Bubblephobia and Monetary Policy/November 23, 2013, 8:42 am

Bubblephobia and Monetary Policy バブル恐怖症と金融政策

How do you know that monetary policy is too loose? The textbook answer is that excessively expansionary monetary policy shows up in rising inflation; stable inflation means money is neither too loose nor too tight. This answer has, however, come under challenge from both sides. One side — the side I’m on, and I’m pretty sure the side Janet Yellen is on, says that at low inflation rates this rule breaks down: the Phillips curve isn’t vertical, even in the long run, at low inflation (perhaps thanks to downward nominal wage rigidity), so stable inflation at a low level is consistent with an economy operating well below potential.
金融政策が緩和しすぎってどうすれば分かるのか? 教科書的な答えでは、過度に拡張的な金融政策はインフレの急上昇を招く。つまり、インフレ率が安定しているなら貨幣は緩和しすぎでもなければ、引き締めすぎでもないということになる。しかしながら、この答えは双方向からの挑戦に会っている。一方の側が主張するには――僕が属している立場で、きっとジャネット・イエレンもこっち側だ――低インフレ率の下では、この法則は成り立たなくなる:低インフレ率では、フィリップス曲線は長期的にも垂直でなくなるので(おそらくは名目賃金の下方硬直性のため)、低水準での安定的なインフレ率と潜在成長率を下回った経済とは矛盾しないことになる。

But there’s a critique from the other side that seems to be gaining a lot of traction with central bankers not named Janet Yellen — namely, the notion that if asset prices are rising, and that this might signal a bubble, it’s time to tighten, even if inflation is low or falling.

As Simon Wren-Lewis points out, the Swedish Riksbank has gone all in on this doctrine — a decision that isolated my former colleague Lars Svensson (one of the people who warned long ago about the dangers of a liquidity trap), and led to his departure. The picture is really quite amazing:


The Riksbank raised rates sharply even though inflation was below target and falling, and has only partially reversed the move even though the country is now flirting with Japanese-style deflation. Why? Because it fears a housing bubble.
リスクバンクはインフレ率が目標値以下であり、なお下落していたのに利子率を急激に引き上げた。そして、その国が現在日本型のデフレに向かっているのに、政策の方向転換は部分的なものに留まっている。なぜか? 住宅バブルへの恐れのためだ。

This kind of fits the H.L. Mencken definition of Puritanism: “The haunting fear that someone, somewhere, may be happy.” But here’s the thing: if we really are in the Summers/Krugman/Hansen world of secular stagnation, things like this are going to happen all the time. The underlying deficiency of demand will call for pedal-to-the-medal monetary policy as a norm. But bubbles will happen — and central bankers, always looking for reasons to snatch away punch bowls, will use them as excuses to tighten.

One last point: Isn’t Sweden a sort of liberal’s ideal? Not on monetary policy. In America, right-wingers get their ideas about both aid to the poor (end it) and monetary policy (gold!) from Ayn Rand, so hard money and hatred of the welfare state go hand in hand. In Europe, the connection is less clear-cut.
最後に一点:スウェーデンはリベラルにとっての理想じゃなかったの? 金融政策に関しては、それは違う。アメリカでは、右翼は貧しい人への援助(廃止しろ)と金融政策(金貨だ!)に関してのアイデアの両方をアイン・ランドから得ているので、金本位制と福祉国家への敵意は手に手を取って進んできた。ヨーロッパではこのつながりはそれほど明白なものではない。


Of Cockroaches and Commissioners/March 6, 2013, 3:54 am

Of Cockroaches and Commissioners ゴキブリと委員の中で


Kevin O’Rourke points me to the FT’s Brussels blog, which passes on the news that various officials at the European Commission are issuing outraged tweets against yours truly. You see, I’ve been mean to Olli Rehn.
ケヴィン・オルークが指摘してくれたのだが、FT’s Brusselsブログで欧州委員会(EC)の様々な政府当局者がこの僕に対して怒りをぶちまけるツイートをしているというニュースが載っている。そう、僕のオッリ・レーンについての記事に関して。

And the EC response perfectly illustrates why I do what I do.

What you would never grasp from those outraged tweets is that all my criticisms have been substantive. I never asserted that Mr. Rehn’s mother was a hamster and his father smelt of elderberries; I pointed out that he has been promising good results from austerity for years, without changing his rhetoric a bit despite ever-rising unemployment, and that his response to studies suggesting larger adverse effects from austerity than he and his colleagues had allowed for was to complain that such studies undermine confidence.

It’s telling that what the Brussels blog calls a “particularly nasty attack” was in fact a summary of Paul DeGrauwe’s work indicating that European austerity has been deeply wrong-headed, in the course of which I quoted Mr. Rehn asserting, once again, that old-time austerian faith.
FT Brusselsブログが「特に辛らつな攻撃」と呼ぶものは、ヨーロッパの緊縮財政が酷く頭の悪いものであることを示したポール・デクラウエのサマリーの中で、レーン氏がまたしても昔ながらの緊縮派の信念を吐露しているのを僕が引用しているところであるのは興味深い。

Now, it’s true that I use picturesque language — but I do that for a reason. “Words ought to be a little wild”, said John Maynard Keynes, “for they are the assault of thoughts on the unthinking.” Exactly.

