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2009-04-23 20:14:50|  分类: 默认分类 |  标签: |举报 |字号 订阅

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Saturday, April 18, 2009

Going Negative

Click here to read my column in tomorrow's NY Times



It May Be Time for the Fed to Go Negative

WITHunemployment rising and the financial system in shambles, it’s hard notto feel negative about the economy right now. The answer to ourproblems, however, could well be more negativity. But I’m not talkingabout attitude. I‘m talking about numbers.


Let’s start with the basics: What is the best way for an economy to escape a recession?


Untilrecently, most economists relied on monetary policy. Recessions resultfrom an insufficient demand for goods and services — and so, thethinking goes, our central bank can remedy this deficiency by cuttinginterest rates. Lower interest rates encourage households andbusinesses to borrow and spend. More spending means more demand forgoods and services, which leads to greater employment for workers tomeet that demand.


The problem today, it seems, is that the Federal Reservehas done just about as much interest rate cutting as it can. Its targetfor the federal funds rate is about zero, so it has turned to othertools, such as buying longer-term debt securities, to get the economygoing again. But the efficacy of those tools is uncertain, and thereare risks associated with them.


In many ways today, the Fed is in uncharted waters.


So why shouldn’t the Fed just keep cutting interest rates? Why not lower the target interest rate to, say, negative 3 percent?


Atthat interest rate, you could borrow and spend $100 and repay $97 nextyear. This opportunity would surely generate more borrowing andaggregate demand.


Theproblem with negative interest rates, however, is quickly apparent:nobody would lend on those terms. Rather than giving your money to aborrower who promises a negative return, it would be better to stickthe cash in your mattress. Because holding money promises a return ofexactly zero, lenders cannot offer less.


Unless, that is, we figure out a way to make holding money less attractive.


Atone of my recent Harvard seminars, a graduate student proposed a cleverscheme to do exactly that. (I will let the student remain anonymous. Incase he ever wants to pursue a career as a central banker, having hisname associated with this idea probably won’t help.)


Imaginethat the Fed were to announce that, a year from today, it would pick adigit from zero to 9 out of a hat. All currency with a serial numberending in that digit would no longer be legal tender. Suddenly, theexpected return to holding currency would become negative 10 percent.


Thatmove would free the Fed to cut interest rates below zero. People wouldbe delighted to lend money at negative 3 percent, since losing 3percent is better than losing 10.


Ofcourse, some people might decide that at those rates, they would ratherspend the money — for example, by buying a new car. But becauseexpanding aggregate demand is precisely the goal of the interest ratecut, such an incentive isn’t a flaw — it’s a benefit.


Theidea of making money earn a negative return is not entirely new. In thelate 19th century, the German economist Silvio Gesell argued for a taxon holding money. He was concerned that during times of financialstress, people hoard money rather than lend it. John Maynard Keynesapprovingly cited the idea of a carrying tax on money. With banks nowholding substantial excess reserves, Gesell’s concern about cashhoarding suddenly seems very modern.

货币回报为负的思想,远不是什么新鲜事儿。在19世纪晚期,德国经济学家Silvio Gesell就提出,对持有的货币征税。他认为,在财政困难的时期,人们会储藏货币,而不是借出去。John Maynard Keynes 也赞成这个想法,他引用了这个观点,对货币征收持有税。目前,银行拥有大量的超额准备金,Gesell储藏现金的想法一下子变得异常时髦起来。

Ifall of this seems too outlandish, there is a more prosaic way ofobtaining negative interest rates: through inflation. Suppose that,looking ahead, the Fed commits itself to producing significantinflation. In this case, while nominal interest rates could remain atzero, real interest rates — interest rates measured in purchasing power— could become negative. If people were confident that they could repaytheir zero-interest loans in devalued dollars, they would havesignificant incentive to borrow and spend.


Havingthe central bank embrace inflation would shock economists and Fedwatchers who view price stability as the foremost goal of monetarypolicy. But there are worse things than inflation. And guess what? Wehave them today. A little more inflation might be preferable to risingunemployment or a series of fiscal measures that pile on debtbequeathed to future generations.


Ben S. Bernanke,the Fed chairman, is the perfect person to make this commitment tohigher inflation. Mr. Bernanke has long been an advocate of inflationtargeting. In the past, advocates of inflation targeting have stressedthe need to keep inflation from getting out of hand. But in the currentenvironment, the goal could be to produce enough inflation to ensurethat the real interest rate is sufficiently negative.

联储主席,Ben S. Bernanke,是承担这项任务的最佳人选。Bernanke先生赞成锁定通胀率的目标,有些时日了。过去,锁定通胀率的赞成者强调,不要让通胀率失去控制。但是,在目前的环境中,目的可能是有足够高的通胀率,以保证实际利率远低于零。

Theidea of negative interest rates may strike some people as absurd, theconcoction of some impractical theorist. Perhaps it is. But rememberthis: Early mathematicians thought that the idea of negative numberswas absurd. Today, these numbers are commonplace. Even children can betaught that some problems (such as 2x + 6 = 0) have no solution unlessyou are ready to invoke negative numbers.


Maybe some economic problems require the same trick.


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