Draghis Nullzinspolitik, Friedmans Regel und die deutsche Presse

Die deutsche Presse ist völlig aus dem Häuschen. Nein, nicht wegen der andauernden Flüchtlingskrise, auch nicht wegen Griechenland, nicht einmal Fußball ist der Grund des Aufruhrs. Der Grund ist die jüngste Entscheidung der Europäischen Zentralbank den Hauptrefinanzierungssatz (vulgo Leitzins) von 0,05% auf 0,00% zu senken.

Na mehr brauchst’ nicht.

Die Süddeutsche Zeitung titelt „Draghi kennt keinen halt mehr“, die Welt legt noch eins drauf: „Mario Draghi raubt der Welt des Geldes das Fundament“, „Ist das Mario Draghis letzte Schlacht?“ fragt Spiegel-Online und die FAZ raunt: „Wie geht es weiter mit dem Euro?“

Nun, wie ich auf diesem Blog schon früher einmal festgestellt habe, macht Geld eben verrückt – sogar die biedere deutsche Wirtschaftspresse. Aber hier scheint mir das Maß der monetären Manie neue Höchststände zu erreichen. Nehmen wir den „Welt“-Artikel her. Dieser wirft Draghi vor Inflationserwartungen zu schüren – in deutschen Augen die schlimmste Sünde für einen Geldpolitiker – und erklärt ohne jeden Anschein von Ironie nur wenige Zeilen davor, dass die Niedrigzinspolitik weitgehend wirkungslos gewesen sei. Er beklagt, dass die EZB den Banken jetzt kostenlos Geld leiht, und wirft ihr gleichzeitig vor, dass sie die „Profitabilität der Geldhäuser massiv unter Druck“ bringe. Die Nullzinspolitik, so die „Welt“, setze alle Regeln des Marktes außer Kraft.

Wie reagiert der gute Ökonom auf solchen Unsinn? Ein guter Anfang ist wie immer bei Milton Friedman zu finden.

Jeder weiß, dass Friedman den Monetarismus begründet hat. Das ist jene Doktrin, der zufolge die Zentralbank für ein möglichst konstantes Wachstum der Geldmenge zu sorgen hat. Wenige wissen, dass Friedmans Monetarismus eine einfache Regel für den optimalen Nominalzins impliziert. Das optimale Zinsniveau beträgt – die Spannung steigt – null.

Das Argument, warum der Nullzins optimal ist, sollte nicht schwer zu verstehen sein. Die Regel für die optimale Bereitstellung von Geld ist dieselbe wie die für die optimale Bereitstellung von Wiener Schnitzeln. Die privaten Grenzkosten des Schnitzelkonsums (also die Menge an anderen Gütern, auf die die einzelne Konsumentin verzichten muss, wenn sie ein zusätzliches Schnitzel isst) muss gleich sein den sozialen Grenzkosten der Schnitzelproduktion (die Menge an anderen Gütern, auf die die Gesellschaft verzichten muss, wenn sie ein zusätzliches Schnitzel produziert). Die optimale Geldmenge ist erreicht, wenn die privaten Kosten der Geldhaltung gleich den sozialen Kosten der Geldproduktion sind. Die privaten Kosten der Geldhaltung sind die nominalen Zinserträge, auf die ich verzichte, wenn ich mein Vermögen in Form von Geld halte anstatt in Anleihen und andere Wertpapiere zu investieren. Die sozialen Kosten der Geldproduktion sind praktisch null. Euroscheine zu drucken kostet fast nichts, digitales Buchgeld zu schaffen genau nichts. Ergo sollte die Zentralbank genau so viel Geld bereitstellen, dass der Nominalzins auf null sinkt.

Aber was ist mit Inflation? Heizt eine Nullzinspolitik nicht die Preissteigerung an? Nein. Die Inflation wird, zumindest langfristig, vom Wachstum der Geldmenge bestimmt und nicht von ihrem Niveau. Eine Nullzinspolitik ist vereinbar mit einer wachsenden, fallenden oder gleichbleibenden Geldmenge und daher mit Inflation, Deflation oder perfekter Preisstabilität. (Friedmans ursprüngliche Analyse verlangt im Optimum eine leichte Deflation.)

