Krugman et al

[Incognitus]

É difícil saber qual seria a duração, mas poderia acontecer algo assim, sim. Normalmente a recuperação posterior a uma tal contracção é bastante rápida.

[Lark]

É difícil saber qual seria a duração, mas poderia acontecer algo assim, sim. Normalmente a recuperação posterior a uma tal contracção é bastante rápida.

sim, estou a assumir um ciclo de cinco anos como podia assumir um outro qualquer.
e o USD durante esse ciclo?

L

[Incognitus]

É difícil saber qual seria a duração, mas poderia acontecer algo assim, sim. Normalmente a recuperação posterior a uma tal contracção é bastante rápida.

sim, estou a assumir um ciclo de cinco anos como podia assumir um outro qualquer.
e o USD durante esse ciclo?

L

Provavelmente subiria inicialmente (com o fim do QE), cairia com o impacto económico, recuperaria com a recuperação.

[Kin2010]

Já agora coloco aqui uma questão que me intriga há algum tempo. Não seria uma solução possível para os EUA aumentarem ainda mais o QE, de forma a que a Fed, gradualmente, comprasse quase toda a dívida outstanding? A ideia é que, depois de o fazer, simplesmente anulava-a (já que é o Estado a dever a si próprio) e, nessa altura, o rácio dívida/PIB ficaria por definição muito baixo, e logo não lhe seria difícil retomar as emissões para o mercado livre, já que os investidores não têm receio quando esses rácios são pequenos.

[Incognitus]

Já agora coloco aqui uma questão que me intriga há algum tempo. Não seria uma solução possível para os EUA aumentarem ainda mais o QE, de forma a que a Fed, gradualmente, comprasse quase toda a dívida outstanding? A ideia é que, depois de o fazer, simplesmente anulava-a (já que é o Estado a dever a si próprio) e, nessa altura, o rácio dívida/PIB ficaria por definição muito baixo, e logo não lhe seria difícil retomar as emissões para o mercado livre, já que os investidores não têm receio quando esses rácios são pequenos.

Seria possível, sim. A própria Alemanha de Weimar não possuía muita dívida devido a isso mesmo.
 
Só que o acto de imprimir a torto e a direito pode levar a uma quebra de confiança em algum ponto.

[Kin2010]

Mas achas que uma tentativa dos actuais EUA de fazerem isso de forma continuada e até ao fim não poderia evitar o colapso da moeda e hiperinflacção, como em Weimar?

[Incognitus]

Mas achas que uma tentativa dos actuais EUA de fazerem isso de forma continuada e até ao fim não poderia evitar o colapso da moeda e hiperinflacção, como em Weimar?

Fazerem isso até ao fim é que deveria trazer a hiperinflação. Mas é difícil dizer se o faria ou não, será que as pessoas perdiam a confiança mesmo perante uma coisa óbvia?

[Kin2010]

Inclinar-me-ia para pensar que a confiança no USD é e continuará a ser por muitos anos, desmedida, exageradamente positiva face aos fundamentais, simplesmente porque o país domina geo-militarmente de uma forma quase totalmente hegemónica. Não é pelo poder industrial (aí são meramente a 4ª potência) é pelo militar.

No entanto, talvez isso não impeça um processo de inflacção muito forte do dólar, pois o mesmo aconteceu na Roma antiga, quando esta também era completamente hegemónica. Ou seja, Roma indica-nos que, mesmo que só haja uma moeda aceite no mundo, na posse do império incontestado, essa moeda pode (hiper)inflaccionar.

[hermes]

Inclinar-me-ia para pensar que a confiança no USD é e continuará a ser por muitos anos, desmedida, exageradamente positiva face aos fundamentais, simplesmente porque o país domina geo-militarmente de uma forma quase totalmente hegemónica. Não é pelo poder industrial (aí são meramente a 4ª potência) é pelo militar.

O argumento até seria bastante convincente, não fora a Inglaterra ter sido a grande potência naval, onde o Sol jamais se punha e agora ser uma sombra do que era, mas este até nem o exemplo mais recente, não obstante a poderosa potência militar da ex URSS parecer ter já caído no esquecimento. Em resumo, em ambos os casos, os respectivos povos fartaram-se de pagar a factura.

