oil 100 again, Gold $1,500

Inflation, not deflation, Mr. Bernanke / 謝國忠
http://my1510.cn/article.php?id=550bc091573269fd

通脹全球化

In the wake of a barrage of bad economic data the yield on the 2Y US treasury has tumbled to 0.5% and the 10Y to 2.8%, almost reaching the levels after the Lehman’s collapse. Pundits in the US and other western countries are talking about deflation again. The decline in CPI for the past three months gives this view ammunition. The Fed is coming under pressure to resume quantitative easing (‘QE’). In anticipation of the Fed resuming QE or nicknamed QE 2, the dollar has declined quickly by 10% from its recent high. Both the treasury and currency market have already priced in QE 2. It just downgraded the US’s economic outlook, decided to reinvest its proceeds from its huge mortgage bond holdings in treasuries. It is not quite QE 2, as it doesn’t involve additional QE, just maintaining the past liquidity injection. But it leaves much for the market to imagine.



European economic news have recently surprised on the upside. This is to be expected. First, its short-term economic problems are less serious than the US’s. Property bubble was restricted to Ireland and Spain. Second, the sovereign debt crisis is mostly about small southern countries and is less serious than the fiscal crisis of the state governments in the US. And, the average budget deficit is must lower than the US’s. Third, the euro’s decline has boosted the export-oriented economies like Germany. While Europe’s long term problems remain serious, it looks better than the US or Japan in the short term. This is why euro has performed well lately.



But, Europe’s economic performance may deteriorate in the next twelve months. Euro has rebounded and won’t help its exports like before. Its fiscal contraction will negatively affect its domestic demand. Europe’s employment situation has always been poor. The US’s employment data are poor relative to its past but still better than Europe’s. The US’s private sector is still growing jobs. The odds are that Europe’s private sector is still losing jobs.



Similarly, Japan’s situation has improved but remains poor. Its nominal GDP has stopped declining. But, if yen remains as strong as it is now, it could decline again. Japan’s employment has stabilized, thanks to strong exports. As yen’s strength drags down its exports, the employment should resume declining. With national debt above 200% of GDP and annual fiscal deficit of 8% of GDP, Japan urgently needs to rein in its debt growth. Hence, if its economy improves, it will likely increase consumption tax to decrease fiscal deficit, which would slow its economy. Japan is essentially structured not to have a good economy.



The developed world is essentially competing on bad economic news. Major currencies move on who is worse at the moment. The Greek debt crisis caused the euro to plunge. Now the weak employment and resuming property weakness have caused the dollar to plunge. Maybe yen is next.



On the other side of the world, inflation is sweeping the emerging economies. Oil has climbed above $80/barrel again. Copper is back above $7,000/ton, closing in on the pre-crisis peak. The prices of agricultural commodities are gapping up. India is seeing double digit inflation. Emerging economies as a whole are experiencing inflation rate above 5% on average. India, Korea, and Taiwan have recently raised interest rate, fearing accelerating inflation and overheating property market. China has taken steps to rein in the overheating property. It is still reporting moderate inflation. But, as the data lose touch with what people feel on the street, the pressure for rate hikes may become too strong to resist. Inflation and asset bubble dominate the concerns in emerging economies.



The global economy seems to be bifurcating into the ice cold developed economies and red hot developing economies. Would the bifurcation persist? If the two sides converge, which side would dominate?



Let me write the conclusions first: Inflation, not deflation, will dominate the global economy. The deflation scare causes the central banks in the developed economies to sustain loose monetary policy. It will fuel inflation in emerging economies. Through trade, currency market, and ultimately inflation expectation, inflation will hit developed economies.



We are seeing the interplay between the forces of globalization and policy mistakes. Globalization has severely restricted the effectiveness of economic stimulus. Trade plus FDI are half of the global GDP. Trade is visible in terms of stimulus leakage. But, where investment occurs in response to demand growth is far more important. Multinationals can invest anywhere in response to demand. It cuts the linkage between demand stimulus and investment response. The later is crucial employment growth, which is necessary for sustaining demand growth beyond stimulus. Essentially, demand is local, but supply is global. This is why the old assumptions on stimulus are not good anymore.



