Germany´s position in Europe´s Crisis

BERLIN – Germany’s stance toward Europe has become one of rejection and disengagement. Its policymakers deny the eurozone’s crisis-ridden countries a more active fiscal policy; refuse to support a European investment agenda to generate demand and growth; have declared a fiscal surplus, rather than faster potential growth, as their primary domestic goal; and have begun turning against the European Central Bank (ECB) in the struggle against deflation and a credit crunch. On all four counts, Germany is wrong.

To be sure, Germany is justified in rejecting narrow-minded calls by France and Italy for unconditional fiscal expansion. After all, fiscal stimulus can work only if it supports private investment and is accompanied by much more ambitious structural reforms – the kind of reforms that France and Italy are currently resisting.

But Germany has all of the leverage it needs to implement the stability-oriented reforms that it wants for Europe. For starters, Germany, together with the European Commission, can compel France to pursue deeper reforms in exchange for more time to consolidate its deficit.

Germany cannot, however, indulge its obsession with supply-side reforms without also pursuing growth-enhancing policies. As Germany knows from its own experience in the early 2000s, the benefits of supply-side reforms – namely, improved competitiveness and higher long-term growth rates – take a long time to emerge.

Time is a luxury that Europe does not have. With every month that the economy loses productive capacity, the likelihood of stagnation and deflation rises.

The key to ending the European crisis is a stimulus plan that addresses deficiencies on both the supply and demand sides. That is why Germany’s refusal to help find a way to finance the proposed European investment agenda – which, for a limited time, would fund productive private investment – is a mistake.

Equally problematic is Germany’s focus on maintaining a fiscal surplus. With projections for German GDP growth this year and next revised downward by more than 0.6 percentage points in the last few months, the government could be forced to initiate a pro-cyclical fiscal policy to achieve its goal, inducing even lower growth at home and throughout the eurozone.

Given that the German economy’s output gap remains negative, the government should be implementing expansionary fiscal policy that targets the country’s infrastructure weaknesses. In this sense, Finance Minister Wolfgang Schäuble’s plan to spend an additional €10 billion ($12.5 billion) on public investment in 2016-2018 is a step in the right direction. But, at just 0.1% of Germany’s annual GDP, Schäuble’s scheme looks more like an attempt to quiet criticism from the rest of Europe than a genuine policy shift.

Germany’s fourth policy mistake is its apparent withdrawal of support for the ECB. Over the last seven years, the ECB’s actions have helped Germany’s economy and taxpayers as much as those of its neighbors. Moreover, the claim that the ECB’s purchases of asset-backed securities amount to “toxic loans” that transfer risk to German taxpayers is unfounded; after all, there have been almost no defaults since 2008.

Germany’s leaders need to recognize this – and to defend the ECB publicly from baseless fear mongering. Failure to do so may reflect an effort to forestall the rise of the far-right anti-European political forces, particularly the Alternative for Germany. But this strategy merely plays into the party’s hands.

If Germany refuses to take a more reasoned approach, it risks undermining the ECB’s credibility, thereby reducing the effectiveness of its measures. If that happens, the ECB may well be compelled to initiate large-scale purchases of eurozone government bonds through its so-called “outright monetary transactions” scheme – a plan that many German policymakers and economists staunchly oppose.

The German government can use its considerable leverage to compel France and Italy to pursue the structural reforms that both countries need, while allowing a growth-friendly demand stimulus to lift the threat of deflation hanging over the eurozone. And it has the authority to bolster the ECB’s credibility and thus its efforts to ensure future price stability and prevent financial contagion.

Europe needs a grand bargain, involving close coordination on structural reforms and fiscal and monetary policy. Germany’s relative economic and political stability, far from enabling it to disengage from such efforts, makes it among the most important protagonists in their development and implementation. The question is whether Germany’s leaders will recognize this before Europe’s economy falls into an even deeper slump.

Read more at http://www.project-syndicate.org/commentary/germany-wrong-on-european-policy-by-marcel-fratzscher-2014-11#jgzfx3ZlLVGRL7Ot.99

Dollar recovery and international economy

 

 

The Return of the Dollar

 

LAGUNA BEACH – The US dollar is on the move. In the last four months alone, it has soared by more than 7% compared with a basket of more than a dozen global currencies, and by even more against the euro and the Japanese yen. This dollar rally, the result of genuine economic progress and divergent policy developments, could contribute to the “rebalancing” that has long eluded the world economy. But that outcome is far from guaranteed, especially given the related risks of financial instability.

