Zhang Wuchang: Currency Regulation Is Not A Joke.

The development of economics in twentieth Century involved so many able people, so many statistical analysis, so many important documents, and so many controversies, that the theory is more powerful than any other monetary theory. monetary policy 。 Keynes, Fei Xue, Freedman and others can not be exaggerated, but Hicks, Mundell, lex, Bruner, Meltzer, Tobin and others have made great contributions to monetary knowledge. Other members of the division are difficult to count. However, the controversy between monetary theory and policy remains to this day. The dust is uncertain. 。

Earth three years ago financial crisis Incident, the United States Federal Reserve The reaction is fast. Until now, the monetary policy of heavy handed drugs is still fruitless. The Keynes school's spending policy was defeated first, and monetary control was used up. If my classmates read again, "I think there is a difference between the three schools of financial rescue" published in January 6th of two, nine, I will know that I had already deduced the fruitless situation we saw today. I use my own price theory.

No matter what others say, I think the two greatest economists in twentieth Century are Fisher and Freedman. The two are all good at monetary theory and related empirical research. I admire them very much. However, Fisher's 1929 inference of the US economy was very wrong. In 1982, he had made a big mistake in the inference of US inflation, followed by big or small errors until he died two six. Lack of success or failure is based on heroes, and monetary policy regulates the economy. inflation It's hard to get into the blue sky!

The core of monetary theory is currency theory. In principle, the theory of currency volume is the truth. Since the beginning of Smith, in twentieth Century, Fisher and Freedman reinterpreted and worked hard for a long period of time. However, the transformation of the world's limits is often unexpected. The development of telecommunications has made it difficult to calculate the amount of money. The disturbance of war has changed the strength of different currencies. The impermanence of policies has made the investment or consumption unpredictable. A limited change will affect behavior. As we all know, there is no doubt that the error in currency theory inference is not due to the error of theory itself, but the neglect of the theory or the contempt of other limitations in proportion. Yes, I think Freedman paid too much attention to the change of money and ignored other limitations.

The analysis of limited transformation is the theory of choice. category That is the price theory. In the early 80s of the last century, the inference of the macro phenomenon must start with a limited change. That is to say, the theory of price must be the first step. I totally don't need Keynes school theory. My friends say that my inference is wrong, but the accuracy is different. I am interested in curiosity, and sometimes I have to deduce my theories for a little bit of concern. All of them are written down, and readers can calculate whether their friends are so powerful.

I want to demonstrate the complexity and difficulty of monetary policy regulating the economy by some recent monetary issues raised by my classmates. Students may feel that the sky is spinning. What an article can demonstrate is just a small corner of the iceberg.

Not long ago, a classmate said he read the words of the central bank. Negative interest rate Therefore, it is extremely difficult to regulate inflation. I don't know why, but why does China have negative interest rates? The so-called negative interest rate means that inflation rate is higher than interest rate. Is it? Not right. To be right, negative interest rate means anticipated rate of inflation is higher than market interest rate. Fisher's purchasing power of money published in 1911 provides a penetrating analysis. The expected inflation rate can not be seen in the real world, and experts can only measure the yield of bonds in different years of the market. Today, the yield of China's bonds is lower than the market interest rate, implying that negative interest rates do not exist. Although the yield of long-term bonds is higher than that of short-term ones, it is not easy to measure the supply of long-term demand in short supply. Having said this, my feeling is that China's inflationary expectation is relatively serious at present, but negative interest rates do not exist. I also think that this expectation is beginning to ease.

I am disappointed that China's bond market is neither fish nor fowl. The good development of the bond market can provide important information about inflation expectations. The market needs to have enough debt maturities with different maturities. The long-term and short-term share should be roughly balanced, and the auctions should be auctioned off while the price of the free market is to be purchased. Only in this way can we measure the inflation expectation of the market in the change of the price of government bonds in different maturities (or changes in yield). On the other hand, a developed bond market can help people plan their retirement plans.