[Lark]

É difícil saber qual seria a duração, mas poderia acontecer algo assim, sim. Normalmente a recuperação posterior a uma tal contracção é bastante rápida.

sim, estou a assumir um ciclo de cinco anos como podia assumir um outro qualquer.
e o USD durante esse ciclo?

L

Provavelmente subiria inicialmente (com o fim do QE), cairia com o impacto económico, recuperaria com a recuperação.

se bem percebi, com o fim do QE na tua opinião, terias inicialmente, indíces a cair, USD a cair e a economia em geral em provável recessão ou com uma prestação muito fraca.
quando essa crise fosse ultrapassada, terias indíces a subir, USD a subir e a economia em geral a crescer.

é isto?

[Incognitus]

É difícil saber qual seria a duração, mas poderia acontecer algo assim, sim. Normalmente a recuperação posterior a uma tal contracção é bastante rápida.

sim, estou a assumir um ciclo de cinco anos como podia assumir um outro qualquer.
e o USD durante esse ciclo?

L

Provavelmente subiria inicialmente (com o fim do QE), cairia com o impacto económico, recuperaria com a recuperação.

se bem percebi, com o fim do QE na tua opinião, terias inicialmente, indíces a cair, USD a cair e a economia em geral em provável recessão ou com uma prestação muito fraca.
quando essa crise fosse ultrapassada, terias indíces a subir, USD a subir e a economia em geral a crescer.

é isto?

No muito curto prazo o USD subiria. Depois é como dizes.
 
Entretanto, há um factor que é (até hoje) favorável ao USD: a revolução do shale, que está a aumentar a produção de gás natural, e principalmente a de petróleo. 1/2 ou mais do déficit externo dos EUA é petróleo, pelo que isto pode ter um impacto bastante grande.

[Iced]

Parece que o Krugman vai fazer um artigo sobre Portugal em breve...

Just Say Nao

Sorry about the silence — I spent yesterday being human (the High Line in NYC is all it’s cracked up to be!), and then had a hellishly busy day today. If I had more energy left I’d plunge into the next stage in the European crisis; the moving finger of instability has now reached Portugal, with the government, of course, proposing to cure matters with More Austerity. But it will have to hold until tomorrow.

[Iced]

Deixo aqui a opinião do Soros:

http://www.guardian.co.uk/business/2013/apr/09/eurozone-crisis-germany-eurobonds

How to save the European Union

There is a strong case for Germany to make a definitive choice whether to accept eurobonds or to leave the euro

The euro crisis has already transformed the European Union from a voluntary association of equal states into a creditor-debtor relationship from which there is no easy escape. The creditors stand to lose large sums should a member state exit the union, yet debtors are subjected to policies that deepen their depression, aggravate their debt burden and perpetuate their subordinate position. As a result, the crisis is now threatening to destroy the European Union. That would be a tragedy of historic proportions which can only be prevented with German leadership.

The causes of the crisis are so complicated that they boggle the mind. They cannot be properly understood without realising the crucial role that mistakes and misconceptions have played in creating them.The fatal flaw of the euro is that by creating an independent central bank, member countries have become indebted in a currency that they don't control. The risk of default relegates some member countries to the status of third world countries that became over-indebted in a foreign currency. This feature of the euro was ignored both by the authorities and market participants until the Greek crisis and it is still not properly understood today.

At first, both the authorities and market participants treated all government bonds as if they were riskless, creating a perverse incentive for banks to load up on the weaker bonds. When Greece revealed the extent of its deficit, financial markets discovered the risk of sovereign debt default and raised risk premiums not only on Greek bonds but on the bonds of all heavily indebted euro members with a vengeance. Since European banks were heavily loaded with exactly those bonds, this precipitated a twin sovereign debt and banking crisis.