Two major factors are currently working in the dollar’s favor, particularly compared to the euro and the yen. First, the United States is consistently outperforming Europe and Japan in terms of economic growth and dynamism – and will likely continue to do so – owing not only to its economic flexibility and entrepreneurial energy, but also to its more decisive policy action since the start of the global financial crisis.

Second, after a period of alignment, the monetary policies of these three large and systemically important economies are diverging, taking the world economy from a multi-speed trajectory to a multi-track one. Indeed, whereas the US Federal Reserve terminated its large-scale securities purchases, known as “quantitative easing” (QE), last month, the Bank of Japan and the European Central Bank recently announced the expansion of their monetary-stimulus programs. In fact, ECB President Mario Draghi signaled a willingness to expand his institution’s balance sheet by a massive €1 trillion ($1.25 trillion).

With higher US market interest rates attracting additional capital inflows and pushing the dollar even higher, the currency’s revaluation would appear to be just what the doctor ordered when it comes to catalyzing a long-awaited global rebalancing – one that promotes stronger growth and mitigates deflation risk in Europe and Japan. Specifically, an appreciating dollar improves the price competitiveness of European and Japanese companies in the US and other markets, while moderating some of the structural deflationary pressure in the lagging economies by causing import prices to rise.

Yet the benefits of the dollar’s rally are far from guaranteed, for both economic and financial reasons. While the US economy is more resilient and agile than its developed counterparts, it is not yet robust enough to be able to adjust smoothly to a significant shift in external demand to other countries. There is also the risk that, given the role of the ECB and the Bank of Japan in shaping their currencies’ performance, such a shift could be characterized as a “currency war” in the US Congress, prompting a retaliatory policy response.

Furthermore, sudden large currency moves tend to translate into financial-market instability. To be sure, this risk was more acute when a larger number of emerging-economy currencies were pegged to the US dollar, which meant that a significant shift in the dollar’s value would weaken other countries’ balance-of-payments position and erode their international reserves, thereby undermining their creditworthiness. Today, many of these countries have adopted more flexible exchange-rate regimes, and quite a few retain adequate reserve holdings.

Read more at http://www.project-syndicate.org/commentary/us-dollar-rally-global-rebalancing-by-mohamed-a--el-erian-2014-11#HqSSFoZf34MDxeBf.99

Crecimiento economico vs bienestar social

Dos nuevos estudios muestran, una vez más, la magnitud del problema de la desigualdad que azota a Estados Unidos. El primero, el informe anual sobre ingresos y pobreza, emitido por la Oficina del Censo de Estados Unidos, muestra que, a pesar de la supuesta recuperación de la economía desde la Gran Recesión, los ingresos de los estadounidenses comunes continúan estancados. El ingreso promedio de los hogares, ajustado a la inflación, se mantiene por debajo del nivel de hace un cuarto de siglo.

Antes se pensaba que la mayor fortaleza de Estados Unidos no era su poder militar, sino un sistema económico que era la envidia del mundo. Sin embargo, ¿por qué otros buscarían emular un modelo económico mediante el cual una gran parte —incluso una mayoría— de la población ha visto que sus ingresos se estancan mientras que los ingresos de los ubicados en la parte superior de la distribución de ingresos se disparan al alza?

Un segundo estudio, el Informe sobre Desarrollo Humano 2014 del Programa de las Naciones Unidas para el Desarrollo, corrobora estos hallazgos. Cada año, el PNUD publica una clasificación de países según su índice de desarrollo humano (IDH), el cual incorpora otras dimensiones del bienestar además del ingreso, que incluyen las relacionadas a la salud y educación.

EE UU, según el IDH, ocupa el quinto lugar en el mundo y se encuentra por debajo de Noruega, Australia, Suiza y los Países Bajos. No obstante, cuando su puntuación se ajusta por el factor desigualdad, esta cae 23 puntos —uno los más grandes descensos de ese tipo entre los países altamente desarrollado. De hecho, EE UU cae por debajo de Grecia y Eslovaquia, países que las personas normalmente no consideran como modelos a seguir o como competidores de EE UU en la disputa por los primeros puestos en las tablas de clasificación.