The above analysis always applies to a small open economy. A typical macroeconomics textbook will study the extreme cases of a small open economy and a large closed economy. In the former, the leakage is so powerful that stimulus is futile. The later has no leakage and has maximum stimulus effectiveness. The economies in the real world are in between. A large economy like the US’s is always assumed to resemble a closed economy, while a small trade-oriented economy like Singapore’s is close to a completely open economy.



Multinational-led globalization has made large economies behave like small open economies. Demand is still local, but supply is global. When the Fed or the ECB tries to stimulate, they are actually stimulating the global economy as a whole. Water, no matter where it comes from, flows downwards. Stimulus, similarly, flows to where costs are low and banking system healthy. If you believe this logic, what the Fed or ECB is doing is fueling inflation and asset bubble in emerging economies rather than stimulating growth at home.



A similar movie occurred after the US’s Savings and Loans crisis in early 1990s. The Fed cut interest rate to 3% to help its banking system recover. The low interest rate pushed western banks to lend a lot to Southeast Asia, fueling a property bubble there. When the US’s monetary policy was tightened, the capital was pulled back. It caused the Asian Financial Crisis of 1997-98.



Today’s story is much bigger and with more dimensions. The emerging economies are twice as big relative to the developed economies and trade twice as big relative to the global economy as then. Investment and financial capital can now flow with little friction across the world. I suspect that the Fed policy today would cause distortions in the global economy three times as big as it did in the early 1990s. Its consequences would cause a global calamity far bigger than the Asian Financial Crisis.



The big difference from the 1990s is the employment response to stimulus in the developed economies. Despite trillions of dollars in stimulus and a sharp one-year rebound in the global economy from the middle of 2009 the developed economies have virtually seen no employment growth. The consequences of the financial crisis have eaten away quite a big chunk of the stimulus. It is, however, not the full explanation. We are seeing overheating in emerging economies. The stimulus is just working somewhere else.



For the stimulus to work for developed economies, it needs to inflate cost in emerging economies so much that the multinationals want to add additional capacity in the developed economies. That is unlikely. The average wage in developed economies is about ten times the average level in emerging economies. And there are five people in emerging economies for each one in developed economies. The math just wouldn’t work out for this approach.



The stimulus policy is more likely to end with inflation. Inflation is a monetary phenomenon. The massive growth in money supply in the US and other developed economies is not causing inflation there for three special reasons. First, the financial crisis has crippled their banking system. Before it is fully repaired, it will slow down money velocity, equivalent to a reduction in money supply in the short term. Second, weak demand is forcing suppliers to refrain from raising prices. Third, as discussed before, multinational companies are investing in emerging economies.



The first two factors are temporary. When the two factors are removed, many argue that the central banks will have time to withdraw money before inflation happens. This is a bold assumption. The amount of money that has been injected into the global economy is so massive that removing it would be extremely hard. The odds are that the central banks couldn’t.



Before the first two factors are removed, inflation still can happen via the emerging economies. Oil price is above $80/barrel, even though the global economy and the demand for oil are depressed. It has more than doubled from the low during the 2008 crisis. One may argue that the supply shortage is the reason. I seriously doubt it. Inflation expectation is likely the critical driver. Today oil producers are less willing to extract oil from under the ground in exchange for paper currency. Ceteris paribus, the price needs to be higher to motivate them to produce the same amount of oil. Unfortunately, the needed price goes up with further loosening in monetary policy.



Financial capital is turbo-charging the oil price both due to speculation and inflation hedging. Speculators are trying to anticipate the producers’ willingness to supply and the demand from inflation hedges. Such motivations don’t necessarily cause bubble. But, when there are too many speculators, the price loses its normal signaling function and just reflects speculative demand. When interest rate is near zero, speculators mushroom. If the Fed does pursue QE 2, oil price is very likely to rise above 100 again.



Many analysts think that gold is a bubble now. Quite a lot of money has been pulled out of gold lately. I think that the gold price just reflects how loose the monetary environment is now. If the Fed does QE 2, gold price could rise above $1,500/ounce quickly and may move much higher afterwards.



When the Fed cut interest late in the summer of 2007 in response to the first signs of the sub-prime crisis, the commodity index (‘CRB’) surged 50% in the following ten months. It then collapsed by 60% when Bear Stearns and Lehman Brothers collapsed. It has recovered by over 30% from the bottom. The recent history shows how volatile the commodity prices could be. If the Fed does pursue QE 2, the CRB index will surely surge. And, it won’t collapse like last time. There is so much more money in the world now. Some of it should turn into inflation through commodities. The value of commodities is about one tenth of the global GDP. It is a powerful force in turning money supply into inflation.



