984]

PRINT LESS, TRANSFER MORE

In the decades following World War II, Japan’s economy grew so quickly and for so long that experts came to describe it as nothing short of miraculous. During the country’s last big boom, between 1986 and 1991, its economy expanded by nearly $1 trillion. But then, in a story with clear parallels for today, Japan’s asset bubble burst, and its markets went into a deep dive. Government debt ballooned, and annual growth slowed to less than one percent. By 1998, the economy was shrinking.

That December, a Princeton economics professor named Ben Bernanke argued that central bankers could still turn the country around. Japan was essentially suffering from a deficiency of demand: interest rates were already low, but consumers were not buying, firms were not borrowing, and investors were not betting. It was a self-fulfilling prophesy: pessimism about the economy was preventing a recovery. Bernanke argued that the Bank of Japan needed to act more aggressively and suggested it consider an unconventional approach: give Japanese households cash directly. Consumers could use the new windfalls to spend their way out of the recession, driving up demand and raising prices.

As Bernanke made clear, the concept was not new: in the 1930s, the British economist John Maynard Keynes proposed burying bottles of bank notes in old coal mines; once unearthed (like gold), the cash would create new wealth and spur spending. The conservative economist Milton Friedman also saw the appeal of direct money transfers, which he likened to dropping cash out of a helicopter. Japan never tried using them, however, and the country’s economy has never fully recovered. Between 1993 and 2003, Japan’s annual growth rates averaged less than one percent.

Today, most economists agree that like Japan in the late 1990s, the global economy is suffering from insufficient spending, a problem that stems from a larger failure of governance. Central banks, including the U.S. Federal Reserve, have taken aggressive action, consistently lowering interest rates such that today they hover near zero. They have also pumped trillions of dollars’ worth of new money into the financial system. Yet such policies have only fed a damaging cycle of booms and busts, warping incentives and distorting asset prices, and now economic growth is stagnating while inequality gets worse. It’s well past time, then, for U.S. policymakers -- as well as their counterparts in other developed countries -- to consider a version of Friedman’s helicopter drops. In the short term, such cash transfers could jump-start the economy. Over the long term, they could reduce dependence on the banking system for growth and reverse the trend of rising inequality. The transfers wouldn’t cause damaging inflation, and few doubt that they would work. The only real question is why no government has tried them.

EASY MONEY

In theory, governments can boost spending in two ways: through fiscal policies (such as lowering taxes or increasing government spending) or through monetary policies (such as reducing interest rates or increasing the money supply). But over the past few decades, policymakers in many countries have come to rely almost exclusively on the latter. The shift has occurred for a number of reasons. Particularly in the United States, partisan divides over fiscal policy have grown too wide to bridge, as the left and the right have waged bitter fights over whether to increase government spending or cut tax rates. More generally, tax rebates and stimulus packages tend to face greater political hurdles than monetary policy shifts. Presidents and prime ministers need approval from their legislatures to pass a budget; that takes time, and the resulting tax breaks and government investments often benefit powerful constituencies rather than the economy as a whole. Many central banks, by contrast, are politically independent and can cut interest rates with a single conference call. Moreover, there is simply no real consensus about how to use taxes or spending to efficiently stimulate the economy.

Steady growth from the late 1980s to the early years of this century seemed to vindicate this emphasis on monetary policy. The approach presented major drawbacks, however. Unlike fiscal policy, which directly affects spending, monetary policy operates in an indirect fashion. Low interest rates reduce the cost of borrowing and drive up the prices of stocks, bonds, and homes. But stimulating the economy in this way is expensive and inefficient, and can create dangerous bubbles -- in real estate, for example -- and encourage companies and households to take on dangerous levels of debt.

That is precisely what happened during Alan Greenspan’s tenure as Fed chair, from 1997 to 2006: Washington relied too heavily on monetary policy to increase spending. Commentators often blame Greenspan for sowing the seeds of the 2008 financial crisis by keeping interest rates too low during the early years of this century. But Greenspan’s approach was merely a reaction to Congress’ unwillingness to use its fiscal tools. Moreover, Greenspan was completely honest about what he was doing. In testimony to Congress in 2002, he explained how Fed policy was affecting ordinary Americans:

"Particularly important in buoying spending [are] the very low levels of mortgage interest rates, which [encourage] households to purchase homes, refinance debt and lower debt service burdens, and extract equity from homes to finance expenditures. Fixed mortgage rates remain at historically low levels and thus should continue to fuel reasonably strong housing demand and, through equity extraction, to support consumer spending as well."

