The Vice President of the European Central Bank, Vítor Constâncio, gave the opening speech – Developing models for policy analysis in central banks – at the Annual Research Conference, Frankfurt am Main, on September 25, 2017. Last time I heard Constâncio speak in person, in Florence 2015, he was in typical Europhile central bank denial. He thought the Eurozone was fine, a great success given the low inflation, inferring that the ECB’s conduct had something to do with that. He didn’t talk about the millions of people that had deliberately been rendered jobless because of the austerity obsession of the Troika, of which his institution was an integral part. Things might be changing a bit as the evidence mounts that the mainstream approach to macroeconomics and monetary theory is moribund, at best. But the changes are really just more of the same. There is no willingness to admit that the whole framework is without merit. The mainstream profession is lost in my view and clutching at anything they can to stay credible. But credibility went out the window years ago.Bill Mitchell – billy blog
Mainstream macroeconomics credibility went out the window years ago
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
7 comments:
"I noted in my answer that central banks have been working overtime, with massive expansions of their balance sheets, trying to do just that – increase inflation – with virtually no success." What about all of the asset inflation the Fed has created? The Fed has re inflated the housing bubble, tripled stock market prices and cut bond yields to almost nothing. Is that not inflation?
"with massive expansions of their balance sheets, "
That also expands the depository institution balance sheets... requires more regulatory capital...
http://www.zerohedge.com/news/2016-10-03/deutsche-bank-insolvent
govt has since put in more capital to DB...
GLH,
Oil is 1/3 the price, airline tickets are 1/2 price, nat gas is 1/5 the price, gold is 1/2,
"What about all of the asset inflation the Fed has created?"
Other way around. Look at all the asset suppression the Fed has removed.
Interest rates above zero are a market intervention to suppress the price of assets, and increase the income from them, above the market level.
Matt Franko: All commodities and they are not down because the Fed bought them up. The asset prices inflated because the Fed bought them up.
Neil: I appreciate your comment and maybe I don't comprehend what you are saying but how do you see asset suppression when the stated aim of the Fed in QE and lower interest rates was to inflate asset prices back to bubble levels? Do you not agree that if the Fed had pumped trillions of dollars into the real economy instead of the banking system that we would have had commodity inflation? Wouldn't you agree that if more money is pumped into the economy than productivity increases then there will be inflation? It seems to me that Prof. Mitchell wasn't considering the asset inflation when he said that there was no inflation.
You missed my point.
When interest rates are high then asset prices are artificially suppressed by a market intervention.
So when they go back to the 'natural' rate - zero - asset prices go back to their actual market price.
QE and ZIRP remove artificial alternative assets from the economy. Assets that wouldn't naturally be there in the first place.
So there is no asset inflation. There is a removal of artificial asset price suppression.
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