Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Inflation’

Race to the bottom

Posted by hkarner - 26. Februar 2015

Date: 25-02-2015
Source: The Economist

Consumer prices IndiaINFLATION rates around the world have been sinking over the last three years. Pervasive economic weakness in the rich world and a slowdown in Chinese growth drove the initial decline. Lately tumbling oil prices have helped to push inflation into negative territory across much of the euro area. America, Britain and China, where inflation rates have dropped below 1%, may soon join Europe in deflation. Falling prices for things like petrol have been “unambiguously good” for consumers, in the words of Mark Carney, the governor of the Bank of England. But broad and persistent deflation is not a healthy thing for a modern economy. It will make big debts harder for households and governments to repay, and it could hinder central banks looking to perk up slumping economies.

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Rethinking the Global Currency System

Posted by hkarner - 9. Februar 2015

Author: David Nowakowski  ·  February 6th, 2015  ·  RGE EconoMonitor

From a talk by Professor Kenneth Rogoff; January 15th 2015.rogoff

All of the views are Rogoff’s (as best I could jot them down and interpret them), except where [bracketed], which are my comments.

[Rogoff talked to a powerpoint on the above topic a few weeks ago, which was more about individual monetary regimes in today’s world than a global monetary system or  arrangement of exchange rates, as the title might suggest. Of course, there is no such framework whatsoever.  –DN]

Rogoff:

To begin with, the current state of affairs has turned the monetary world upside down. Central banks in Advanced Economies face problems they have never before faced, and don’t understand. QE is being used, but is not a great tool and we don’t fully grasp it [its effects, benefits, risks, or how to calibrate].

Over modern history, paper currency has always produced inflation over the longer term, even in the absence of large gold discoveries. Examples: Den Rest des Beitrags lesen »

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Disinflation in EU Countries outside the Eurozone

Posted by hkarner - 3. Februar 2015

Posted on by iMFdirect

By Plamen Iossifov and Jiri Podpiera

Inflation has been falling sharply across Europe since 2012 (see Charts 1 and 2). Across Central and Eastern Europe (CEE), inflation expectations have also drifted down especially among countries who peg their currencies to the euro (Bulgaria, Croatia and Lithuania, which adopted the euro on January 1, 2015), but also in those that target their inflation rate (the Czech Republic, Hungary, Poland, and Romania).

The recent drop in world oil prices has re-ignited the debate about good vs. bad disinflation. For the euro area, risks from low inflation have been discussed in the March 2014 iMFdirect post. Our blog examines the causes and potential consequences of falling inflation from the perspective of EU countries outside the euro zone.

EUR.Disinflation charts 1-2

Disinflationary dynamics Den Rest des Beitrags lesen »

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ECB to Reassess Stimulus in 2015

Posted by hkarner - 5. Dezember 2014

Date: 04-12-2014

Source: The Wall Street Journal

Stock Markets Sink on Lack of Urgency Over QE

FRANKFURT—European Central Bank President Mario Draghi Thursday said the governing council will decide early next year whether its current policies are sufficient to raise inflation toward its target, and noted the decline in oil prices may make that objective more difficult to attain.

The euro jumped and European stocks tumbled after Mr. Draghi’s comments.

Outlining new, lower forecasts for economic growth and inflation over the coming two years, Mr. Draghi said that should the council conclude its policies aren’t sufficient to end a period of very low inflation, that would “imply altering the size, pace and composition of our measures.”

His reference to the “composition” of the central bank’s programs suggests policy makers may consider launching a program of sovereign bond purchases. Known as quantitative easing or QE, they have been a key part of responses from the U.S. Federal Reserve, Bank of England and Bank of Japan . But the ECB has largely refrained from going down this route amid worries, especially from Germany, that such a policy would stoke inflation and discourage countries from reforming their labor markets.

Mr. Draghi said the governing council had discussed “various options of QE.”

“Early next year the governing council will reassess the monetary stimulus achieved and the outlook for price developments,” he told reporters in a news conference. “We will also evaluate oil price developments.”

Mr. Draghi said the ECB’s economists have cut their growth and inflation forecasts for next year. They now expect the eurozone economy to grow by just 1.0%, having previously forecast an expansion of 1.6%, while their projection for inflation was lowered to 0.7% from 1.1%. 

