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News>Steven Cheung: currency regulation and control of non-trifling
Steven Cheung: currency regulation and control of non-trifling

Brief:The economics of the twentieth century involved the development of so many capable people to participate, so much statistical analysis, so many important documents, and so much controversy, was more influential on, there is no subject matter comparable to monetary theory and monetary policy. Keynes, Fisher, Friedman, who's talent can not be exaggerated, and Hicks, Robert Mundell, Lao Kasi, Bruner, Meltzer, Tobin and others in monetary contributions Zhuoranyoucheng on learning . Other people involved in the division level are hard to calculate flexor. However, monetary theory and policy debate today, or dust uncertain.

economics of the twentieth century involved the development of so many capable people to participate, so many of the statistical analysis, so many important documents, and so much controversy on more than just potential large, there is no subject matter comparable to monetary theory and monetary policy. Keynes, Fisher, Friedman, who's talent can not be exaggerated, and Hicks, Robert Mundell, Lao Kasi, Bruner, Meltzer, Tobin and others in monetary contributions Zhuoranyoucheng on learning . Other people involved in the division level are hard to calculate flexor. However, monetary theory and policy debate today, or dust uncertain.

global financial crisis three years ago the incident, the U.S. Federal Reserve react quickly, and today, big hands a heavy dose of monetary policy or do not see any results. Keynesian spending policy first defeated, currency regulation and control be used to make. If students read my second ○ ○ 九year 一月 on 6 of the "disaster of a financial rescue of the other three factions," will know what I had already concluded today we see the outcome of the free. I own price theory.

no matter what others say, I consider the greatest of the twentieth century, two economists are Fisher and Friedman, Both are experts in monetary theory and the empirical research. Of adequacy, I sincerely admire their work. However, the fee's 1929 inference wrong for the U.S. economy, Vladimir old and one on the U.S. inflation since 1982 there has been a big mistake inference, followed by large or small mistakes continue to die the second he ○ ○ six years. The success of Heroes, not to the economy and monetary policy, inflation control difficult, extremely difficult!

currency monetary theory is the core of the amount of theory. The amount of currency in principle, the theory is the truth, starting from Smith before the twentieth century Fisher and Friedman re-interpretation, gods, there is a long extrapolation of the inflation promising. However, unpredictable changes in the world limitations. Telecom developed so that the amount of money what should be considered in trouble, troubled by the war the strength of different currencies has changed, the impermanence of the investment policy or consumer desire elusive. Limited changes will affect the behavior we all know, there is no doubt that the amount of money on the theory of errors in the inferred because the theory itself is not wrong, but the use of the theory of the proportion of people ignored or underestimated the other limitations on the changes. Yes, I think that too much emphasis on money supply Friedman year changes in the neglect of other limitations.

change analysis is limited to the scope of choice theory, that is a matter of price theory. Since the early eighties of last century, the "macro" phenomenon inference I will start from the limitations of change, in other words, the price will advance the theory, have probably concluded before the introduction of monetary theory as a supplement. Keynesian theory, I totally do not. Friends say I infer that although there are wrong, but the exact extent of dreams. I have a hobby, to satisfy curiosity, and sometimes a little concerned but also to make their own theories inferred hit rate, or high or low seldom taken into account. Are written down, the reader can calculate what friends say is not so powerful.

I want the students to some of the recent currency issues on monetary policy in order to demonstrate the complexity and difficulties of the economy, students may feel dizzy, and a article to demonstrate just the tip of a small corner.

Not long ago a student said he read the central bank's statement, referring to the current China has negative interest rates, control inflation, it is particularly difficult, and asked why not. I said do not know why, but how can the negative interest of China? The so-called negative interest rates, inflation is higher than interest rates. Is not it? Is not correct. Correct view, negative interest rate is the expected rate of inflation (anticipated rate of inflation) is higher than market interest rates, Fisher published in 1911, "the purchasing power of money," provides an incisive analysis. The expected inflation rate in the real world can not see, the experts can only different from the market-year bond yields to measure. Look at China today, the bonds, the yields were all below the market rate, meaning a negative interest rate does not exist. Although more long-term bond yield is higher than the relatively short-term, but longer-term demand is not easy to measure. Having said that, my feeling is that China's current inflation expectations (inflationary expectation) is more serious, but there is no negative interest rates. I think this is expected to be a gentle start.

China's bond market nondescript disappoint me. Bond market development may well provide important information on inflation expectations. This market needs a sufficient amount of bonds of various maturities, less important than short-term balance, put out to public auction, when, and to follow to make any person who is willing to bid prices to the free market by how many there are that many options. So that we can in the government bonds of different maturities price changes (or changes in yield) measure of market inflation expectations. On the other hand, a developed bond market can help pass the national planning their retirement plans.