La movilidad descendente es una amenaza real, mientras que la movilidad ascendente es limitada

El informe del PNUD hace hincapié en otro aspecto del desempeño social: la vulnerabilidad. Señala que, si bien muchos países lograron sacar a las personas de la pobreza, la vida de muchas de esas personas continúa siendo precaria. Una pequeña vicisitud —por ejemplo, una enfermedad en la familia— puede empujarlas nuevamente a la indigencia. La movilidad descendente es una amenaza real, mientras que la movilidad ascendente es limitada.

En Estados Unidos la movilidad ascendente es más un mito que una realidad, mientras que la movilidad descendente y la vulnerabilidad es una experiencia ampliamente compartida. Esto se debe, en parte, al sistema de atención de salud de Estados Unidos, el cual continúa dejando a los estadounidenses pobres en una situación precaria, a pesar de las reformas del presidente Barack Obama.

Aquellos en la parte inferior se encuentran sólo a pocos pasos de la quiebra, enfrentando todo lo que esto implica. Con frecuencia, es suficiente que sufran una enfermedad, divorcio o pérdida del empleo para que se vean empujados al abismo.

La Ley de Protección al Paciente y Cuidado de Salud Asequible de 2010 (también llamada Obamacare) tenía la intención de desahogar estas amenazas —y hay fuertes indicios que señalan que esta ley sí se encuentra de camino a reducir significativamente el número de estadounidenses sin seguro médico. Sin embargo, y en parte debido a un fallo de la Corte Suprema y a la obstinación de los gobernadores y legisladores republicanos, que en dos docenas de Estados de EE UU se han negado a ampliar Medicaid (seguro para los pobres) —a pesar de que el Gobierno federal paga casi la totalidad de la factura— 41 millones de estadounidenses permanecen sin seguro de enfermedad. Cuando la desigualdad económica se traduce en desigualdad política —tal como ha sucedido en muchas regiones de EE UU—, los gobiernos prestan poca atención a las necesidades de aquellos en los estratos inferiores.

Ni el producto interior bruto (PIB) ni el IDH reflejan cambios en el transcurso del tiempo o las diferencias entre países en cuanto a la vulnerabilidad. No obstante, en Estados Unidos y en otros lugares se ha mostrado una marcada disminución de la seguridad del empleo. Aquellos con un trabajo se preocupan sobre si van a ser capaces de mantenerlos, mientras que los desempleados se preocupan sobre si van a conseguir trabajar .

La reciente crisis económica aniquiló la riqueza de mucha gente. En EE UU, incluso después de la recuperación del mercado de valores, la mediana de la riqueza cayó más del 40% desde el año 2007 al 2013. Eso significa que muchas de las personas mayores y aquellas que se acercan a la jubilación se preocupan sobre sus niveles de vida. Millones de estadounidenses han perdido sus viviendas y millones de personas más se enfrentan a la inseguridad de saber que pueden perder las suyas en el futuro.

Tradicionalmente, Europa ha entendido la importancia de abordar la vulnerabilidad, pero la austeridad ha hecho crecer de una manera sin precedentes

Estas inseguridades se suman a las que durante mucho tiempo han enfrentado los estadounidenses. En las zonas urbanas centrales marginadas del país miles de jóvenes hispanos y afroamericanos se enfrentan a la inseguridad de una policía y un sistema judicial que son disfuncionales e injustos; cruzarse en el camino de un oficial de policía que tuvo una mala noche puede llevar a una pena de prisión injustificada, o incluso a peores situaciones.

Tradicionalmente, Europa ha entendido la importancia de abordar la vulnerabilidad mediante el suministro de un sistema de protección social. Los europeos han reconocido que un buen sistema de protección social puede incluso conducir a un mejor desempeño económico en general, debido a que los individuos están más dispuestos a asumir riesgos que conducen a un mayor crecimiento económico.

No obstante, en muchas partes de Europa, en la actualidad, la alta tasa de paro (12% en promedio, y del 25% en los países más afectados), junto con los recortes en la protección social que fueron inducidos por la austeridad, se han traducido en un aumento sin precedentes en la vulnerabilidad. Esto implica que la caída del bienestar de la sociedad puede ser mucho mayor a la disminución que muestran la medición convencional del PIB —cifras que por sí solas ya son bastante sombrías, debido a que la mayoría de los países publican ingresos reales per cápita (ajustados a la inflación) que son menores en la actualidad que aquellos que mostraban antes de la crisis—. Es decir, que se ha perdido un lustro.