However, he said those forecasts didn’t fully incorporate the recent fall in oil prices, which could push the inflation rate even lower in coming months. The annual rate of inflation fell to 0.3% in November, far below the ECB’s target of just below 2%.

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Why is euro inflation so low?

Posted by hkarner - 4. Dezember 2014

Jean-Pierre Landau 02 December 2014, voxeu

Economics Department, Sciences Po

 

Inflation in the Eurozone stood at 0.4% (year on year) in November. It has been persistently declining for almost a year, and constantly undershooting forecasts. The Eurozone is now clearly diverging from many advanced economies, where inflation is either on the rise – albeit at moderate levels – as in the US, or, when falling, still remaining close to target, as the UK.

Inflation has kept falling even in ‘core’ economies, where employment remains strong and the output gap has been reduced, such as Germany. Recent data show little prospect for improvement. According to the October World Economic Outlook (IMF 2014b), under current policies, the Eurozone inflation rate “is expected to remain substantially below the ECB’s price stability objective through at least 2019”. Den Rest des Beitrags lesen »

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Euro Hits Two-Year Low

Posted by hkarner - 3. Dezember 2014

Date: 03-12-2014

Source: The Wall Street Journal

Expectations of Further Easing Run High as ECB Meets Thursday

The euro slipped to a two-year low Wednesday, with the latest dose of drab economic data bolstering expectations of further easing ahead of the European Central Bank’s monthly meeting.

The common currency was 0.5% lower against the dollar at $1.2321, the lowest since August 2012. 

The ECB makes its policy announcement Thursday, and persistently low inflation and a flagging economic recovery have ramped up the pressure on the central bank to expand its program of asset purchases. Such a move would likely dent the euro, which has steadied since hitting its previous low for the year in November.

Data on Wednesday showed a sharper slowdown in eurozone private sector activity than first estimated. Composite PMI in the currency bloc was revised to 51.1 from 51.4 in November. Den Rest des Beitrags lesen »

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Eurozone Sees Further Rise in Jobless, Fall in Inflation

Posted by hkarner - 29. November 2014

Date: 28-11-2014
Source: The Wall Street Journal

More Aggressive Stimulus Measures Likely Soon

French consumer spending dropped 0.9% in October from September, the sharpest month-on-month decline since June 2013,

The number of people without jobs in the eurozone rose for the second straight month in October, while the annual rate of inflation fell further below the European Central Bank’s target in November as energy prices tumbled.

This represents a combination of worrying economic developments that increases the likelihood policy makers will soon take more aggressive stimulus measures.

The European Union’s statistics agency Friday said the number of people without work increased by 60,000 in October, the biggest monthly rise since January 2013. Den Rest des Beitrags lesen »

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What Quantitative Easing Did Not Do: Three Revealing Charts

Posted by hkarner - 5. November 2014

Author: Ed Dolan  ·  November 4th, 2014  ·  RGE EconoMonitordolan-1

The Fed has declared an official end to quantitative easing. It is a logical time to ask, did QE work? Danielle Kurtzleben gives the honest answer in a recent post on Vox: “It’s very, very hard to know.”

Still, we do know three things that QE did not do. These are worth pointing out, especially since back when QE was just getting under way, there were people who expected that QE 2 would do all of them.

1. QE did not work according to the textbook model

One thing was never in doubt.  As the Fed added massively to its assets, QE would cause an equally massive increase in the monetary base—the sum of bank reserves and currency that accounts for the bulk of its liabilities.

Some economists used to refer to the base as high powered money. It got that name from a familiar textbook model, according to which two simple ratios link the monetary base to the rest of the economy. One is the money multiplier, which is the ratio of ordinary money (M2) to the monetary base. The other is the ratio of nominal GDP to the M2 money stock, known as the velocity of circulation of money, or just velocity, for short.