February 14, 1985 I issued a "do not have brothers and sisters society", against a one-child policy. The article points out a key, will stick to this policy is unaccompanied elderly, or the lack of a younger generation care homes everywhere tumble. Today I was unfortunate to see the words. Beijing to launch as soon as possible a reliable bond market, to encourage retail, so that three hundred dollars you can bet, do not worry about focusing on the fundamental institutions of the big boss of rice of interest.

several students made another far more complex issue. These are words that let the yuan's exchange rate appreciation can help less inflation. I remember Mondale said, would improve the yuan deflation. He may not mean the situation faced by China today, may also reflect the opinion of Mongolia and the former brother Vladimir old's view with separation. Talk about what I see.

my opinion, the appreciation of the RMB in the international community will enhance China's inflation expectations, thus increasing inflationary pressure. Not a shallow reason, points that would be more clear, the students have to read careful.

(a) a strong currency is not likely to have a large inflation, a weak currency is likely to have. The eighties and nineties, there were two times increase in the amount of money the United States badly, but the inflation rate is not high, so that Friedman or the glasses. Vladimir old and me and my brother Alan Meltzer discussion for this phenomenon too, to the conclusion that these two periods, a strong dollar in the international arena. Currency hedge to encourage people to hold strong, especially up to the international release. This increased binding of inflation.

(b) What is the weak strong currency What currency? Comparison of international exchange rates, a strong currency exchange rate is low, the high is weak. In recent years the yuan against the U.S. dollar or Hong Kong dollars be low, compared to a strong currency can see. The last century, the forties and fifties big strong dollar in international exceptionally strong, the exchange rate is obviously on the low side.

(c) the inflation or deflation point is that the "rate", which means that each time on a rate of inflation or deflation. Large one-off price rise or drop, after the change, there is no "rate" is not really an inflation or deflation. Inflation plague because there is a rate, contributed to the persistence of inflation expectations, so that people plan ahead, to take preventive, use of resources waste.

(d) If the yuan against the U.S. tomorrow, the central bank suddenly raised to three against one, of course, immediately mainland prices declined sharply, Friedman would say that this decline in value is not deflation, because this or is not a sustainable rate. On the other hand, improve the RMB to the U.S. dollar to three will immediately become weak currency, people will switch to hold foreign currencies, or buying goods, inflation is expected to appear along with a decrease of the soaring price inflation is inevitable.

the "three against one," of course, is an exaggerated assumption, but an exaggerated idea of reasoning is the key to using a few decades, easy to use, push prospective the students to learn and when learning. In the last article I propose two reasons for the persistence of inflation in the Mainland today, where the extra one. In recent years Beijing friend saying that the yuan to gradually appreciate. This has led speculators are jubilant, also say the yuan to gradually reduce the strong to weak. In this way, the mainland's inflation expectations can not help but increase their stubborn as well? Beijing friends mean of course not saying we should change the yuan weak currency, but less strong is that many times, in the extent of the increase in inflation expectations will have the same effect.

(e) This reasoning brings a big trouble. Exchange rate is a price in the market, how can high or low? Hawkers selling peanuts on the street, its price is never high or low. Go to money, if I use the gold standard, silver standard you use, gold and silver price chosen by the market, you and I because of the currency exchange gold or silver price change for the sake of change, there is no such thing as high or low . I used the gold standard, you do not anchor currency, in many cases may be high or low rates. Different in different countries, monetary policy, fiscal policy is different in the absence of an anchor currency system, the exchange rate determination is not easy to adjust to the free float does not appear high or low always the case, not to mention China and today there are exchange controls. I hook with your money, but you and I produce different rates, exchange rates can be sustained high or low.

I consider these years the yuan's exchange rate persistently low - to note here is "persistent" - another reason. This is a foreign import lasting more than market expectations. There are paragraphs short period of ten years of foreign imports is reduced, but before long they soared. The influx of foreign investment generally lasted more than a decade, signs that the market is often not expected. Decades, the mainland is much higher than the interest rate increase in property prices is evidence.

course, Friedman would say, let the yuan float freely will greatly reduce the high or low situation. Of course, but I am opposed to China's adoption of the non-anchor of Western monetary system, that the yuan stable anchor first before the next float. Greenspan period RMB USD tight hook is desirable, but today what fishes to hook it? I repeatedly suggested that the renminbi would turn a kind of anchor hook, this proposal is true, as the sea anchor Shen (smile)! If the renminbi non-anchor currency using the Western system, I am sure that all the open portal will exchange Inside Scoop fried upside down. Vast land does have its unique: our great motherland is not in today's Inside! No anchor floating, speculators will be busy elsewhere also.

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