Kevin O’Rourke refers to the “cocooned elites in Brussels”, which gets to the heart of the matter. The dignity of office can be a terrible thing for intellectual clarity: you can spend years standing behind a lectern or sitting around a conference table drinking bottled water, delivering the same sententious remarks again and again, and never have anyone point out how utterly wrong you have been at every stage of the game. Those of us on the outside need to do whatever we can to break through that cocoon — and ridicule is surely one useful technique.

There’s an especially telling tweet in there about how “unimpressive” I was when visiting the Commission in 2009. No doubt; I’m not an imposing guy. (I’ve had the experience of being overlooked by the people who were supposed to meet me at the airport, and eventually being told, “We expected you to be taller”). And for the life of me I can’t remember a thing about the Commission visit. Still, you can see what these people consider important: never mind whether you have actually proved right or wrong about the impacts of economic policy, what matters is whether you come across as impressive.

And let’s be clear: this stuff matters. The European economy is in disastrous shape; so, increasingly, is the European political project. You might think that eurocrats would worry mainly about that reality; instead, they’re focused on defending their dignity from sharp-tongued economists.

Slump And Circumstance/August 16, 2012, 6:51 AM

Slump And Circumstance 不況と状況

The New Statesman had a good idea — it went to 20 British economists who signed a letter back in early 2010 calling for immediate austerity and asked them whether they still supported the Osborne policies now that Britain is in double-dip recession. Only one of those who replied said yes, while nine urged Osborne to reconsider his opposition to stimulus.
The New Statesman誌の面白いアイデア――2010年早期に即座の緊縮財政を要求する書簡にサインした経済学者のところへ行って、イギリスが二番底の景気後退に陥る中で、今でもオズボーンの政策を支持するのか尋ねてみた。その中のたった1人だけがイエスと答えた一方、9人がオズボーンは景気刺激策に反対してることを再考すべきだと主張した。

Good on them. I was, however, disappointed to see so many of the prodigal economists asserting that they were responding to changed circumstances rather than admitting that they simply got it wrong.

For circumstances really haven’t changed; the UK had a depressed economy then, and it still does now. Fiscal austerity while the economy is depressed, and in particular when conventional monetary policy has reached its limits, was an obviously bad idea from day one. Not to put too fine a point on it, what I was writing about austerity back in 2010 looks just fine a couple of years later.

The fact of the matter is that the austerians chose to throw basic macroeconomics out the window. And that, not failure to anticipate negative surprises, is where they went wrong.

ECB Death Wish/July 5, 2012, 3:53 PM

ECB Death Wish ECBの死の願望

Can the euro be saved? It’s not easy. I think of the euro problem as involving three layers: troubled banks, overlaid on troubled sovereign debt, overlaid on a deep problem of competitiveness created by runaway capital flows between 2000 and 2007. Saving the thing requires credible bank rescue, sufficient intervention in Spanish and Italian bonds to keep yields manageable, and high enough inflation in Germany that the south doesn’t face an impossible need for deflation.
ユーロを救うことはできるのか? それは簡単なことではない。僕はユーロの問題を三層構造で考えている:銀行の問題、その下にソブリン債の問題、その下に2000年から2007年にかけての資本流入の殺到によって生まれた深刻な競争力の問題がある。それを切り抜けるためには信頼できる銀行救済策とスペイン国債とイタリア国債の利回りを維持可能なものにするのに十分なほどの介入、そして南ヨーロッパが実現不可能なデフレの必要性に直面しないですむほど十分に高いドイツのインフレが必要になる。

I don’t expect Europe to accept the whole program all at once. But just to keep the crisis from exploding, we need enough movement from policy makers to give hope that a solution is coming, and reassure markets.

So what did the ECB do today? The minimal amount. Even in Frankfurt I guess they realized that not cutting rates at all would have meant full-blown crisis right away; but there was no effort to get ahead of the curve, no message about more to come.
それでECBは今日何をした? 最低限のことだ。フランクフルトの連中ですら、まったく利子率を下げないということが即座の本格的な危機を意味することを理解していたんだと思う。だが、先を見越して進んでいく努力もなければ、更なる行動があるというメッセージもない。

And sure enough, bond yields are moving back into meltdown territory.

The euro could be saved. I’m really doubting whether it will.


Peripheral Performance/June 14, 2012, 8:57 AM

Peripheral Performance 周縁国のパフォーマンス

Responding to reader requests, from Eurostat. And no, I don’t know anything about Lithuania, which for some reason doesn’t seem to be on anyone’s radar:


By the way, Iceland has a much lower unemployment rate than any of the others.

Looking at this, would you have expected that Latvia would be lionized as the hero of the crisis?