Labor cost in the emerging economies is rising due to their overheating. Global trade is about one fifth of the global GDP in value. The labor cost in the emerging economies underpins its price. One often hears that labor cost is only one tenth of the cost at most factories. But, the components that often account for over half of the cost are made by labor in other factories. The infrastructure and logistics services have significant labor cost too. The total labor content for export goods is probably over one third in emerging economies. When labor cost rises at 20-30% per annum, it becomes a serious source of inflation.



The case for deflation is based on Japan’s experience. It has been suffering from deflation on and off for the past two decades. A strong yen has made deflation possible. Dollar-yen has declined from 140 to 85. Japan’s service price has not declined over the past two decades. Its deflation is due to the tradable sector. Japan’s rising imports of food and manufacturing products from China have been the main factor for the deflation. If yen had depreciated, it could have offset the decline. A strong yen has amplified this deflation force. But, this is not really bad deflation. When imports become cheaper, it should be good news for living standard. I think that the understanding of Japan’s deflation needs reconsideration.



In the case of the US, its bubble deflates after the manufacturing price has declined to China’s cost level. China is entering a decade of wage inflation. China’s export price is likely to rise. Hence, the US won’t experience what Japan has. Also, the dollar is weak, because the US runs a large current account deficit. The dollar isn’t likely to be a source of deflation. The temporary deflation due to suppliers cutting costs at the expense of profit margins will not last.



Weak economy doesn’t mean deflation. Ultimately, inflation is a monetary phenomenon. When inflation spreads to the developed economies from the emerging ones, inflation expectation could become a factor. In the 1970s, despite high unemployment rate, the labor demanded wage increase to compensate for inflation. If the Fed keeps loose monetary policy for the next decade, such a wage-price spiral is surely to occur.



There is a bright spot for developed economies from globalization. While their economic data tend to surprise on the downside, the corporate profits will surprise on the upside. This observation is important to many who make a living by taking positions before data releases. Such market gyrations are not important overtime. What’s important is its importance to the soundness of the pension system in developed economies. After globalization, aging is the next most important force. After losing labor income growth to globalization, a healthy corporate sector is the only path for meeting their pension liability.



The globalization reality is that the developed economies like Europe, Japan, and the US will suffer slow growth and high unemployment. Stimulus is the wrong medicine for solving the problems. Believing so leads to excessive stimulus, which causes inflation and bubble in the emerging economies first and inflation in the developed economies later. The wrong policy prescription pushes the global economy through unnecessary gyration, stagflation, and possibly another major financial crisis in the emerging economies. It’s high time for Mr. Bernanke to wake up from his stimulus obsession.


　　通脹全球化

　　本文來源於《新世紀》週刊 2010年第33期 出版日期2010年08月16日

　　全球化的作用導致刺激政策首先引發新興經濟體通脹；而後通脹將通過貿易、貨幣市場以及通脹預期，轉而衝擊發達經濟體

　　謝國忠

　　冰火兩重天

　　美國接二連三報出慘澹的經濟數據。美國和西方國家的人士又在談論通縮。前三個月，美國CPI指數下滑，更加驗證了這種論調。美聯儲目前面臨重新恢復“量化寬鬆”（QE）的壓力。由於預測美聯儲將重拾QE政策（俗稱QE2），美元匯率迅速從最近的高位下跌10%。國債和貨幣市場價格已經體現了QE2預期。美聯儲調低了對美國經濟前景的預估。美聯儲決定，將其持有的抵押債券所獲得的大量收益投資買國債。 這不能算真正的QE2，因為沒有注入額外的量化寬鬆額度，只是保持過去流動性注入的水準。但是，市場對此卻想像無限。

　　歐洲最近的經濟令人吃驚地看漲。這不足為奇。首先，歐洲短期問題沒有美國嚴重。房產泡沫僅限于愛爾蘭和西班牙。其次，主權債務危機也僅限于南歐小國，而且也沒有美國各州政府面臨的財政危機嚴重。同時，平均預算赤字肯定也比美國低。再者，歐元貶值，刺激出口國經濟增長，比如德國。雖然歐洲長期問題仍很嚴重，但比起美國和日本眼前的問題要輕得多。這就是歐元最近表現良好的原因。

