jueves, 14 de enero de 2010

ECONOMÍA: Debate sobre Inflación

A continuación presentamos los puntos de vista contrarios de dos analistas estadounidenses sobre el tema de la inflación en los EEUU. Los invitamos a que lean, saquen sus conclusiones y comenten.

Why we should worry about inflation

Rarely have so many been so optimistic about inflation. Unfortunately, it could turn out that rarely have so many been so wrong.

Few Wall Street economists see a serious risk of sharply rising prices over the next year or so, but elsewhere, people are plainly worried. The Chinese, for example, keep expressing concerns that their trillions in Treasury securities aren't so secure. The declining exchange value of the dollar also reflects fears of differentially higher inflation in the United States.

The principal cause for concern is the vast liquidity that the Federal Reserve created in late 2008 and early 2009. Most economists, even many New Keynesians, have come to accept the monetarist precept that the quantity of money is what determines the price level over the long run. A significant increase in the quantity of money relative to the output of goods and services inevitably translates into higher prices. And never has the quantity of money increased the way it did when the Fed embarked on "quantitative easing" to unfreeze the credit markets and prevent an economic free fall.

All that new money supply hasn't affected prices yet. The reasons are an unprecedented decline in the velocity of money, or the number of times a dollar turns over each year, and a similar drop in the money multiplier, which determines the increase in monetary aggregates like M1 and M2 when the Fed adds to the monetary base. The declines in velocity and the money multiplier also are the major reason that the Fed actions a year ago made sense. No one believes, however, that these declines are permanent. When they reverse, the more than $1 trillion of excess bank reserves that the Fed has created could become the engine of rapidly escalating prices.

The current sanguinity over the inflation outlook reflects two presumptions, one of them simply wrong and the other sadly implausible. The first is the classic Keynesian notion that prices cannot rise fast when there is so much idle capacity. It's as though the Fed and many on Wall Street have completely forgotten the word stagflation. We had it aplenty in the late 1970s, and we could again.

The second presumption, the implausible one, is that the Fed will suck all the extra liquidity out of the system when velocity and the money multiplier bounce back. History and the current political dynamic suggest otherwise. Will the Fed really have the courage and the political latitude to risk aborting a weak recovery solely to contain potential inflation? That clearly is what Mr. Bernanke intends. That also is what the Fed intended throughout the great inflation from the mid '60s through the '70s. But it didn't follow through. Says Allan H. Meltzer, a professor of political economy at Carnegie Mellon University and author of a definitive history of the Fed: "Every effort to do anything about inflation raised unemployment, and the Fed's resolve disappeared."

Paul Volcker did follow through, of course, and defeated inflation in the early 1980s, but he had to resist fierce pressure from Congress to give up the inflation fight in order to combat 10 percent unemployment. With unemployment back at 10 percent, with a 13-digit deficit to finance, with many in Congress calling for more direct oversight of monetary policy, and with a crucial mid-term election coming in November, it seems rather bold to assume that Bernanke will exhibit Volcker-caliber courage, or that Barack Obama will provide the political cover he'll need. It has to be at least as likely that the Fed will err on the side of jobs, and do so over and over, until the public again decides that inflation is the major problem. Last time around, that didn't happen until inflation got to 13 percent.

Al Ehrbar

Mild deflation in the years ahead

In the decade ahead, expect inflation to dwindle, giving way to mild deflation. The chance of a sustained pickup in inflation is miniscule. The dominant influence on price trends for years to come will be the deflationary influence of chronically high unemployment.

Labor costs are by far the most important long-term influence on inflation. Although rapidly rising commodity prices can put upward pressure on inflation in the short run, inflation cannot accelerate for long without an acceleration in pay rates. As long as unemployment is high, the present trend toward ever smaller pay raises, more pay freezes, and increasingly common pay cuts will continue.

Let's assume, conservatively, that the unemployment rate only has to fall to 6 percent (considerably higher than in recent business cycles) before compensation inflation begins to reaccelerate. Let's also assume optimistically that unemployment peaks at 10.5 percent in the second quarter of 2010, and falls a percentage point every year—considerably sooner and faster than it did after either of the past two expansions. Even with these assumptions, the unemployment rate would not hit an "inflationary" 6 percent until the end of 2014.

Moreover, these unemployment assumptions are too optimistic because the economy has passed a great watershed and is facing a decade or so of weakness and financial instability. After decades of private-sector balance sheets growing faster than incomes (in the household, nonfinancial business, and financial sectors), the economy has entered a period in which private debt and assets must contract profoundly. This period is a depression, although probably not another "great" depression; thanks to government support for the economy and financial system, it will be a contained depression. The adjustment process will necessarily involve chronically weak fixed investment, weak profits, financial problems, and choppy, overall substandard economic growth. All of these conditions argue for disinflation and some deflation—most certainly not rising inflation.

Many people cite the large government budget deficit as a reason why inflation will eventually rise. However, large government deficits cannot spark rising inflation unless they overheat the economy, and there is little risk of that given the high unemployment, idle capacity, and generally poor growth ahead.

Another common fear is that easy monetary policy will lead to rising inflation as the economy picks up, and many people believe that easy monetary policy necessarily means rising inflation. However, flooding the system with reserves does not under all circumstances lead to additional demand, and if it does not, it cannot affect prices. Presently, excess reserves are not inducing lending for many reasons. The economy would have to be strong for years—long enough to greatly reduce unemployment, raise capacity utilization rates, and shift expectations away from deflation—before the flood of reserves could lead to strong net credit creation, fat profit margins, and upward pressures on prices. That isn't likely before the contained depression ends, and whenever the economy does begin to show sustained strength, the Fed can tighten policy.

What about a dollar collapse leading to higher import prices and thus rising domestic inflation? The dollar may fall significantly further, but there will be no ongoing, downward spiral because such a decline would have severe consequences on the wealth, revenue, and profits of the global economy, much of which is already troubled. The resulting destabilization would lead to flight back to dollars. Still, the dollar could depreciate considerably for a while. If it did, however, much of the exchange rate shift would be absorbed by exporters to the United States. To the extent that U.S. import prices did increase, the impact would be moderate, nonrecurring, and soon outweighed by the weakness in pay trends.

David A. Levy

1 comentario:

Geeta dijo...

This article simply ROCKS ! That was a great read for me. keep it up with all the good work..
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