Subsequently the so-called periphery countries were treated as if they were solely responsible for their misfortunes and the structural defects of the euro remained uncorrected. Germany and the other creditor countries did the minimum necessary to preserve the euro but they continued to apply the treaties that proved to be flawed and imposed new rules that prolonged and aggravated the recession. The pain and suffering is almost entirely self-inflicted by the eurozone. It has the quality of a nightmare.

The burden of responsibility falls mainly on Germany. The Bundesbank helped design the blueprint for the euro, whose defects put Germany into the driver's seat. This has created two problems. One is political, the other financial. It is the combination of the two that has rendered the situation so intractable.

The political problem is that Germany did not seek the dominant position into which it has been thrust and it is unwilling to accept the obligations and liabilities that go with it. Germany understandably doesn't want to be the "deep pocket" for the euro. So it extends just enough support to avoid default but nothing more, and as soon as the pressure from the financial markets abates it seeks to tighten the conditions on which the support is given.

The financial problem is that Germany is imposing the wrong policies on the eurozone. Austerity doesn't work. You cannot shrink the debt burden by shrinking the budget deficit. The debt burden is a ratio between the accumulated debt and the GDP, both expressed in nominal terms. And in conditions of inadequate demand, budget cuts cause a more than proportionate reduction in the GDP – in technical terms the so-called fiscal multiplier is greater than one. This means for every that for every million euro reduction in the budget deficit, the country's GDP falls by more than a million euros, leading to a rise in the ration of national debt to GDP.

The German public finds this difficult to understand. The fiscal and structural reforms undertaken by the Schröder government worked in 2006; why shouldn't they work for the eurozone a few years later? The answer is that austerity for a single country works by increasing its exports and reducing its imports. When everybody is doing the same thing it simply doesn't work: it is clearly impossible for all members of the eurozone to improve their balance of trade with one another.

In the bailout of Cyprus, Germany went too far. In order to minimise the cost of the bailout it insisted on bailing in bank depositors. This was premature. If it had happened after a banking union had been established and the banks recapitalised, it might have been a healthy reform. But it came at a time when the banking system was retreating into national silos and remained very vulnerable. What happened in Cyprus undermined the business model of European banks, which relies heavily on deposits. Until now the authorities went out of their way to protect depositors. Cyprus has changed that. Attention is focused on the impact of the rescue on Cyprus but the impact on the banking system is far more important. Banks will have to pay risk premiums that will fall more heavily on weaker banks and the banks of weaker countries. The insidious link between the cost of sovereign debt and bank debt will be reinforced and a banking union that would re-establish a more level playing field will be more difficult to attain.

Chancellor Merkel would have liked to put the euro crisis on ice at least until after the elections, but it is back in force. The German public may be unaware of this because Cyprus was a tremendous political victory for chancellor Merkel. No country will dare to challenge her will. Moreover, Germany itself remains relatively unaffected by the deepening depression that is enveloping the eurozone. I expect, however, that by the time of the elections Germany will also be in recession. That is because the monetary policy pursued by the eurozone is out of sync with the other major currencies. The others are engaged in quantitative easing. The Bank of Japan was the last holdout but it changed sides recently. A weaker yen coupled with the weakness in Europe is bound to affect Germany's exports.

The solution for all these problems of the eurozone can be summed up in one word: eurobonds. If countries that abide by the fiscal compact were allowed to convert their entire stock of government debt into eurobonds, the positive impact would be little short of the miraculous. The danger of default would disappear and so would the risk premiums. The balance sheets of the banks would receive an immediate boost and so would the budgets of the heavily indebted countries. Italy, for instance, would save up to 4% of its GDP. Its budget would move into surplus and fiscal stimulus would replace austerity. Its economy would grow and its debt ratio would fall. Most of the seemingly intractable problems would vanish into thin air. It would be truly like waking from a nightmare.

With some modification, the fiscal compact would provide adequate safeguards against the risks involved in a joint and several obligation. It would allow member countries to issue new eurobonds only to replace maturing ones, but nothing more; after five years the outstanding debt would be gradually reduced to 60% of GDP. Non-compliant countries would be penalised by restricting the amount of eurobonds they are allowed to issue, forcing them to borrow the balance in their own name and pay heavy risk premiums – a powerful inducement to adhere to the fiscal compact's terms.

