Who Is Responsible For Global Inflation?

The world is getting into an uncontrollable situation. inflation In the shadow, this is very like 1970s: the US dollar depreciates continuously, the price of gold and oil keeps rising and soaring all the way; trade protectionism is rampant and international. Economics The conflict intensifies; the global economic system presents a pluralistic structure; the existing governance mechanisms are not effective; the traditional economic ideology is facing challenges, and the world is facing new conceptual revolution.

All this made 2008. Finance The crisis has become the most important watershed of international economic relations since 70s. In order to deal with the crisis in the "core zone" of the global market, as the issuer of the world's main reserve currency, the Federal Reserve has been forced to stimulate economic growth through two rounds of quantitative easing monetary policy. Other countries, too, are unwilling to lag behind. They are willing to release large amounts of liquidity to the market in order to give the world economy a strong shot. The most prominent one is China, which plans to make 4 trillion investment plans in the short term.

As a result, the largest global inflation since the collapse of the Bretton Woods system took place in 2010. As the most sensitive barometer of price signals, the price of gold is like a kite with a broken line. It is soaring and banknotes are flooded and abandoned. All this is a wonderful banner in response to the financial crisis and international coordinated action under the G20 framework.

The question of whether there is a real positive correlation between inflation and employment still needs further verification. But at least historical experience has proved more than once that inflation is the number one killer of social stability. Every application will bring more lasting harm to the body of society, so that people will have to spend an extra expensive price on the market to disrupt the disorder of market order and the destruction of social structure. The most profound lesson in history is that the German government of Weimar is unable to control the inflation caused by the great depression and plunged the whole world into World War II. And the number of governments that collapsed due to hyperinflation is countless. Therefore, serious scholars believe that inflation can not be released from the tiger at any time, even if it can bring short-term excitement. But the memory of history can easily be forgotten. Politicians will always put up inflation weapons at the critical moment to tide over the difficulties before them, leaving behind a mess for the latecomers.

Today, in the face of the enormous social pressure brought by inflation, governments all over the world do not try to step on the throttle of currency issuance, but blame each other and blame each other. They believe that the monetary policy of other countries has pushed up international prices, and eventually imported inflation into their country. No one is willing to admit that they have inflated inflation. Only the European Central Bank, which inherited the Deutsche Bank's anti inflation tradition, took the lead in raising interest rates and recovering currency. In the wake of global inflation, the European Central Bank has shown a remarkable sense of responsibility and professionalism.

In this crisis, the United States, the world's number one currency power, has been trying to grasp monetary policy accurately, so as to shift the crisis as far as possible and achieve global wealth transfer. On the other hand, it will not destroy the credibility of the US dollar and threaten its international monetary hegemony. Through the two years' performance of the two countries, the Fed can not say that it has done everything right, but it is generally successful. The biggest loss is China, the largest foreign exchange surplus country in the world that relies on the US dollar for a long time.

But even so, in the past two years, the negative effects of the zero interest rate and quantitative easing policy implemented by the Federal Reserve have been gradually showing up, and have begun to "hit their feet". Apart from being accused by international accusations and harming the "soft power" that the United States is proud of, the most direct manifestation is the significant depreciation of the US dollar, the real purchasing power in the international market has been engulfed seriously, and the general expectation that the US dollar continues to descend in the international community has been formed. At the same time, the US government's multiple rounds of fiscal stimulus also led to a rapid rise in fiscal deficits and government debt, triggering a market's concern about the credit risk of US Treasuries. Recently, standard & Poor's lowered its US Treasury debt rating to "negative" for the first time. It is precisely because of the growing concern about the future value of US dollar assets that an international campaign to dump US dollar assets is quietly proceeding, including the Chinese government.

At the juncture of a major crisis in the US dollar, the Federal Reserve held its first press conference since its establishment in late April, reflecting its superb skills in playing monetary policy. This is an extraordinary press conference. As an independent body, the Federal Reserve has been marking its professionalism of monetary policy for 97 years. It does not need to obey the president or report to Congress, so there is no need to make any policy explanation to the public. However, if the Federal Reserve does not publicly clarify the direction of its monetary policy, the international position of the US dollar will suffer a historical slide.

At the news conference, Federal Reserve Chairman Bernanke announced that he would continue to implement the second round of quantitative easing monetary policy until the end of June this year. At the same time, he emphasized once again that the strong dollar is in line with the interests of the United States and the world economy. This is tantamount to making it known to the world that quantitative easing monetary policy is likely to change after the end of June this year, and the Fed will gradually tighten its currency to rebuild the credibility of the US dollar. As a signal for the world economy, the Fed has sent a positive signal, but whether it can turn into people's confidence in curbing world inflation needs further observation.