Of course, Greenspan’s model crashed and burned spectacularly when the housing market imploded in 2008. Yet nothing has really changed since then. The United States merely patched its financial sector back together and resumed the same policies that created 30 years of financial bubbles. Consider what Bernanke, who came out of the academy to serve as Greenspan’s successor, did with his policy of “quantitative easing,” through which the Fed increased the money supply by purchasing billions of dollars’ worth of mortgage-backed securities and government bonds. Bernanke aimed to boost stock and bond prices in the same way that Greenspan had lifted home values. Their ends were ultimately the same: to increase consumer spending.

(...¿Falta?)

[G]overnments have still followed Bernanke’s lead. Japan’s central bank, for example, has tried to use its own policy of quantitative easing to lift its stock market. So far, however, Tokyo’s efforts have failed to counteract the country’s chronic underconsumption. In the eurozone, the European Central Bank has attempted to increase incentives for spending by making its interest rates negative, charging commercial banks 0.1 percent to deposit cash. But there is little evidence that this policy has increased spending.

China is already struggling to cope with the consequences of similar policies, which it adopted in the wake of the 2008 financial crisis. To keep the country’s economy afloat, Beijing aggressively cut interest rates and gave banks the green light to hand out an unprecedented number of loans. The results were a dramatic rise in asset prices and substantial new borrowing by individuals and financial firms, which led to dangerous instability. Chinese policymakers are now trying to sustain overall spending while reducing debt and making prices more stable. Like other governments, Beijing seems short on ideas about just how to do this. It doesn’t want to keep loosening monetary policy. But it hasn’t yet found a different way forward.

The broader global economy, meanwhile, may have already entered a bond bubble and could soon witness a stock bubble. Housing markets around the world, from Tel Aviv to Toronto, have overheated. Many in the private sector don’t want to take out any more loans; they believe their debt levels are already too high. That’s especially bad news for central bankers: when households and businesses refuse to rapidly increase their borrowing, monetary policy can’t do much to increase their spending. Over the past 15 years, the world’s major central banks have expanded their balance sheets by around $6 trillion, primarily through quantitative easing and other so-called liquidity operations. Yet in much of the developed world, inflation has barely budged.

To some extent, low inflation reflects intense competition in an increasingly globalized economy. But it also occurs when people and businesses are too hesitant to spend their money, which keeps unemployment high and wage growth low. In the eurozone, inflation has recently dropped perilously close to zero. And some countries, such as Portugal and Spain, may already be experiencing deflation. At best, the current policies are not working; at worst, they will lead to further instability and prolonged stagnation.

MAKE IT RAIN

Governments must do better. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.

Such an approach would represent the first significant innovation in monetary policy since the inception of central banking, yet it would not be a radical departure from the status quo. Most citizens already trust their central banks to manipulate interest rates. And rate changes are just as redistributive as cash transfers. When interest rates go down, for example, those borrowing at adjustable rates end up benefiting, whereas those who save -- and thus depend more on interest income -- lose out.

Most economists agree that cash transfers from a central bank would stimulate demand. But policymakers nonetheless continue to resist the notion. In a 2012 speech, Mervyn King, then governor of the Bank of England, argued that transfers technically counted as fiscal policy, which falls outside the purview of central bankers, a view that his Japanese counterpart, Haruhiko Kuroda, echoed this past March. Such arguments, however, are merely semantic. Distinctions between monetary and fiscal policies are a function of what governments ask their central banks to do. In other words, cash transfers would become a tool of monetary policy as soon as the banks began using them.

Other critics warn that such helicopter drops could cause inflation. The transfers, however, would be a flexible tool. Central bankers could ramp them up whenever they saw fit and raise interest rates to offset any inflationary effects, although they probably wouldn’t have to do the latter: in recent years, low inflation rates have proved remarkably resilient, even following round after round of quantitative easing. Three trends explain why. First, technological innovation has driven down consumer prices and globalization has kept wages from rising. Second, the recurring financial panics of the past few decades have encouraged many lower-income economies to increase savings -- in the form of currency reserves -- as a form of insurance. That means they have been spending far less than they could, starving their economies of investments in such areas as infrastructure and defense, which would provide employment and drive up prices. Finally, throughout the developed world, increased life expectancies have led some private citizens to focus on saving for the longer term (think Japan). As a result, middle-aged adults and the elderly have started spending less on goods and services. These structural roots of today’s low inflation will only strengthen in the coming years, as global competition intensifies, fears of financial crises persist, and populations in Europe and the United States continue to age. If anything, policymakers should be more worried about deflation, which is already troubling the eurozone.

There is no need, then, for central banks to abandon their traditional focus on keeping demand high and inflation on target. Cash transfers stand a better chance of achieving those goals than do interest-rate shifts and quantitative easing, and at a much lower cost. Because they are more efficient, helicopter drops would require the banks to print much less money. By depositing the funds directly into millions of individual accounts -- spurring spending immediately -- central bankers wouldn’t need to print quantities of money equivalent to 20 percent of GDP.