Und die Banken? Werden die durch die Nullzinspolitik nicht zu immer riskanteren Investitionen gedrängt? Wieder daneben. Ich bin eine Bank. Investition A garantiert eine Rendite von 4% jährlich. Investition B bringt 10% oder 0% mit gleichen Wahrscheinlichkeiten. Wenn ich, solange der Leitzins bei 1% lag, Investition A gegenüber Investition B bevorzugt habe, warum sollte ich meine Präferenz ändern wenn der Leitzinssatz auf 0% sinkt?

Damit hier kein falscher Eindruck entsteht sollte ich vielleicht darauf hinweisen, dass Friedmans Regel eher wenig mit der jüngsten Zinsentscheidung der EZB zu tun hat. Mario Draghi weiß bestimmt, dass diese Regel, obwohl hilfreich als eine erste Annäherung an gute Geldpolitik, in unserer komplexen Realität nicht ganz optimal ist.

Wenn er an eine Regel denkt, dann wohl eher an die Taylor-Regel, die grob besagt, dass der Nominalzinssatz sich an der Inflation und der „Outputlücke“ (Differenz zwischen tatsächlichem BIP und seinem „natürlichen“, d.h. idealen Niveau) orientieren sollte. Gemäß der Taylor-Regel sollte der Leitzinssatz schon seit geraumer Zeit nicht null, sondern negativ sein. Weil aber der Nominalzins nicht negativ sein kann (der Beweis dieser Aussage ist dem geneigten Leser überlassen!), ist null die nächstbeste Alternative.

Wie dem auch sei, die EZB-Politik der Nullzinsen steht durchaus im Einklang mit der ökonomischen Lehrmeinung. Das heißt selbstverständlich nicht automatisch, dass sie auch richtig ist. Aber die Hysterie, mit der sie in deutschen Medien diskutiert wird, basiert weitgehend auf ökonomischem Analphabetismus.

(Die andere geldpolitische Entscheidung der EZB, den Aufkauf von Staatsanleihen auszuweiten, steht auf wesentlich dünnerem Eis – aber davon ein andermal.)

Advertisements

Further thoughts on the fiscal implications of OMT

Florian and I are having a good discussion on the fiscal implications of the ECB’s OMT program. I don’t have much time right now, but I want to make two points in response to his latest post. 

First, Flo’s latest post taught me something I didn’t know: The ECB’s use of the term “sterilization” is somewhat different from the textbook use. A sterilized intervention is usually defined as an action by the central bank that leaves the monetary base unaffected. What the ECB did in its SMP program (and, as best we can guess, that’s what it will do in the OMT program) was buying government bonds with newly created base-money and simultaneously taking short-term deposits from commercial banks in the same amount. So, figuratively speaking, the ECB prints a new euro, uses it to buy government bonds from the banks, and offers the banks the opportunity to deposit the newly created euro with the ECB at interest. Clearly, this intervention increases the monetary base, although the money in circulation stays unaffected.

Fair enough. So what does this mean for our discussion on the fiscal implications of the OMT program? Nothing.

What matters for our discussion is the effect of the OMTs on the ECB’s net profit: roughly speaking interest earnings on assets minus interest payments on deposits. Under conventional sterilization the ECB would reduce its holdings of interest bearing assets and hence reduce its interest earnings. Under the ECB’s sterilization technique, new liabilities are incurred which increases the ECB’s interest payments. As long as the ECB’s lending interest rate is not substantially different from the deposit interest rate (both are essentially zero at the moment), the effect of net profit is the same in both cases.

So the particular way how OMT bond purchases are going to be neutralized seems to me quite irrelevant to our discussion.

The relevant question is this: Will the bonds the ECB is likely to purchase under the OMT program be bought for more or less than they are really worth. If the price the ECB pays is too high there will losses to the ECB and therefore, eventually, to all Eurozone governments except those whose bonds were being bought. If the price is too low there will be gains to the EZ governments. It is, of course, possible that the ECB knows exactly the true default probability of periphery governments and therefore the true value of their bonds.