　　然而，未來一年內，歐洲經濟情況可能惡化。歐元已經開始反彈，不再有利於擴大出口。歐洲緊縮財政，也將對內需造成負面影響。歐洲的就業形勢已經很糟糕。美國的就業數據比過去差，但仍比歐洲強。美國的私人部門仍在創造就業。而歐洲的私人部門的失業數量仍在增加。

　　同樣，日本經濟形勢雖有好轉，但仍很虛弱。日本的名義GDP已經止住下跌。但是，如果日元持續保持堅挺，名義GDP仍會下滑。由於出口強勁，日本就業已趨穩定。不過，日元持續堅挺將導致出口下降，就業率將因此重新下滑。日本急需控制債務增長。因此，如果經濟好轉，日本可能會增加消費稅，以衝抵財政赤字。此舉將阻滯經濟增長。日本經濟結構從本質上決定了，其經濟無法健康發展。

　　發達國家經濟噩耗層出不窮，主要貨幣匯率也在其牽引下波動。希臘債務危機導致歐元急劇貶值。目前，美國就業低迷，房產市場再度走低，導致美元大幅下跌。下一個可能輪到日元。

　　反觀世界的另一半，通脹橫掃新興經濟體。石油價格再次攀升到每桶80美元。銅價漲到每噸7000美元，接近危機前的峰值水準。農產品價格也跳空向上。印度正遭受兩位數的通脹。整個新興經濟體的通脹率平均達到5%。因為擔心通脹進一步加速，房產市場更加過熱，印度、南韓和中國台灣最近紛紛提高利率。中國已經採取措施，控制房產市場過熱。同時，中國的通脹仍較溫和。但是，由於經濟數據與老百姓切身感受差距較大，可能無法抵禦加息的壓力。通脹和資產泡沫是目前新興經濟體普遍擔憂的問題。

　　主流是通脹

　　我的看法是：全球經濟發展的主流是通脹，而非通縮。由於擔心出現通縮，發達經濟體的央行維持寬鬆的貨幣政策。這將加劇新興經濟體的通脹。通脹將通過貿易、貨幣市場以及通脹預期，轉而衝擊發達經濟體。

　　目前，全球化趨勢和各國政策失誤相互影響。全球化已經嚴重制約了經濟刺激政策的有效性。貿易及FDI佔全球GDP總量的一半。國內刺激政策可以通過貿易流向別國。但是，需求增長引發的投資出現在何處更為重要。只要有需求，跨國公司在哪投資都行。這就切斷了刺激需求的政策和投資反應之間的地緣聯繫。投資對就業增長至為關鍵，惟有就業才能比刺激政策更好維持需求的增長。本質上，需求來自本地，但供給是全球性的。這就是關於刺激政策的陳舊假設不再成立的原因。

　　上述分析對於小型開放經濟體屢試不爽。典型的宏觀經濟教科書研究的是小型開放經濟體和大型封閉經濟體的極端案例。前者，刺激政策外流過多，完全失效。後者，刺激作用極少外流，因此最有效。真實世界的經濟體介乎兩者之間。

　　跨國公司引領的全球化使得大型經濟體的行為更像理論中的小型開放經濟體。美聯儲或歐洲央行努力刺激經濟增長時，實際上也在刺激全球經濟增長。刺激政策會流向成本較低、銀行系統健康的地方。如果相信這個道理，那麼美聯儲和歐洲央行目前的措施，是在加速新興經濟體產生通脹和資產泡沫，而非刺激本國經濟增長。

　　上世紀90年代，美國儲蓄及貸款危機上演過同一幕。美聯儲將利率削減為3%，幫助銀行業復蘇。低利率促使西方國家銀行大量放貸給東南亞國家，導致後者的房產泡沫愈演愈烈。後來，美國收緊貨幣政策，資本被抽回，亞洲金融危機由此爆發。

　　當今的情形是規模更大，影響更廣。新興經濟體的規模是發達經濟體的2倍，貿易總量比當時的全球貿易總量翻了一番。投資和金融資本在全世界流通更加順暢。我猜測，美聯儲目前的政策可能會導致全球經濟扭曲。後果是，在全球範圍內引發比亞洲金融危機嚴重得多的災難。