El informe emitido por la Comisión Internacional para la Medición del Desempeño Económico y el Progreso Social (que presidí) hizo hincapié en que el PIB no es una buena medida para mostrar cuán bien se desempeña la economía. Los informes del Censo de EE UU y del PNUD nos recuerdan la importancia de esta percepción. Ya se ha sacrificado demasiado en el altar del fetichismo del PIB.

Independientemente de cuán rápido crece el PIB, un sistema económico que no puede brindar ganancias a la mayoría de sus ciudadanos y en el cual una proporción creciente de la población se enfrenta a una inseguridad cada vez mayor es, fundamentalmente, un sistema económico fracasado. Y algunas las políticas, como las de la austeridad, que aumentan la inseguridad y conducen a ingresos y nivel de vida menores a grandes segmentos de la población son, fundamentalmente, políticas erróneas.

 

Joseph E. Stiglitz es premio Nobel de Economía y profesor en la Universidad de Columbia.

Su libro más reciente, en coautoría con Bruce Greenwald, es Creating a Learning Society: A New Approach to Growth, Development, and Social Progress.

 

© Project Syndicate, 2014.

 

Traducido del inglés por Rocío L. Barrientos.

Inequality: theory and practice

MOHAMED A. EL-ERIAN article on inequality....

LAGUNA BEACH – There were quite a few disconnects at the recently concluded Annual Meetings of the International Monetary Fund and World Bank. Among the most striking was the disparity between participants’ interest in discussions of inequality and the ongoing lack of a formal action plan for governments to address it. This represents a profound failure of policy imagination – one that must urgently be addressed.

There is good reason for the spike in interest. While inequality has decreased across countries, it has increased within them, in the advanced and developing worlds alike. The process has been driven by a combination of secular and structural issues – including the changing nature of technological advancement, the rise of “winner-take-all” investment characteristics, and political systems favoring the wealthy – and has been turbocharged by cyclical forces.

In the developed world, the problem is rooted in unprecedented political polarization, which has impeded comprehensive responses and placed an excessive policy burden on central banks. Though monetary authorities enjoy more political autonomy than other policymaking bodies, they lack the needed tools to address effectively the challenges that their countries face.

In normal times, fiscal policy would support monetary policy, including by playing a redistributive role. But these are not normal times. With political gridlock blocking an appropriate fiscal response – after 2008, the United States Congress did not pass an annual budget, a basic component of responsible economic governance, for five years – central banks have been forced to bolster economies artificially. To do so, they have relied on near-zero interest rates and unconventional measures like quantitative easing to stimulate growth and job creation.

Beyond being incomplete, this approach implicitly favors the wealthy, who hold a disproportionately large share of financial assets. Meanwhile, companies have become increasingly aggressive in their efforts to reduce their tax bills, including through so-called inversions, by which they move their headquarters to lower-tax jurisdictions.

As a result, most countries face a trio of inequalities – of income, wealth, and opportunity – which, left unchecked, reinforce one another, with far-reaching consequences. Indeed, beyond this trio’s moral, social, and political implications lies a serious economic concern: instead of creating incentives for hard work and innovation, inequality begins to undermine economic dynamism, investment, employment, and prosperity.

Given that affluent households spend a smaller share of their incomes and wealth, greater inequality translates into lower overall consumption, thereby hindering the recovery of economies already burdened by inadequate aggregate demand. Today’s high levels of inequality also impede the structural reforms needed to boost productivity, while undermining efforts to address residual pockets of excessive indebtedness.

This is a dangerous combination that erodes social cohesion, political effectiveness, current GDP growth, and future economic potential. That is why it is so disappointing that, despite heightened awareness of inequality, the IMF/World Bank meetings – a gathering of thousands of policymakers, private-sector participants, and journalists, which included seminars on inequality in advanced countries and developing regions alike – failed to make a consequential impact on the policy agenda.

Policymakers seem convinced that the time is not right for a meaningful initiative to address inequality of income, wealth, and opportunity. But waiting will only make the problem more difficult to resolve.

In fact, a number of steps can and should be taken to stem the rise in inequality. In the US, for example, sustained political determination would help to close massive loopholes in estate planning and inheritance, as well as in household and corporate taxation, that disproportionately benefit the wealthy.