Eurobonds would not ruin Germany's credit rating. On the contrary, they would favorably compare with the bonds of the United States, the United Kingdom, and Japan.

Eurobonds are not a panacea. First of all, the fiscal compact itself needs some modifications to ensure that the penalties are automatic, prompt and not too severe to be credible. Second, the boost derived from eurobonds may not be sufficient, necessitating additional stimulus but it would be a luxury to have such a problem. Third, the European Union also needs a banking union and eventually a political union. The Cyprus rescue made these needs more acute by calling into question the business model of European banks that relies heavily on large deposits. The main limitation of eurobonds is that they would not eliminate the divergences in competiveness. But Germany accepting eurobonds would totally change the political atmosphere and facilitate structural reforms. Unfortunately Germany is adamantly opposed to eurobonds. Since chancellor Merkel vetoed them, the arguments put forward here have not even been considered. People don't realise that agreeing to eurobonds would be much less costly than doing only the minimum to preserve the euro.

It is up to Germany to decide whether it is willing to authorise eurobonds or not. But it has no right to prevent the heavily indebted countries from escaping their misery by banding together and issuing eurobonds. In other words, if Germany is opposed to eurobonds it should consider leaving the euro and letting the others introduce them.

This exercise would yield a surprising result: eurobonds issued by a eurozone that excludes Germany and other like-minded countries would still compare favourably with those of the US, UK and Japan.

Let me explain why. SSince all the accumulated debt is denominated in euros, it makes all the difference which country remains in charge of the euro. If Germany left, the euro would depreciate. The debtor countries would regain their competitiveness. Their debt would diminish in real terms and, if they issued eurobonds, the threat of default would disappear. Their debt would suddenly become sustainable. Most of the burden of adjustment would fall on the countries that left the euro. Their exports would become less competitive and they would encounter stiff competition from the euro area in their home markets.

By contrast, if Italy left, its euro-denominated debt burden would become unsustainable and would have to be restructured. This would plunge the global financial system into a meltdown, which may well prove beyond the capacity of the monetary authorities to contain. The collapse of the euro would likely lead to the disorderly disintegration of the European Union and Europe would be left worse off than it had been when it embarked on the noble experiment of creating a European Union. So, if anyone must leave it should be Germany, not Italy.

There is a strong case for Germany to make a definitive choice whether to accept eurobonds or to leave the euro. The trouble is that Germany has not been put to the choice, and it has another alternative at its disposal: it can continue along the current course, always doing the minimum to preserve the euro, but nothing more. That is not the best alternative even for Germany, except perhaps in the very near term. Nevertheless, that is chancellor Merkel's preferred choice, at least until after the elections.

In sum, I contend that Europe would be infinitely better off if Germany made a definite choice between accepting eurobonds or leaving the euro. That holds true whether Germany chose eurobonds or exit; and it holds true not only for Europe but also for Germany, except perhaps in the very near term. Which of the two alternatives is better for Germany is less clear-cut. Only the German electorate is qualified to decide.

If a referendum were called today the eurosceptics would win hands down. But more intensive consideration could change people's mind. They would discover that authorising eurobonds would actually benefit Germany and the cost of leaving the euro has been greatly understated.

I have made some surprising assertions; notably how well eurobonds could work even without Germany. My pro-European friends simply cannot believe it. They can't imagine a euro without Germany. I think they are conflating the euro with the European Union. The two are not identical. The European Union is the goal and the euro is a means to an end. Therefore the euro ought not to be allowed to destroy the European Union.

But I may be too rational in my analysis. The European Union is conflated with the euro not only in popular narratives but also in law. Consequently the European Union may not survive Germany leaving the euro. In that case the German public needs to be persuaded to abandon some of its most ingrained prejudices and misconceptions and accept eurobonds.

I should like to emphasise how important the European Union is not only for Europe, but for the world. The EU was meant to be the embodiment of the principles of open society. That means that perfect knowledge is unattainable. Nobody is free of prejudices and misconceptions; nobody should be blamed for having made mistakes. The blame begins only when a mistake or misconception is identified but not corrected. That is when the principles on which the European Union was built are betrayed. It is in that spirit that Germany should agree to eurobonds and save the European Union.

