Un método

Una buena propuesta de política monetaria hoy, enMike Konczal. Por cierto, tan buena para la FED como para el BCE. Inflación creíble. ¿Por qué? para estimular el desahorro del dinero; para estimular la oferta; para acelerar poder adquisitivo de los acreedores a los deudores y estos paguen sus deudas más deprisa.

...Harvard economist and former Federal Reserve economist Kenneth Rogoff explicitly used this logic when he called for a period of sustained, higher inflation of 4 to 5 percent. He notes that the credibility the Federal Reserve has built as an inflation fighter over the past several decades should be used to now fight the current recession. As he told the Washington Post’s Ezra Klein, “This is a once-every-75-years great contraction where you spend your credibility. This is what that credibility is for.”

If the Federal Reserve were allowed to deploy its credibility, higher inflation would take care of several of the major problems that are currently impacting our economy. We suffer from a deficiency in demand, a severe debt overhang, and a large amount of capital that is sitting on the sidelines, not being put towards more productive uses. Inflation impacts all three of these obstacles: It generates demand, reduces the burden of debt, and pushes those who hold capital to put it into the economy.

There is a large amount of work that argues that we are stuck in a “balance-sheet recession”, one in which consumers, deleveraging from large amounts of bad debts, drag on the larger economy. In a way, this is inflation redistributed from creditors to debtors. A higher period of inflation would reduce this burden of debt in a cleaner, broader way than more cumbersome legal procedures. Until now, most of the large-scale debt reduction in housing has taken place through foreclosures, which is a particularly painful way to lower the amount of debt in our economy. Foreclosures have spillover effects that reduce the value of neighboring properties, putting those homeowners even more underwater, and in turn increasing the need to reduce their debts as well. This process can spiral out of control; inflation can help reign it back in to a more steady deleveraging process.

In producing a sustained period of higher inflation, the Federal Reserve needn’t abandon the inflation-fighting aspects of monetary credibility. It can commit to being responsibly irresponsible, showing that it will tolerate higher inflation as part of the path to full employment and catch-up growth, without introducing permanent changes to its mission. One way it could do this would be to target a particular growth rate or an unemployment level, and accept the higher-rate of inflation that would come with it.  As Chicago Federal Reserve President Charles Evans recently pointed out, the Federal Reserve could "make a simple conditional statement of policy accommodation relative to our dual mandate responsibilities."  We might even call this the Evans Rule: the Federal Reserve could simply agree to keep interest rates at zero and tolerate 3 percent average inflation until unemployment was down to 7 percent.

Maintaining expectations in this way should be Bernanke’s primary task in nursing the economy back to health. When a country is in this kind of recession, it is more important than ever that the Federal Reserve make a straightforward explanation of what it plans to do. This has been the problem with the Fed’s program of Quantitative Easing so far. Nothing about QE has shown the markets where the central bank wants to end up. By explicitly making targets, either of GDP growth, inflation and unemployment, or others, the Federal Reserve can put its credibility to good use—and even maintain it.

...To whatever extent the Obama administration’s fiscal proposals might “Win the Future,” without taking monetary policy into consideration, they are unfortunately destined to lose the present. Because the present is a battle over low demand, high debt and people hoarding capital—three things that only a short period of sustained inflation will cure.

Mike Konczal is a fellow at the Roosevelt Institute. He blogs at Rortybomb.