Out of Ammo? The Eroding Power of Central Banks

Redacția
Texte selectate sau scrise de echipa redacţională: Vasile Ernu, Costi Rogozanu, Florin Poenaru.

 În care surpriza nu e că Bancherul Central e obligat de recesiune să intre tocmai în rolul făptașului care ne-a adus în criză și să presteze ca ultimul Goldman Sachs, inventând mereu mecanisme ingenioase și tot mai neconvenționale de susținere economică; surpriza e că fie și adoptând acest rol, chiar și eliminând orice regulă și angajându-se până la capăt în acest efort de salvare – nu prea iese nimic.

Out of Ammo? The Eroding Power of Central Banks

At the most recent meeting of the International Monetary Fund (IMF) in Washington, financial policy experts and bank industry executives urged central banker governors to continue their policy of cheap money. More bond purchases were discussed, as were negative interest rates and central bank deals involving collateralized debt securities. It almost seems as though monetary policy officials are now being asked to come up with as many financial innovations as investment bankers once did…

The only problem is that since the financial crisis, the scripts followed by central bankers no longer contain elements of Western movies, but instead resemble the American TV series “Emergency Room.”…the Fed has already bought up sovereign bonds and mortgage-backed securities worth $18 trillion — a sum comparable to a quarter of the entire US government debt — with little effect.

That’s because much of the money flowing into the financial sector did not reach the private sector in the form of credit, as central bankers had expected. Instead, banks are pumping it into the stock market, where prices have reached dizzying highs in recent months. Values are now approaching levels similar to those before Black Friday in 1929 and the bursting of the dotcom bubble 70 years later….

Mario Draghi knows that a single sentence can sometimes work miracles, but that it can also produce catastrophes, especially in monetary policy… “The Governing Council is unanimous in its commitment to using” Draghi begins, looks pointedly at his audience, underscores his next word, “also,” then pauses again and continues, “unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation.”

This means that conventional measures have not been fully exploited yet, he adds.

Got it? Draghi has developed knack for impressing the markets with ambiguous sentences. His latest creation is a response to an unsettling number: 0.5 percent. That was the level of inflation in the euro zone in March. According to ECB standards, a 2 percent rate of inflation is considered healthy. Even the central bankers did not predict such a sharp decline.

What’s more, the classical weapon generally deployed in such situations has been largely exhausted, now that the ECB’s key interest rate is at a historically low 0.25 percent… ECB experts have calculated that even if the central bank purchased securities for €1 trillion, this would only increase the inflation rate by between 0.2 and 0.8 percentage points.

Central banks were, of course, doing the right thing when they did everything in their power to avert a crash, but now they have exhausted their options. In the United States, the Fed bought up trillions in treasury bonds, but it cannot force politicians in Washington to reach an agreement in the budget fight. In Europe, the ECB flooded the banks with liquidity, but is unable to restructure the institutions. In the UK, the Bank of England has pledged to keep interest rates low for the foreseeable future, but it is unable to create jobs by itself. “Monetary policy is overburdened,” says Borio. No matter what central bankers do, the pendulum swings of an unfettered credit sector either render their impulses ineffective or amplify them to such an extent that they become a threat.

Articolul integral aici: http://www.spiegel.de/international/business/central-banks-ability-to-influence-markets-waning-a-964757-5.html

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