• George Soros is chairman of Soros Fund Management and of the Open Society Foundations.

[Lark]

The Intellectual Contradictions of Sado-Monetarism

Still convalescing from This Week; but it helped focus my thoughts a bit more on the jihad against low interest rates.

What I realized is that Stockman, and many others, represent the latest incarnation of sado-monetarism, the urge to raise rates even in a deeply depressed economy. It’s a long lineage, going back at least to Schumpeter’s warning that easy money would leave “part of the work of depressions undone” and Hayek’s inveighing against the “creation of artificial demand”. Nothing must be done to alleviate the pain!

I have to admit that the resurgence of sado-monetarism has come as a surprise. In the early stages, some readers may recall, there were many people — e.g. my colleague David Brooks — arguing that we should use monetary rather than fiscal policy to respond to the crisis. The hard task of persuasion therefore seemed to be one of explaining the zero lower bound and why it matters, the great difficulty of getting monetary traction and hence the need for fiscal action.

But now that the deficit scolds have killed fiscal policy, monetary policy is also under attack, and with even more vehemence. Yet there’s something very odd about that attack.

The modern sado-monetarist view is, after all, very much centered on the presumption that markets, left to their own devices, will get it right, and that it’s only the distortions introduced by money-printing central banks that cause bubbles and crises — which is why the Fed must stop its easing right away.

But here’s the problem: for loose monetary policy to have the dire effects the sadomonetarists claim, markets must massively get it wrong, and hugely overreact to low interest rates.

Suppose, to take the obvious example, that your claim is that loose policy by the Fed caused the housing bubble, and hence all our current woe. Well, it’s true that borrowing costs were relatively low during the bubble years. Here are mortgage rates:

[gráfico 1]

So mortgage rates fell by about 20 percent from late-90s levels. If housing prices were the simple inverse of bond prices, this could explain something like a 25 percent rise. Realistically, you can adjust this either up or down; focusing on real rates would push the number up, realizing that there are other costs to buying a house would push it down. But one thing seems clear: on no rational calculation can the fairly modest interest rate decline shown above justify this:

[gráfico 2]

Now, you could try to explain the doubling or more of housing prices in key markets by arguing that low interest rates were what set in motion a process of irrational exuberance, in which lenders and borrowers both got carried away; I would agree with Ben Bernanke that most of the evidence suggests otherwise, but your mileage may vary. The point, however, is that even if you want to make the Fed the villain here, you can only do that by assuming that markets are highly irrational and unstable. If they can overreact so drastically to loose money, why should you believe that they get it right in response to other shocks?

So sadomonetarism is intellectually inconsistent. It wants to blame central banks for all the instability in the economy, it preaches a doctrine of non-intervention, but it can only make the case by insisting that financial markets are irrational and unstable to begin with, in which case it’s hard to see why laissez-faire makes sense under any conditions.

And no, I don’t think the sadomonetarists have thought this through. Their position isn’t intellectual, it’s visceral: easy money=sin, and must not be condoned. And while everyone is entitled to his own viscera, this is no way to make economic policy.

krugman

[Lark]

maaatem-me....

[Lark]

How to Beat a Dead Horse

Part of the answer is paying attention to events, looking for the illustration, looking for the dramatic motivating example. It kind of helps to use various people as foils. If someone has said something that’s demonstrably at odds with experience or just demonstrably stupid, I use it. Jean-Claude Trichet [former president of the European Central Bank] delivered some wonderful quotes. Olli Rehn [vice president of the European Commission] has been doing beautifully helpful quotations. I’m not being unfair to him. The austerity thing has been helped on a great deal as an argument by unfolding events in Europe. In 2010 it was based mostly on the logic of the case, not the evidence. Now I can say, “Look, you’ve done this thing. Look what’s happened. Look at Britain. Look at Portugal.”