Likewise, there is scope for removing the antiquated practice of taxing hedge and private-equity funds’ “carried interest” at a preferential rate. The way home ownership is taxed and subsidized could be reformed more significantly, especially at the top price levels. And a strong case has been made for raising the minimum wage.

To be sure, such measures will make only a dent in inequality, albeit an important and visible one. In order to deepen their impact, a more comprehensive macroeconomic policy stance is needed, with the explicit goal of reinvigorating and redesigning structural-reform efforts, boosting aggregate demand, and eliminating debt overhangs. Such an approach would reduce the enormous policy burden currently borne by central banks.

It is time for heightened global attention to inequality to translate into concerted action. Some initiatives would tackle inequality directly; others would defuse some of the forces that drive it. Together, they would go a long way toward mitigating a serious impediment to the economic and social wellbeing of current and future generations.

Read more at http://www.project-syndicate.org/commentary/imf-world-bank-annual-meetings-and-inequality-by-mohamed-a--el-erian-2014-10#BZkarHF2oS5dlCi0.99

Where economic policy is taken Europe?

Unfortunately, Krugman´s analysis continue to be right based in the evidence of Europe economic performance.......

Anyone who works in international monetary economics is familiar with Dornbusch’s Law:

The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.

And so it is with the latest euro crisis. Not that long ago the austerians who had dictated macro policy in the euro area were strutting around, proclaiming victory on the basis of a modest uptick in growth. Then inflation plunged and the eurozone economy began to sputter — and perhaps more important, everyone looked at the fundamentals again and realized that the situation remainsextremely dire.

Now, things looked very dire in the summer of 2012, too, and Mario Draghi pulled Europe back from the brink. And maybe, just maybe, he can do it again. But the task looks much harder.

In 2012, the problem was very high borrowing costs in the periphery — which we now know were driven more by liquidity issues than solvency concerns. That is, the markets basically feared that Spain or Italy might default in the near term because they would literally run out of money — and market fears threatened to turn into a self-fulfilling prophecy. And all it took to defuse that crisis was three words: “Whatever it takes”. Once the prospect of a cash shortage was taken off the table, the panic quickly subsided, and at this point both Spain and Italy have historically low borrowing costs.

What’s happening now, however, is very different. It’s a slower-motion crisis, involving the euro area as a whole, which is sliding into a deflationary trap with the ECB already essentially at the zero lower bound. Draghi can try to get traction through quantitative easing, but it’s by no means clear that this could do the trick even under the best of circumstances — and in reality he faces severe political constraints on what he can do.

What strikes me, also, is the extent of intellectual confusion that remains. Germany still seems determined to regard the whole thing as the wages of fiscal irresponsibility, which not only rules out effective fiscal stimulus but hobbles QE, since it’s anathema for them to consider buying government debt.

And it’s remarkable, too, how the logic of the liquidity trap remains elusive even after six years — six years! — at the zero lower bound. Not the worst example, but I read Reza Moghadam today:

Wages and other labour costs are simply too high, even by the standards of rich countries, let alone emerging markets competitors.

Augh! If it’s external competitiveness you’re worried about, depreciating the euro is what you want, not wage cuts. And cutting wages in a liquidity-trap economy almost surely deepens the slump. How can this not be part of what everyone understands by now?

Europe has surprised many people, myself included, with its resilience. And I do think the Draghi-era ECB has become a major source of strength. But I (and others I talk to) are having an ever harder time seeing how this ends — or rather, how it ends non-catastrophically. You may find a story in which Marine Le Pen takes France out of both the euro and the EU implausible; but what’s your scenario?
http://krugman.blogs.nytimes.com

Recuperacion en US versus depresion en Europa

Interesante analisis de Krugman.

 

El jueves, el Banco Central Europeo anunciaba una serie de nuevas medidas que iba a tomar para tratar de impulsar la economía de Europa. El anuncio tenía un tufillo a desesperación, lo cual era tranquilizador. Europa, que está en peor situación económica que durante la década de 1930, se encuentra sin lugar a dudas atrapada en un torbellino deflacionario, y es bueno saber que el BCE es consciente de ello. Pero puede que la revelación haya llegado demasiado tarde. No está nada claro que las medidas que hay ahora sobre el tapete sean lo bastante contundentes para invertir el sentido de esa espiral deflacionaria.