However, I think the most important thing to notice is this: the purpose of the OMT is to signal to the market the ability and willingness to lend without limit to EZ governments. If the public believes that promise, the ECB will never have to make any actual bond purchases at all. The only circumstance in which the ECB would have to buy periphery bonds is when investors are so convinced that those bonds are going to default that no promise of Mr Draghi can calm them. In such a situation I find it highly likely that the ECB will incur losses on its bond purchases.

The ECB’s Sterilization Policy And Its Fiscal Effects

First of all, it’s obvious that I have horribly failed at something I always try to do when writing a new post: coming up with a title that hopefully makes people actually want to read it. Yet I still feel this is important, and I’m thankful to Max for insisting on continuing the discussion. In the comments section of my last post, originally meant more as a general monetary policy post, a vivid discussion has emerged on what the ECBs Outright Monetary Transactions Policy (OMT) entails and particularly in what way it would potentially lead to fiscal transfers between Eurozone members, potentially making it illegal under EU treaties. While writing my latest comment, I noticed it was getting way too long, so let me offer a response as a new post.

The way I see it, the main disagreement between Max and me involves the direction any possible fiscal transfers would go if the ECB would, some day, actually buy bonds under the OMT program. We don’t seem to disagree on the fact that any purchases of government bonds by the ECB would potentially prove legally problematic, but rather on what these purchases would entail economically with regards to possible fiscal transfers within the Union. Max argues that, through sterilization, i.e. the ECBs attempts to remove an equal amount of money from the market as it is injecting by buying government bonds of troubles periphery countries, it is substituting low-risk assets on its balance sheet for high-risk assets, making its entire balance sheet more risky and thus representing a real cost to the core, which gets their share of any interest payments accrued from these assets (and thus potentially stands to loose these due to their increased riskiness). However, it would seem that this is based on an inaccurate description of how the ECB conducts (and would conduct) said sterilization. That no OMT purchases have ever actually taken place does not really make the issue harder – for all intents and purposes, OMT is just a replacement for the Securities Markets Program (SMP) instituted by the ECB in 2010 and under which it has already bought around €200 billion worth of bonds of periphery countries (mostly Italy), most of which it still holds on its books. Although there might be some technical differences, conceptually it would seem to me that the main feature of the “change” is that OMT made this program open-ended (thus also reducing the actual need to buy the bonds in the first place). So we know pretty well how OMT as well as sterilization measures would work – so how would they?

Continue reading

The ECB Isn’t Allowed To Directly Finance EU Governments – Who Said It Needs To?

A large part of the debate on whether or not the ECB can do quantitative easing revolves around the issue that the ECB statutes prohibit the central bank from “financing” any of the member governments directly (or, depending on what German courts say, indirectly as well). To a certain extent this policy makes sense – it avoids a lot of explicit moral hazard and essentially prevents the EU from ever getting stuck in a hyperinflationary situation where governments issue bonds to raise their spending and the central banks just acquiesces and goes on buying these bonds. Also, the Bundesbank has a price stability fetish because of something that happened over 80 years ago but for some reason they can’t seem to learn the correct lessons from. Somewhere else on this blog I have also argued that introducing Eurobonds would provide an instrument for the ECB to actually engage in straight-forward QE, even though just buying a reasonably weighted basket of national bonds would do the same trick (however, with potentially different fiscal implications). But why should buying government bonds be one of the go-to policy to try and gain traction in a liquidity trap in the first place?

Continue reading

Goodhart’s Law – in Good Times and in Bad

A large part of the success of central banks all around the world during what became known as the Great Moderation is often attributed to the successful anchoring of inflation expectations to the levels that central banks would like to see – generally defined as 2% in most of the industrialized world. In basic theory this is awesome: if the inflation rate, through some kind of phillips curve or any other structural relationship you prefer, is linked to the aggregate level of economic activity in a stable way, than a stable inflation rate also leads to a stable level of economic activity.

In comes Charles Goodhart, former member of the Bank of England’s Monetary Policy Committee, who stated something as profound as at the same time similar to the famous Lucas Critique: Goodhart’s Law. In it’s most common version it says that “when a measure becomes a target, it ceases to be a good measure”. In other words, once a central bank (or in theory indeed any institution with enough clout to consistently affect the economy) states that it will do whatever it needs to in order to keep a given indicator at a level it so desires, the market structure will be affected by this, expectations of market agents will adapt, and the target will be achieved, even if the central bank does not really even do much – it just has to credibly promise that it would.