Metaphors, if you can find good ones, are helpful. Sometimes you can mull over an issue for years before the right thing comes to you. “Confidence fairy” has been a good friend to me. That one just came out of the blue in 2010. “Zombie ideas” is not original with me, but it’s been very useful.

It also helps if you’re going to make the same point many times that it’s a very important point worth making.

More on the blog than in the column, I follow research. When there’s new papers, that can be helpful. The ideas evolve, too. I wasn’t thinking much about the importance of having your own currency at first. I learned about that a couple of years into this Don Quixote role—some mixture of Don Quixote and Cassandra. One thing about Cassandra is that she was always right. A lot of what I’ve been doing is telling people they’re about to make a terrible mistake, watching them make the mistake, and then saying, “See, you made a terrible mistake.”

With austerity we’ve had this monstrous exercise in unethical human experimentation. I came out with some assertions that were very much at odds with what other people were saying. The duration of the slump, the likely path of interest rates and inflation. I haven’t batted a thousand, but it’s been pretty good. This having-been-right thing helps sustain me in pounding on the issues.

I do mix it up once in a while. I may have reached the point where I need to mix it up quite a lot. To some extent, people have gotten the message. My next column will be about food and recipes. No. Anyway, something different.

A lot of it’s just persistence. In any kind of communications profession, the point is above all to have something to say. I look at a lot of people in the punditry business and I think they’re trying to be clever and counterintuitive. They’re viewing themselves as being in the entertainment business. That’s not what it’s about. From a professional standpoint, you end up with a dedicated readership if you actually stand for something and stick to your guns. Don’t give up just because other people don’t like what you’re saying.

krugman

[Vanilla-Swap]

Taxas negativas nos bancos?

Isso implicaria uma fuga de capitais para fora, a única maneira de atrair investimento é ter leis laborais atrativas, uma boa politica de impostos, ideias que consigam captar investimento e compreender a sociedade de consumo, ou seja o que querem os consumidores, neste ponto de vista cada ideia deve compreender o seu mercado. 

[Lark]

Milton Friedman, Currency Debaser
Brad DeLong links to a Forbes piece by Tim Lee from last year that I missed, which in turn quotes Milton Friedman on the macroeconomic views that prevailed in the early 1930s:

Lerner was trained at the London School of Economics, where the dominant view was that the depression was an inevitable result of the prior boom, that it was deepened by the attempts to prevent prices and wages from falling and firms from going bankrupt, that the monetary authorities had brought on the depression by inflationary policies before the crash and had prolonged it by “easy money” policies thereafter; that the only sound policy was to let the depression run its course, bring down money costs, and eliminate weak and unsound firms.
Friedman viewed this as evident nonsense, and commended instead the then Chicago view that banks should be rescued, government should act to reflate the economy, and that there was a strong case “for the use of large and continuous deficit budgets to combat the mass unemployment and deflation of the times.”

But as Lee notes, the doctrine Friedman considered self-evident nonsense is now more or less the official doctrine of the Republican party, while the Chicago view he praised are now, according to conservatives, tyrannical socialism.

Krugman

[Lark]

É impressionante.
A epítome dos economistas conservadores - Milton Friedman - defendia exatamente o que o Krugman hoje defende.

Os conservadores/libertários de hoje estão tão ultrapassados como já estavam nos anos 30 do sec XX.
O Friedman seria considerado hoje um perigoso socialista.

Isto leva-me a pensar se não será melhor ignorar de todo o parlapié libertário e conservador.
É uma conversa insana. Não vale a pena refutá-la. Já o foi há um século.
Nós é que fazemos papel de malucos ao discutir com este pessoal.

L

[Castelbranco]

Taxas negativas nos bancos?

Isso implicaria uma fuga de capitais para fora, a única maneira de atrair investimento é ter leis laborais atrativas, uma boa politica de impostos, ideias que consigam captar investimento e compreender a sociedade de consumo, ou seja o que querem os consumidores, neste ponto de vista cada ideia deve compreender o seu mercado.

bom....e boa...o grande problema de hoje é a grande concorrência muita oferta para procura estabilizada com teendencia de queda, contra isto nada há a fazer podem correr ou saltar.