Y ahí estaríamos nosotros, si no fuera por Bernanke. En Estados Unidos, las cosas distan de ir bien, pero parece que (al menos por ahora) hemos escapado a la clase de trampa que amenaza a Europa. ¿Por qué? Una posible respuesta es que la Reserva Federal empezó hace años a hacer lo que debía, al comprar billones de dólares en obligaciones, a fin de evitar la situación a la que se enfrenta ahora su homólogo europeo.

Se puede alegar, y yo lo haría, que la Reserva debería haber hecho todavía más. Pero sus responsables han sido víctimas de ataques feroces durante todo este tiempo. Expertos, políticos y plutócratas los han acusado una y otra vez de "degradar" el dólar, y nos advertían de que la inflación iba a dispararse de un momento a otro. El repunte de la inflación que predijeron no se ha producido pero, a pesar de haberse equivocado un año tras otro, casi ninguno de esos detractores ha reconocido su error, y ni siquiera han cambiado de cantinela. Y la pregunta que me he estado haciendo es por qué. ¿Qué empuja a un sector poderoso de nuestra clase política —llamémoslo el comité de la deflación— a exigir políticas de restricción del crédito incluso en una economía deprimida y con poca inflación?

Una cosa está clara: como tantas otras cosas hoy día, la política monetaria se ha convertido en gran medida en un asunto partidista. No solo porque los mensajes sobre la degradación del dólar provengan casi exclusivamente de la derecha del espectro político; la paranoia de la inflación se ha convertido, hasta un punto llamativo, en una cuestión de corrección política conservadora, de manera que incluso algunos economistas que deberían ser más sensatos se han unido al coro. Así que podemos concretar más la pregunta: ¿por qué la gente de derechas odia la expansión monetaria, aun cuando se necesita desesperadamente?

Una de las respuestas reside en el poder de la verdadez, expresión de justa fama acuñada por Stephen Colbert para referirse a cosas que no son ciertas, pero se lo parecen a algunos. "La Reserva Federal está imprimiendo dinero, el hecho de imprimir dinero genera inflación y la inflación siempre es mala" es una afirmación falsa por partida triple, pero a mucha gente le parece verdadera. Y sí, la tendencia a preferir la verdadez a una verdad más compleja está y ha estado casi siempre relacionada con el conservadurismo político, y esta tendencia se intensifica aún más en una época en la que algunos líderes políticos extraen sus teorías monetarias de las novelas de Ayn Rand.

Otra respuesta es el interés de clase. La inflación ayuda a los deudores y perjudica a los acreedores, mientras que con la deflación sucede lo contrario. Y los ricos tienen muchas más probabilidades que los pobres de ser acreedores, de tener dinero en el banco y obligaciones en la cartera, en vez de hipotecas y saldos pendientes en la tarjeta de crédito. En la época dorada de finales del siglo XIX, la élite se movilizó en masa para derrotar a William Jennings Bryan, que pretendía sacar a Estados Unidos del patrón oro; el coste de la campaña electoral, expresado como porcentaje del PIB, fue mucho más alto en 1896 que en cualquier otra elección presidencial, anterior o posterior. ¿Se están movilizando hoy los ricos de manera similar en contra de la política del crédito barato?

Por lo que yo sé, no tenemos pruebas fehacientes de ello. Sin duda, hay muchos inversores ricos entre la multitud que denuncia la degradación del dólar, pero no sabemos con certeza lo representativos que son; y se podría argumentar que a los grandes inversores les deberían gustar las políticas expansivas de la Reserva, que han sido muy beneficiosas para la Bolsa. Pero puede que los ricos no confíen en esa conexión, en parte porque la inflacionaria década de 1970 fue muy mala para los mercados bursátiles. Y sabemos a ciencia cierta que los muy ricos tienen más tendencia que el resto de los ciudadanos a considerar que el déficit presupuestario es nuestro mayor problema, aun cuando la austeridad fiscal probablemente sea perjudicial para sus ganancias. Por tanto, es probable que el interés de clase aparente también sea una motivación clave para el comité de la deflación.

Una nota al margen: los ricos de Europa no son tan ricos ni tan influyentes como los estadounidenses pero, no obstante, los intereses de los acreedores son todavía mayores que en Estados Unidos porque los países acreedores, Alemania en concreto, han acabado dictando las políticas de toda Europa.