　　如今和上世紀90年代最大的差異在於，發達經濟體的就業對刺激政策的反應不同。儘管投入了數以萬億的美元刺激經濟， 2009年中期之後的一年中，全球經濟開始出現大幅反彈，但是，發達經濟體實際上並未出現就業增長。可以說，全球金融危機的後果吞噬了相當一塊刺激政策本應具有的效果。目前，新興經濟體發展過熱，這表明刺激政策在別處起作用了。

　　刺激政策並未對症下藥

　　想要刺激政策作用於發達經濟體，需要大幅提高新興經濟體的成本，高到跨國公司回到發達經濟體，重新帶來生產力的地步。但這不太可能。發達經濟體的平均工資是新興經濟體的10倍左右。新興經濟體的人口數為發達經濟體的5倍。

　　刺激政策更可能會隨著通脹終結而停止。通脹是一種貨幣現象。美國和其他發達經濟體大幅增加貨幣供給，並未導致通脹，原因有三：一、金融危機嚴重削弱了這些國家的銀行系統。在銀行業完全恢復正常之前，它會減緩貨幣流通速度，相當於短期內收縮貨幣供給；二、需求疲軟迫使供應商無法漲價；三、正如前文所述，跨國公司還是投資于新興經濟體。

　　前兩種因素是暫時的。當這兩種因素消失時，很多人都說，各國央行會有時間在通脹到來之前回收貨幣。這種假設很大膽。注入全球經濟的資金數額如此之大，想要資金回籠勢比登天。也就是說，央行回天無術。

　　如果兩項因素仍然存在，通脹仍會通過新興經濟體發生。儘管全球經濟和需求都受到了抑制，但是，石油價格目前仍突破了每桶80美元。這比2008年危機時的低油價翻了一番以上。有人會說，漲價的原因是供應短缺。我很懷疑這種說法。通脹預期可能是關鍵推力。目前，產油國家不像以前那樣願意從地下開採石油，換成紙幣。同等條件下，需要上調石油價格，才能夠動員產油國家開採同樣數量的石油。但貨幣政策越寬鬆，這一目標價格也水漲船高。

　　由於新興經濟體經濟過熱，勞動力成本隨之上升。全球貿易的價值相當於全球GDP總量的五分之一左右。新興經濟體的勞動力成本支撐價格。有種說法是，大多數工廠的勞動力成本僅佔最終成本的五分之一。但佔最終成本一半以上的部件也是由其他工廠的勞動力生產的。基礎設施建設和物流服務也存在顯著的勞動力成本。新興經濟體出口貨物的勞動力成本總和可能超過貨物最終成本的三分之一。如果勞動力成本每年增長20%-30%，會成為嚴重的通脹誘因。

　　就美國而言，如其製造業價格下滑，逐漸與中國的成本持平，那泡沫就會破滅。中國正進入工資增長期。中國商品的出口價格可能會上漲。因此，美國不會重蹈日本之覆轍。而且，美國擁有鉅額經常項目赤字，因此美元疲軟。美元不太可能會成為通縮之源。供應商以壓縮利潤空間為代價，削減成本，因此，會產生暫時性通縮，但不會長久。

　　經濟疲軟並不意味著通縮。通脹最終還是貨幣現象。如果通脹從新興經濟體蔓延至發達經濟體，通脹預期也可能成為誘因之一。上世紀70年代，儘管失業率居高不下，勞動者仍要求加薪，彌補通脹帶來的損失。未來十年，如果美聯儲繼續實施寬鬆貨幣政策，“工資-價格”交替上升在所難免。

　　全球化的現實是，像歐洲、日本和美國這樣的發達經濟體會遭受低增長和高失業率雙重打擊。刺激經濟並未對症下藥。迷信刺激會導致刺激過量，首先將導致新興經濟體出現通脹，產生泡沫。隨後，發達經濟體也將步其後塵。錯誤的政策處方會將全球經濟陷入不必要的震蕩，或使其停滯發展，也可能在新興經濟體引發新一輪的金融危機。伯南克先生，醒醒吧，別再對刺激政策執迷不悟。

　　作者為玫瑰石顧問公司董事，經濟學家