The transfers’ overall impact would depend on their so-called fiscal multiplier, which measures how much GDP would rise for every $100 transferred. In the United States, the tax rebates provided by the Economic Stimulus Act of 2008, which amounted to roughly one percent of GDP, can serve as a useful guide: they are estimated to have had a multiplier of around 1.3. That means that an infusion of cash equivalent to two percent of GDP would likely grow the economy by about 2.6 percent. Transfers on that scale -- less than five percent of GDP -- would probably suffice to generate economic growth.

LET THEM HAVE CASH

Using cash transfers, central banks could boost spending without assuming the risks of keeping interest rates low. But transfers would only marginally address growing income inequality, another major threat to economic growth over the long term. In the past three decades, the wages of the bottom 40 percent of earners in developed countries have stagnated, while the very top earners have seen their incomes soar. The Bank of England estimates that the richest five percent of British households now own 40 percent of the total wealth of the United Kingdom -- a phenomenon now common across the developed world.

To reduce the gap between rich and poor, the French economist Thomas Piketty and others have proposed a global tax on wealth. But such a policy would be impractical. For one thing, the wealthy would probably use their political influence and financial resources to oppose the tax or avoid paying it. Around $29 trillion in offshore assets already lies beyond the reach of state treasuries, and the new tax would only add to that pile. In addition, the majority of the people who would likely have to pay -- the top ten percent of earners -- are not all that rich. Typically, the majority of households in the highest income tax brackets are upper-middle class, not superwealthy. Further burdening this group would be a hard sell politically and, as France’s recent budget problems demonstrate, would yield little financial benefit. Finally, taxes on capital would discourage private investment and innovation.

There is another way: instead of trying to drag down the top, governments could boost the bottom. Central banks could issue debt and use the proceeds to invest in a global equity index, a bundle of diverse investments with a value that rises and falls with the market, which they could hold in sovereign wealth funds. The Bank of England, the European Central Bank, and the Federal Reserve already own assets in excess of 20 percent of their countries’ GDPs, so there is no reason why they could not invest those assets in global equities on behalf of their citizens. After around 15 years, the funds could distribute their equity holdings to the lowest-earning 80 percent of taxpayers. The payments could be made to tax-exempt individual savings accounts, and governments could place simple constraints on how the capital could be used.

For example, beneficiaries could be required to retain the funds as savings or to use them to finance their education, pay off debts, start a business, or invest in a home []. Such restrictions would encourage the recipients to think of the transfers as investments in the future rather than as lottery winnings. The goal, moreover, would be to increase wealth at the bottom end of the income distribution over the long run, which would do much to lower inequality.

Best of all, the system would be self-financing. Most governments can now issue debt at a real interest rate of close to zero. If they raised capital that way or liquidated the assets they currently possess, they could enjoy a five percent real rate of return -- a conservative estimate, given historical returns and current valuations. Thanks to the effect of compound interest, the profits from these funds could amount to around a 100 percent capital gain after just 15 years. Say a government issued debt equivalent to 20 percent of GDP at a real interest rate of zero and then invested the capital in an index of global equities. After 15 years, it could repay the debt generated and also transfer the excess capital to households. This is not alchemy. It’s a policy that would make the so-called equity risk premium -- the excess return that investors receive in exchange for putting their capital at risk -- work for everyone.

MO' MONEY, FEWER PROBLEMS

As things currently stand, the prevailing monetary policies have gone almost completely unchallenged, with the exception of proposals by Keynesian economists such as Lawrence Summers and Paul Krugman, who have called for government-financed spending on infrastructure and research. Such investments, the reasoning goes, would create jobs while making the United States more competitive. And now seems like the perfect time to raise the funds to pay for such work: governments can borrow for ten years at real interest rates of close to zero.

The problem with these proposals is that infrastructure spending takes too long to revive an ailing economy. In the United Kingdom, for example, policymakers have taken years to reach an agreement on building the high-speed rail project known as HS2 and an equally long time to settle on a plan to add a third runway at London’s Heathrow Airport. Such large, long-term investments are needed. But they shouldn’t be rushed. Just ask Berliners about the unnecessary new airport that the German government is building for over $5 billion, and which is now some five years behind schedule. Governments should thus continue to invest in infrastructure and research, but when facing insufficient demand, they should tackle the spending problem quickly and directly.