Y es importante que entendamos que el dominio que ejercen los intereses de los acreedores a ambos lados del Atlántico, respaldado por doctrinas económicas falsas pero que generan una atracción visceral, ha tenido consecuencias trágicas. Nuestras economías se han debilitado a causa de la penosa situación de los deudores, que se han visto obligados a recortar drásticamente el gasto. Para evitar una depresión profunda y prolongada, necesitamos políticas que contrarresten ese lastre. Pero, en vez de eso, lo que tenemos es la obsesión con los peligros del déficit presupuestario y la paranoia de la inflación. Y una depresión económica que no se acaba nunca.

Paul Krugman es profesor de Economía de la Universidad de Princeton y premio Nobel de Economía de 2008.

US economic recovery vs EU depression

Krugman analysis of EU and US economic situation

 

On Thursday, the European Central Bank announced a series of new steps it was taking in an effort to boost Europe’s economy. There was a whiff of desperation about the announcement, which was reassuring. Europe, which is doing worse than it did in the 1930s, is clearly in the grip of a deflationary vortex, and it’s good to know that the central bank understands that. But its epiphany may have come too late. It’s far from clear that the measures now on the table will be strong enough to reverse the downward spiral.

 

And there but for the grace of Bernanke go we. Things in the United States are far from O.K., but we seem (at least for now) to have steered clear of the kind of trap facing Europe. Why? One answer is that the Federal Reserve started doing the right thing years ago, buying trillions of dollars’ worth of bonds in order to avoid the situation its European counterpart now faces.

 

You can argue, and I would, that the Fed should have done even more. But Fed officials have faced fierce attacks all the way. Pundits, politicians and plutocrats have accused them, over and over again, of “debasing” the dollar, and warned that soaring inflation is just around the corner. The predicted surge in inflation has never arrived, but despite being wrong year after year, hardly any of the critics have admitted being wrong, or even changed their tune. And the question I’ve been trying to answer is why. What is it that makes a powerful faction in our body politic — call it the deflation caucus — demand tight money even in a depressed, low-inflation economy?

 

One thing is clear: Like so much else these days, monetary policy has become very much a partisan issue. It’s not just that talk of dollar debasement comes pretty much exclusively from the right of the political spectrum; inflation paranoia has, to a remarkable extent, become a matter of conservative political correctness, so that even economists who should know better have joined in the chorus. So we can focus the question further: Why do people on the right hate monetary expansion, even when it’s desperately needed?

 

One answer is the power of truthiness — Stephen Colbert’s justly famed term for things that aren’t true, but feel true to some people. “The Fed is printing money, printing money leads to inflation, and inflation is always a bad thing” is a triply untrue statement, but it feels true to a lot of people. And, yes, a tendency to prefer truthiness to more complicated truth is and pretty much always has been associated with political conservatism, and this tendency is especially strong in an era when leading politicians get their monetary theory from Ayn Rand novels.

 

Another answer is class interest. Inflation helps debtors and hurts creditors, deflation does the reverse. And the wealthy are much more likely than workers and the poor to be creditors, to have money in the bank and bonds in their portfolio rather than mortgages and credit-card balances outstanding. Back in the Gilded Age, the elite mobilized en masse to defeat William Jennings Bryan, who threatened to take the United States off the gold standard; campaign spending as a percentage of G.D.P. was far higher in 1896 than in any presidential election before or since. Are the wealthy similarly mobilized against easy-money policies today?

 

As far as I know, we don’t have rigorous evidence to that effect. There are certainly a lot of wealthy investors in the debasing-the-dollar crowd, but we don’t know for sure how representative they are — and you could argue that big investors should like the Fed’s expansionary policies, which have been very good for the stock market. But the wealthy may not trust that connection, in part because the inflationary ’70s were very bad for stocks. And we do know that the very wealthy are much more likely than the general public to consider budget deficits our biggest problem, even though fiscal austerity is probably bad for profits. So perceived class interest is probably also a key motivation for the deflation caucus.

 

A side note: Europe’s wealthy aren’t as wealthy or influential as their American counterparts, but creditor interests are nonetheless even more powerful than they are here because creditor nations, Germany in particular, have ended up dictating policy for the whole of Europe.

 

And the important thing to understand is that the dominance of creditor interests on both sides of the Atlantic, supported by false but viscerally appealing economic doctrines, has had tragic consequences. Our economies have been dragged down by the woes of debtors, who have been forced to slash spending. To avoid a deep, prolonged slump, we needed policies to offset this drag. What we got instead was an obsession with the evils of budget deficits and paranoia over inflation — and a slump that has gone on and on.