December 4th, 2010
Given the unease about inflated central bank balance sheets and exploding national debt has begun to talk about the exit from the low interest rate policies of major central banks. The more messages a global economic recovery signal, the more it seems a return to macroeconomic everyday.The positions of the major central banks are different.The European Central Bank, which was the extent of quantitative easing comparatively restrained signaled the determined exit. The Federal Reserve under Ben Bernanke discusses the technical options available, the date could be uncertain and hesitant. The Bank of Japan, which combined for over 10 years pursuing a zero interest rate policy and quantitative easing remains in torpor. The traded before the election as the future of Japanese Finance Minister Eisuke Sakakibara, a professor of economics says that Japan is conceivable for a departure from the zero interest rate policy earlier than in five years.
What lies ahead? The return promoted by economists like Ben Bernanke and Paul Krugman triumph of macroeconomic control is sustainable only if consolidated in the coming upturn state budgets and the interest rate on a financial market bubble and inflation-neutral level. Alternatively, as threatened in Japan, drifting into the liquidity trap, or inflation. For the last option to speak in four main reasons: the reluctance of voters and policy reforms.
Had it in depreciation phases unchanged. As a result, the yield fell to zero over the time course. A similar practice Greenspan and Bernanke as regards the equity markets. While were significantly reduced in response to crises, interest rates, they were not in the boom after the crisis increased accordingly. The interest rate dropped to zero. In Europe, monetary policy was indeed cautious, but even here the yield achieved with the recent mega-crisis, a historic low, the economic consequence is simple:.. The asymmetric monetary policies end up in a liquidity trap and thus the monetary policy impotence
The way out of the zero interest rate trap is difficult, since decreases with the structural relaxation of the monetary Grenzleistungsfähgikeit investment. Entrepreneurs compare the market interest rate with the expected return on capital investment projects and make their investment decisions. Although crises in the Central Bank interest rate cuts by the economic cycle in motion again. However, decreases in a falling interest rate structure, the marginal efficiency of investment projects. Interest rate rises during the boom are difficult since projects were financed with cheap money with low returns or speculative nature. Rising interest rates will quickly burst this fragile projects or speculative bubbles. The central bank is forced to monetary policy reversal and drifts back into the liquidity trap.
This puts pressure on the fiscal policy. As long as interest rates fall, may remain stable government finances. The monetary stimulus money flushed with the rise in the tax coffers. In the recession, the responsibility for macroeconomic stabilization is shifted to the monetary policy. This affects the interest rate channel faster than the fiscal policy and does not incur costs. However, the responsibility falls on macroeconomic stabilization, fiscal policy, then back on, when – the interest rate approaches zero – as in Japan and since 1999 in the U.S. and Europe at the moment. In times of crisis will increase the national debt soared.
The higher the level of public debt, the greater the pressure on the central bank to keep its key interest rate low. Japan shows this very clearly. There, the national debt was at the time of the bursting of its bubble in 1990 about 70% of GDP. At an interest rate on 10 year government bond yield of 6.5% of the service was about 10% of the state budget. Since then, the key rate has fallen to zero and increased the gross public debt to nearly 200% of GDP. Despite world record debt service interest remains moderate – 2008 for more than 20% of the state budget – because the interest rate is 10-year government bonds due to the zero interest rate policy has fallen to 1.5%. Had the interest rate in the year 2008, however, situated at a level of 4%, the interest burden, ceteris paribus, already nearly 50% would have made the state budget. In a not unusual 8prozentigen interest near 100%. From this perspective appears Mr. Sakakibara's perspective of the Japanese monetary policy plausible.