If cash transfers represent such a sure thing, then why has no one tried them? The answer, in part, comes down to an accident of history: central banks were not designed to manage spending. The first central banks, many of which were founded in the late nineteenth century, were designed to carry out a few basic functions: issue currency, provide liquidity to the government bond market, and mitigate banking panics. They mainly engaged in so-called open-market operations -- essentially, the purchase and sale of government bonds -- which provided banks with liquidity and determined the rate of interest in money markets. Quantitative easing, the latest variant of that bond-buying function, proved capable of stabilizing money markets in 2009, but at too high a cost considering what little growth it achieved.

A second factor explaining the persistence of the old way of doing business involves central banks’ balance sheets. Conventional accounting treats money -- bank notes and reserves -- as a liability. So if one of these banks were to issue cash transfers in excess of its assets, it could technically have a negative net worth. Yet it makes no sense to worry about the solvency of central banks: after all, they can always print  more money.

The most powerful sources of resistance to cash transfers are political and ideological. In the United States, for example, the Fed is extremely resistant to legislative changes affecting monetary policy for fear of congressional actions that would limit its freedom of action in a future crisis (such as preventing it from bailing out foreign banks). Moreover, many American conservatives consider cash transfers to be socialist handouts. In Europe, which one might think would provide more fertile ground for such transfers, the German fear of inflation that led the European Central Bank to hike rates in 2011, in the middle of the greatest recession since the 1930s, suggests that ideological resistance can be found there, too.

Those who don’t like the idea of cash giveaways, however, should imagine that poor households received an unanticipated inheritance or tax rebate. An inheritance is a wealth transfer that has not been earned by the recipient, and its timing and amount lie outside the beneficiary’s control. Although the gift may come from a family member, in financial terms, it’s the same as a direct money transfer from the government. Poor people, of course, rarely have rich relatives and so rarely get inheritances -- but under the plan being proposed here, they would, every time it looked as though their country was at risk of entering a recession.

Unless one subscribes to the view that recessions are either therapeutic or deserved, there is no reason governments should not try to end them if they can, and cash transfers are a uniquely effective way of doing so. For one thing, they would quickly increase spending, and central banks could implement them instantaneously, unlike infrastructure spending or changes to the tax code, which typically require legislation. And in contrast to interest-rate cuts, cash transfers would affect demand directly, without the side effects of distorting financial markets and asset prices. They would also would help address inequality -- without skinning the rich.

Ideology aside, the main barriers to implementing this policy are surmountable. And the time is long past for this kind of innovation. Central banks are now trying to run twenty-first-century economies with a set of policy tools invented over a century ago. By relying too heavily on those tactics, they have ended up embracing policies with perverse consequences and poor payoffs. All it will take to change course is the courage, brains, and leadership to try something new.

* Aparte de la absurda mención al Pisito, lo importante es que podrían decidirse unas restricciones u otras.

En cualquier caso, no es que yo sea partidario de esta visión, pero la traigo por ser una explicación algo detallada de la defensa de la posición "QE para la gente en lugar de para los bancos".

[lectorhinfluyente1984]

http://www.nybooks.com/articles/archives/2015/jul/09/partnership-china-avoid-world-war/

International cooperation is in decline both in the political and financial spheres. The UN has failed to address any of the major conflicts since the end of the cold war; the 2009 Copenhagen Climate Change Conference left a sour aftertaste; the World Trade Organization hasn’t concluded a major trade round since 1994. The International Monetary Fund’s legitimacy is increasingly questioned because of its outdated governance, and the G20, which emerged during the financial crisis of 2008 as a potentially powerful instrument of international cooperation, seems to have lost its way. In all areas, national, sectarian, business, and other special interests take precedence over the common interest. This trend has now reached a point where instead of a global order we have to speak of global disorder.

In the political sphere local conflicts fester and multiply. Taken individually these conflicts could possibly be solved but they tend to be interconnected and the losers in one conflict tend to become the spoilers in others. For instance, the Syrian crisis deteriorated when Putin’s Russia and the Iranian government came to Bashar al-Assad’s rescue, each for its own reasons. Saudi Arabia provided the seed money for ISIS and Iran instigated the Houthi rebellion in Yemen to retaliate against Saudi Arabia. Bibi Netanyahu tried to turn the US Congress against the nuclear treaty the US was negotiating with Iran. There are just too many conflicts for international public opinion to exert a positive influence.

In the financial sphere the Bretton Woods institutions—the IMF and the World Bank—have lost their monopoly position. Under Chinese leadership, a parallel set of institutions is emerging. Will they be in conflict or will they find a way to cooperate? Since the financial and the political spheres are also interconnected, the future course of history will greatly depend on how China tackles its economic transition from investment and export-led growth to greater dependence on domestic demand, and how the US reacts to it. A strategic partnership between the US and China could prevent the evolution of two power blocks that may be drawn into military conflict.