If the money multiplier and velocity were constants, then the monetary base would be high-powered indeed. Any increase in the base (which the Fed can manipulate at will) would cause a proportional increase in nominal GDP. The only thing left to determine would be how much of the change in nominal GDP would express itself as an increase in real output and how much as inflation. Den Rest des Beitrags lesen »

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Monetary Fallacy? Deep Divisions Emerge over ECB Quantitative Easing Plans

Posted by hkarner - 5. November 2014

Date: 03-11-2014
Source: SPIEGEL

EZB Neubau ccTo prevent dangerous deflation, the ECB is discussing a massive program to purchase government bonds. Monetary watchdogs are divided over the measure, with some alleging that central bankers are being held hostage by politicians.

At first glance, there’s little evidence of the sensitive deals being hammered out in the Market Operations department of Germany’s central bank, the Bundesbank. The open-plan office on the fifth floor of its headquarters building, where about a dozen employees are staring at their computer screens, is reminiscent of the simple set for the TV series “The Office”. There are white file cabinets and desks with wooden edges, there is a poster on the wall of football team Bayern Munich, and some prankster has attached a pink rubber pig to the ceiling by its feet.

The only hint that these employees are sometimes moving billions of euros with the click of a mouse is the security door that restricts access to the room. They trade in foreign currencies and bonds, an activity they used to perform primarily for the German government or public pension funds. Now they also often do it for the European Central Bank (ECB) and its so-called “unconventional measures.”
Those measures seem to be coming on an almost monthly basis these days. First, there were the ultra low-interest rates, followed by new four-year loans for banks and the ECB’s buying program for bonds and asset backed securities — measures that are intended to make it easier for banks to lend money. As one Bundesbank trader puts it, they now have “a lot more to do.”

A Heated Dispute Den Rest des Beitrags lesen »

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Das Rubelproblem

Posted by hkarner - 4. November 2014

Date: 03-11-2014
Source: Die Zeit

Putin carDer russischen Wirtschaft geht es zunehmend schlechter. Doch Wladimir Putin hat jeden Reformwillen verloren. Die Folge: Der Kampf unter den Eliten wird härter.

” Wie schwierig die ökonomische Situation Russlands ist, lässt sich an einer Zahl ablesen: dem Wechselkurs des Rubels zum US-Dollar. Zwischenzeitlich kostete ein Dollar mehr als 43 Rubel – anderthalb Jahre zuvor waren es noch 30. Seit Anfang des Jahres verlor die russische Währung mehr als ein Fünftel ihres Wertes. Der Verfall spiegelt die tiefgreifende Krise der russischen Wirtschaft, aber auch die Folgen der Sanktionen wider.

“Bislang wurde die Abwertung vom Kreml toleriert, weil sie für die Regierung einen entscheidenden Vorteil hatte: Sie sorgte für zusätzliche Einnahmen, denn viele russische Zölle werden auf Dollarbasis berechnet. Nach Einschätzung des Finanzministeriums in Moskau bringt jeder Rubel, um den der Wechselkurs zum Dollar fällt, etwa 3,7 Milliarden Euro zusätzlich in die Staatskasse. Diesem Geldstrom hat es Russlands Finanzminister zu verdanken, dass der Haushalt bislang ausgeglichen blieb.

“Außerdem hat Russlands Präsident Wladimir Putin viele neue Schulden den Regionen aufgebürdet. Die meisten der Geldgeschenke wie Lohnerhöhungen für Staatsangestellte, die Putin nach seiner Amtsübernahme anordnete, müssen die regionalen Haushalte tragen. Viele haben sich dafür stark verschuldet.

“Auch im kommenden Jahr könnte Russlands Haushalt noch ohne Ausgabenkürzungen auskommen – zumal knapp zehn Milliarden Euro aus einem Reservefonds zum Stopfen möglicher Löcher bereitstehen. Aber dann wird es düster: Der föderale Dreijahreshaushalt, den das Parlament vor gut einer Woche verabschiedete, ist schon überholt. Er geht noch von einem Ölpreis von 100 Dollar pro Fass, von einer Rücknahme der Sanktionen Anfang 2015 und von einem anspringenden Wirtschaftswachstum aus. Nichts davon erscheint im Moment realistisch. Der Ölpreis liegt knapp über 80 Dollar. Spätestens 2016 müssen die Ausgaben gekürzt werden – nach heutiger Schätzung um zehn Prozent.

“Die Nachteile werden sichtbarer Den Rest des Beitrags lesen »

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