First of all, and on a very deep level, this of course could be seen as qualifying the very success of central banks in “anchoring” inflation rates. Has inflation in the past two decades been so tame because central banks have become better, or simply because they somehow managed to credibly make everyone believe that they have become better? In the end, the answer doesn’t matter much – it is outcomes that we want, who cares about how we get there. However, while the upside to this stable inflation anchoring in good times is enormous, it seems to have come back to haunt us at a time when we most need our monetary authorities to act. Even though inflation both in the US as well as in the Eurozone is considerably below target, inflation expectations are awkwardly close to those targets over the near-term (e.g. here for the Eurozone). Given most central banks nowadays target the forecast, they might interpret this as signalling that there is no real big need to act, and thus not act in the first place. I personally find this to be one of the most compelling explanations as to why the ECB continues to fail to do its job. As Draghi stated, “inflation expectations are firmly anchored in line with price stability“. Exactly. That’s the problem.

The Fed is in a somewhat better position since it does not only target inflation but also full employment – even if inflation sticks to 2%, as long as unemployment is above target it will (or should) ease monetary policy. The ECB, on the other hand, focuses essentially solely on inflation, and at the moment there are great doubts as to whether inflation (particularly inflation expectations) are of any use at all as a signal for what it should be doing. This monthly bulletin by the ECB (dating back to 2011, .pdf), for example, states that “well anchored expectations have contributed to enhancing the effectiveness of monetary policy and will assist the ongoing economic recovery”. Sure, stable inflation expectations also prevent us from falling into outright deflation in a scneario were we assume the central bank to be asleep. Further, as Clarida states (.pdf), “inflation inertia is the enemy of reflation once deflation set in”. However, I would state that somewhat differently: inflation inertia (in the context of this post in terms of expectations) is the enemy of reflation – period. At the moment it mostly provides a convenient excuse for central banks to do less than they should. Currently, it would seem that those well-anchored inflation expectations are part of what’s preventing effective monetary policy in the first place.

The ECB and its Options at the Zero Lower Bound

Following up on my last post on what easy money actually means I would like to offer some options the ECB could, and in my opinion should, pursue to achieve its mandate of getting inflation back in the vicinity of 2%. Whether doing that is enough is another topic, but it would at least be a start. In general, the consensus is that central banks have three types of tools at their disposal once the zero lower bound is reached: first, they can try to shape public expectations about future monetary policy (e.g. forward guidance), second they can expand the size of central banks balance sheets (e.g. quantitative easing) and third they can change the composition of those balance sheets (e.g. operation twist).

All of these measures have, in the vast majority of studies, shown to be able to affect the economy. The view that economic policy is ineffective at influencing the economy at the ZLB is therefore not correct – it might be less effective, and most importantly probably shows decreasing returns, but it does not become impossible. As Bernanke et al. for instance have argued, we should try to avoid such a situation in the first place, but once there we do have options. So let me offer some more concrete ideas on what the ECB might do in particular.

Continue reading

What Does “Easy Money” Even Mean?

Gerald brought up a really good question in my last post on ECB monetary policy stance since the crisis. I’m afraid Buttonwood got a bit trampled there, which in retrospect seems somewhat one-sided, since a big deal of his post is actually very good. Anyways, to the question:

What do you think a really easy monetary policy by the ECB would look like? Is it mostly about increasing the inflation target? Or would your rather have the central bank buy the debt of troubled economies like Greece?

At first I wanted to rush straight into it, but then I noticed that is pointless without clearing up what my definition of “easy money” is in the first place. I’ve spent quite a bit of time in this blog arguing that monetary policy all around the world, but particularly in the eurozone, is much too tight no matter which way you look at it. Let’s see what the ECB announcement brings today. A big issue i have with a lot of the current discussion, particularly in the Media, is that the currently historically low nominal interest rates are assumed to, by themselves, prove that money is “easy”, which is just wrong. So let me try and clarify some of the issues involved from my perspective.

Continue reading