How did we reach this point of global disorder? During the cold war the world was dominated by two superpowers. Each maintained some degree of control over its allies and satellites, and avoided direct military confrontation with the other because of the danger of Mutually Assured Destruction. It was a MAD system but it worked: it produced a number of local military conflicts but it avoided a world war.

When the Soviet empire fell apart the United States had an opportunity to become the sole superpower and the guarantor of peace in the world, but it did not rise to the occasion. The US was founded on the principle of individual freedom and it was not predisposed to become the policeman of the world. Indeed, it did not have a coherent view of the meaning of leadership in international affairs. During the cold war it had a bipartisan foreign policy, on which Democrats and Republicans largely agreed; but after the cold war ended the partnership broke up. Both parties continued to emphasize American sovereignty but they rarely agreed on subordinating it to international obligations.

Then in 1997, a group of neoconservatives argued that the US should use its military supremacy to impose its national interests, and established a think tank called the Project for the New American Century, “to promote American global leadership.” But that was a false approach: military force cannot be used to rule the world. After the terrorist attack of September 11, the neocons persuaded President George W. Bush to attack Iraq on dubious grounds that turned out to be false, and the US lost its supremacy. The Project for the New American Century had approximately the same lifespan as Hitler’s Thousand-Year Reich: around ten years.

On the financial side, by contrast, there was a clear consensus—the so-called Washington Consensus—on America’s role in the world. It became dominant in the 1980s under the leadership of Ronald Reagan and Margaret Thatcher. It had strong ideological support from market fundamentalists; it had a supposedly scientific foundation in the Efficient Market Hypothesis and Rational Choice Theory; and it was efficiently administered by the International Monetary Fund (IMF). The consensus was a much more subtle compromise between international governance and national self-interest than the neocons’ view that military power is supreme.

Indeed, the Washington Consensus had its roots in the original compromise on which the Bretton Woods institutions were founded. John Maynard Keynes proposed a truly international currency, the bancor, but the US insisted on the dollar as the world’s reserve currency and it prevailed. In the memorable words of George Orwell’s Animal Farm, “all animals are equal, but some animals are more equal than others.” The Washington Consensus promoted free trade and the globalization of financial markets. In the late 1990s, market fundamentalists even tried to modify the articles of agreement of the IMF so as to impose capital account convertibility, the free exchange of currencies. That attempt failed, but by allowing financial capital to move around freely the Washington Consensus also allowed capital to escape taxation and regulation. That was a triumph for market fundamentalism.

Unfortunately, the scientific foundations of this approach proved to be ill conceived. Unregulated financial markets are inherently unstable: instead of a general equilibrium that assures the optimum allocation of resources, they produce financial crises. This was dramatically demonstrated by the crash of 2008. By coincidence, 2008 marked both the end of America’s political supremacy and the demise of the Washington Consensus. It was also the beginning of a process of financial and political disintegration that first manifested itself in the microcosm of the European Union, but then spread to the world at large.

The crash of 2008 had a lasting negative effect on all the economies of the world, with the notable exception of China’s. The Chinese banking system was relatively isolated from the rest of the world and largely government-owned. As a consequence, the Chinese banks could, at the government’s behest, offset the collapse of external demand by flooding the economy with credit. The Chinese economy replaced the American consumer as the motor of the global economy, largely by selling to the American consumer on credit. It has been a rather weak motor, reflecting the relative size of the Chinese and American economies, so that the global economy has grown rather slowly since the emergence of China’s international economic power.

The main reason why the world avoided a global depression is that economists have learned some lessons from the experience of the 1930s. The heavy load of debt and lingering political prejudices limited the scale of fiscal stimulus globally (again with the exception of China); but the Federal Reserve under the leadership of its chairman, Ben Bernanke, embarked on unorthodox monetary policies including quantitative easing—large-scale injection of money into the economy through the purchase of bonds by the Federal Reserve. This prevented the reduction in effective demand from deteriorating into a global depression.

The crash of 2008 was also indirectly responsible for the euro crisis. The euro was an incomplete currency: it had a common central bank but it did not have a common treasury. The architects of the euro were aware of this defect but believed that when the deficiency became apparent the political will could be summoned to correct it. After all, that is how the European Union was brought into existence—taking one step at a time, knowing full well that it was insufficient but that when the need arose it would lead to further steps.

Unfortunately, political conditions changed between 1999, when the euro was adopted, and 2008, when the need arose. Germany under the leadership of Helmut Kohl led the process of European integration in order to facilitate the reunification of Germany. But reunification proved expensive and the German public became unwilling to take on any additional expenses. When, after the bankruptcy of Lehman Brothers in 2008, the European finance ministers declared that no systemically important financial institution would be allowed to fail, Chancellor Angela Merkel, as a politician in touch with the prevailing public opinion, insisted that the responsibility should fall on each country separately, not on the European Union collectively. That ruled out the possibility of a common treasury just when it was needed. That was the beginning of the euro crisis. Crises in individual countries like Greece, Italy, or Ireland are essentially variants of the euro crisis.

Subsequently, the financial crisis has morphed into a series of political crises. The differences between creditor countries and debtor countries have transformed the European Union from a voluntary association of equals into a relationship between creditors, such as Germany, and debtors, such as Greece, that is neither voluntary nor equal and arouses increasing political tensions.

The European Union started out as a valiant attempt at international governance on a regional scale. In the aftermath of 2008, the EU became preoccupied with its internal problems and failed to pull its weight in the international economy. The United States also became inward-looking but by a somewhat different route. The inward turn of the EU and US led to a decline in international cooperation on a global scale.

Since the Western powers are the mainstay of the prevailing world order, their declining influence has created a power vacuum in international governance. Aspiring regional powers and nonstate actors, which are willing to use military force, have rushed to fill the vacuum. Armed conflicts have proliferated and spread from the Middle East to other parts of Asia, Africa, and even Europe.

By annexing Crimea and establishing separatist enclaves in Ukraine, Putin’s Russia has challenged both the prevailing world order, which depends on the Western powers for support, and the values and principles on which the EU was founded. Neither the European nor the American public is fully aware of the severity of the challenge. President Vladimir Putin wants to destabilize all of Ukraine by precipitating a financial and political collapse for which he can disclaim responsibility, while avoiding occupation of a part of eastern Ukraine, which would then depend on Russia for economic support. He has demonstrated his preference by twice converting an assured military victory into a cease-fire that threatened to destabilize all of Ukraine. Unfortunately, Putin is succeeding, as can be seen by comparing the “Minsk Two” cease-fire with “Minsk One,” even if his success is purely temporary. Putin now seeks to use Ukraine to sow dissension and gain political influence within the European Union.

The severity of the Russian threat is directly correlated with the weakness of the European Union. The EU has excelled at muddling through financial and political crises but now it is confronted with not one but five crises: Russia, Ukraine, Greece, immigration, and the coming British referendum on EU membership—and that may be too much. The very survival of the EU is at risk.

ternational governance on a global scale is equally fragile. The world may break up into rival camps both financially and politically. China has begun to build a parallel set of financial institutions, including the Asian Infrastructure Investment Bank (AIIB); the Asian Bond Fund Initiative; the New Development Bank (formerly the BRICS Bank); and the Chiang Mai Initiative, which is an Asian regional multilateral arrangement to swap currencies. Whether the two camps will be able to keep their rivalry within bounds will depend on how China manages its economic transition and on how the US reacts to it.

The International Monetary Fund could play a positive part in this. It has abandoned its commitment to the Washington Consensus but the controlling shareholders of the Bretton Woods institutions—the US, the UK, France, and Germany among them—are unwilling to relinquish their voting control by increasing the representation of the developing world. This is very shortsighted on their part because it does not recognize changes in the relative weight of various economies and particularly the rise of China.

The controlling shareholders are unlikely to abandon their control, however tenuous; but the IMF has an opportunity to build a binding connection between the two camps. The opportunity arises from the fact that the composition of the IMF’s Special Drawing Rights (SDR) basket will be up for its five-yearly review at the end of 2015.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries. The Chinese renminbi is not fully qualified to be included in the SDR basket, but the qualifications to be included are not as rigorously defined as is generally believed. The Japanese yen was introduced when it was not yet widely traded; the franc entered the basket when the French capital account was heavily controlled; and the Saudi riyal was introduced when it was completely pegged to the US currency. The criteria for inclusion have changed over the years but now call for (1) a large exporter country and (2) a “freely usable” currency. This term is often misconstrued as imposing complete convertibility of capital accounts and flexibility of exchange rates; but that is not the case. Indeed, the basket of Special Drawing Rights formerly included currencies with no or little capital account convertibility.

The Chinese leadership has now embarked on a major effort to have the renminbi included in the SDR basket, and the IMF staff is sympathetic. For instance, it has announced that the renminbi is “no longer undervalued,” and it doesn’t seek full and precipitous capital account liberalization, but rather a cautious and gradual pace of reform in order to ensure the smooth functioning of the SDR and the preservation of financial stability in China.

Much now depends on the attitude of the US government, which holds veto rights in the IMF—even if the decision regarding the SDR basket requires only a 70 percent majority of the IMF’s board. The US would be making a major concession if it opened the door to allowing the renminbi to become a potential rival to the dollar. It could demand similar concessions from China in return, but that would be the wrong approach. The relationship between two great powers is not a zero-sum game: one party’s gain is not necessarily a loss for the other.

China is seeking SDR status for the renminbi not to please or hurt the US but for reasons of its own that are only indirectly connected with China’s ultimate ambition of replacing the US dollar as the dominant currency in the world. China seeks to use financial liberalization as an engine of growth for the Chinese economy. China wants to deepen the government bond market and open it up to international investors in order to enable the central government to clean up the bad debts of insolvent local authorities; it also wants to reduce the excessive leverage in the economy by promoting conversions of debt to equity. Inclusion of the renminbi in the IMF basket would facilitate the process, and success would automatically advance the renminbi’s weight and influence in the world.

The US government has little to gain and much to lose by treating the relationship with China as a zero-sum game. In other words it has little bargaining power. It could, of course, obstruct China’s progress, but that would be very dangerous. President Xi Jinping has taken personal responsibility for the economy and national security. If his market-oriented reforms fail, he may foster some external conflicts to keep the country united and maintain himself in power. This could lead China to align itself with Russia not only financially but also politically and militarily. In that case, should the external conflict escalate into a military confrontation with an ally of the United States such as Japan, it is not an exaggeration to say that we would be on the threshold of a third world war.

Indeed, military budgets are rapidly increasing both in Russia and in China, and they remain at a very high level in the United States. For China, rearmament would be a surefire way to boost domestic demand. China is already flexing its military muscle in the South China Sea, operating in a unilateral and often quite belligerent manner, which is causing justifiable concern in Washington. Nevertheless, it may take a decade or more until a Russian–Chinese military alliance would be ready to confront the US directly. Until then, we may expect a continuation of hybrid warfare and the proliferation of proxy wars.

Both the US and China have a vital interest in reaching an understanding because the alternative is so unpalatable. The benefits of an eventual agreement between China and the US could be equally far-reaching. Recently there has been a real breakthrough on climate policy on a bilateral basis. By taking the nonbinding representations and promises made by the two countries at face value, the agreement has made more credible some recent efforts to bring climate change under control. If this approach could be extended to other aspects of energy policy and to the financial and economic spheres, the threat of a military alignment between China and Russia would be removed and the prospect of a global conflict would be greatly diminished. That is worth trying.

On his last state visit to the US in 2013, President Xi spoke of a “new type of great power relationship.” The subject has been widely discussed in China since then. President Obama should outline his own vision by drawing a distinction between Putin’s Russia, which has replaced the rule of law with the rule of force, and today’s China, which does not always abide by the rule of law but respects its treaty obligations. Russian aggression needs to be firmly resisted; by contrast China needs to be encouraged—by offering a more constructive alternative—to avoid the route of military aggression. This kind of offer may elicit a favorable response. Rivalry between the US and China is inevitable but it needs to be kept within bounds that would preclude the use of military force.

It does not follow that a far-reaching agreement amounting to a strategic partnership between the US and China would be easy to accomplish. The two countries have fundamentally different political systems. While the US is founded on the principle of individual freedom, China has no significant tradition of such freedom. It has had a hierarchical structure since time immemorial and it has been an empire throughout most of its history. In recent years the US has led the world in the innovative development of social media, while China has led the world in finding means to control it. Since the end of the cold war, China has been much more successful than Russia in creating a successful hierarchical system.

This is best seen by looking at the way information is distributed. Since the rise of social media, information increasingly travels along horizontal lines, but China is different: information is distributed vertically. Within the party–state apparatus, the closer one is to the top, the better one is informed and the more latitude one enjoys in expressing an opinion. This means that the party–state apparatus offers not only an opportunity for personal enrichment but also a semblance of individual freedom. No wonder that the apparatus has been able to attract much of China’s best talent. The degree of latitude it allows is, however, strictly circumscribed by red lines. People have to walk within a grid; those who transgress the red lines may fall into the hands of the security apparatus and disappear without a trace.

The stranglehold of the security apparatus was gradually diminishing but recently there has been an ominous reversal: under the leadership of President Xi the informal rules defining the rights and status of NGOs, for instance, are now in the process of being significantly tightened.*

Comparing President Xi’s “Chinese dream” with the American dream highlights the difference between the two political and social systems. Xi extols China’s success in “rejuvenating the nation” by harnessing the talents and energies of its people in service of the state. By contrast, the American dream extols the success of the rugged individual who achieves upward social mobility and material prosperity by overcoming obstacles posed by social conventions or prejudices or authorities abusing their power, or sheer bad luck. The US would like China to adopt its values but the Chinese leadership considers them subversive.

In this respect China has more in common with Russia than with the US. Both Russia and China consider themselves victims of America’s aspiration to world domination. From the US point of view, there is much to disapprove of in China’s behavior. There is no independent judiciary and multinational companies are often mistreated and replaced by domestic favorites. And there are conflicts with the US and other nations in the South China Sea and over cyberwarfare and human rights. These are not matters on which cooperation will be easy to achieve.

Fully recognizing these difficulties, the US government should nevertheless make a bona fide attempt at forging a strategic partnership with China. This would involve identifying areas of common interest as well as areas of rivalry. The former would invite cooperation, the latter tit-for-tat bargaining. The US needs to develop a two-pronged strategy that offers incentives for cooperation and deterrents that render tit-for-tat bargaining less attractive.

The areas for cooperation may prove to be wider than is obvious at first sight. Cooperating with China in making President Xi’s financial reforms successful is definitely in the common interest. Success would fulfill the aspirations of the ever-increasing Chinese middle class. It may also allow Xi to relax some of the restrictions he has recently introduced and that would, in turn, increase the probability that his reforms will succeed and improve global financial stability. The weak point of his current approach is that both implementing and monitoring the reform process are in the same hands. Opening up the process to criticism by the media and civil society would greatly improve the efficacy of his reforms. This is particularly true of Xi’s anticorruption campaign. And if China followed this path, it would become increasingly attractive to the US as a strategic partner.

Negotiations between the US and China could not possibly be completed by October 2015, when the board of the IMF is scheduled to consider the composition of the SDR basket. Realistically it would take until President Xi’s state visit to Washington in September to complete the preparations. But there is much to be gained by extending the SDR deadline to 2016. China will then host the meeting of the G20, and 2016 will also be the last year of the Obama administration. The prospect of a strategic partnership between the US and China would mobilize all political forces in favor of international cooperation on both sides.

If a bona fide attempt fails, the US would then be fully justified in developing a strong enough partnership with China’s neighbors that a Chinese–Russian alliance would not dare to challenge it by military force. That would be clearly inferior to a strategic partnership between the US and China. A partnership with China’s neighbors would return us to a cold war, but that would still be preferable to a third world war.

The Trans-Pacific and Trans-Atlantic Partnerships, which are currently being negotiated, could offer an excellent opportunity for a two-pronged strategy but the current approach is all wrong. At present China is excluded; indeed the partnerships are conceived as an anti-Chinese alliance under US leadership. The president has asked Congress to give him and his successor authority for up to six years to negotiate trade agreements under fast-track rules that would deprive Congress of its right to introduce amendments. The bill has passed the Senate and at this writing is before the House. If the House approves, President Xi may be presented with an apparent threat on his visit in September. This is an appropriate response to China’s aggressive behavior in the South China Sea and elsewhere, but it leaves little room for an alternative approach. It would, as a result, be difficult for President Obama to make a bona fide offer of strategic partnership.

It is to be hoped that the House will not authorize putting the bill on a fast track. Instead of railroading the bill through Congress, it ought to be taken off the fast track. In that case, Congress would have plenty of time to correct the fundamental flaws in the proposed treaties that make them unacceptable as they are currently written. And that would also allow President Obama to make President Xi a genuine offer of a strategic partnership with China when he visits Washington in September.

[saturno]

Resumiendo, Europa es el convidado de piedra, pero ¿todos quieren tenerla en su propia mesa?
Las dotes geoestratégicas de Soros no me convencen nada.

Sigo pensando que acabaremos con un FMIxit en Europa, porque aunque las consecuencias sean temporalmente malas, es lo más interesante no sòlo para la UE, lo es para todos: para reequilbrar relaciones con EEUU, China, Rusia.
Y no estoy nada seguro de lo que afirma Soros acerca de que los Alemanes rompieron el proceso de integración, para empezar a jugar al yo más y la culpa es del carrito del helado del vecino. Creo más bien que fueron los gobiernos pisitofilos los que en 2010 aún pensaban que la "krisis" no iba con ellos -- y el Pisito no me lo toques, decía Sarkozy

Pero una vez rectificado el análisis europeo, y comprendido que ya es hora de dar el paso siguiente, (es muy notable que FR decida de pronto, ahora, reformar el sistema fiscal con plazo a ... 2 años, además de otras reformas de Estado para homologarlo con Europa, por ejemplo, después de 20 discutiéndolo), esa vision de Soros sobre el FMI y las relaciones geoestratégicas resulta mala.

Es tan mala, que Soros plantea un cara o cruz, y su duda es sólo saber si China aceptará la apuesta. Pero las cosas no funcionan así. Ni siquiera depsués de Irak y Afganistan, parece que los EEUU (al menos Soros) no aprenden, siguen teniendo un problema gordo a la hora de entender las cosas.