In February 14, 1985, I published a "no siblings society" against the one-child policy. One of the key points pointed out in this article is that this policy will keep the old people unattached, or lack the care of the younger generation. It was unfortunate to see me today. Beijing should launch a reliable bond market as early as possible, encourage retail sales, and make a bet of three hundred yuan. Do not focus on the interests of the boss of a big organization that is not worried about rice at all. {page_break}

Several students raised another complex problem. These are some remarks that allow the appreciation of the renminbi to help reduce inflation. I remember Mundell said there was deflation in the promotion of RMB. What he means may not be what China is facing today, but it may also reflect the separation between Mongolian and his old views. Tell me what I think.

I believe that the appreciation of the renminbi will enhance China's inflation expectations and increase inflation pressure. It's not a shallow truth. The points will be clearer and the students should be careful.

(1) a strong currency is not easy to have big inflation, but a weak currency is easy to get. In the eight and 90s of last century, the amount of money in the United States rose sharply in the two periods, but the inflation rate was not high, which made Freedman lose his glasses. Alan and Meltzer, my elder brother and I, discussed this phenomenon and concluded that the US dollar was strong internationally during the two periods. Strong currency encourages people to maintain their value, especially in the international arena. This increases the binding force on inflation.

(two) what is meant by strong currency? From the comparison of international exchange rates, the low exchange rate of a currency is strong, but high is weak. Over the past few years, the renminbi has been relatively low against the US dollar or the Hong Kong dollar, which can be seen as a strong currency. In the four and 50s of last century, the dollar was very strong in the world, and its exchange rate was obviously low.

(three) the key point of inflation or deflation is the word "rate", that is to say, there is an inflation or deflation rate in each period of time. Once a price rises or falls, then it will remain unchanged. It is not inflation or deflation. Inflation is a disaster because there is a rate that makes the inflation expectations intractable, so that the public can take precautions against it and take precautions against it, resulting in waste of resources.

(four) if the central bank raised the RMB against the US dollar to three against the dollar tomorrow, the price of the mainland would immediately drop sharply, but Freedman would say that the price decline was not deflation, because there was no sustained rate of decline. On the other hand, the rise of RMB to three to one dollar will immediately become a weak currency. People will turn to foreign currencies or rush to buy goods. Inflation expectations follow, and inflation of falling prices is inevitable.

Of course, the "three plus one" is a hyperbole hypothesis, but I have spent decades in reasoning with exaggerated ideas. In the last article, I put forward two reasons why inflation is stubborn in the mainland today. In recent years, friends in Beijing always say that the renminbi will appreciate gradually. This not only led to speculators, but also said that the Renminbi should be gradually weakened and weakened. How can inflation expectations in the mainland not increase their stubbornness? Of course, the meaning of Beijing friends is not to change the renminbi into a weak currency, but to reduce the intensity is said many times, and it will have the same effect of increasing the inflation expectation.

(five) this brings a big trouble in reasoning. Exchange rate is a price. How can it be high or low in the market? Hawkers sell peanuts on the street, and their prices will never be high or low. Turn to money. If I use the gold standard, you use silver standard, the price of gold and silver is determined by the market. The exchange rate between you and my money will change because of the price of gold or silver. There is no such thing as high or low. I use the gold standard, your currency has no anchor, and in many cases the exchange rate is high or low. The monetary policy of different countries is different. Fiscal policy is different. In the absence of anchor money system, the determination of exchange rate is free floating, and it is not easy to adjust to the situation of never being high or low. Besides, China still has foreign exchange control today. My currency hooks you, but you and my production growth rate are different, the exchange rate can last high or low.

I think the RMB exchange rate has been on the low side for a long time. This is the volume of foreign capital imports that exceed market expectations. There have been several short periods in the past more than 10 years, but foreign capital imports have weakened, but they soon rose again. Foreign investment has been going on for roughly more than 10 years, with signs that the market is not always expected. In the past ten years, the rise in property prices in the mainland is far higher than interest rates.

Of course, Freedman will say that letting the RMB exchange rate float freely will significantly reduce the situation of high or low. Of course, yes, but I object to China's adoption of the western system of no anchor currency. In the Greenspan era, it is advisable to keep the renminbi tightly linked to the US dollar, but what is the right thing to do today? I have repeatedly suggested that the Renminbi should be turned into a kind of anchor. This proposal is really anchored to the sea. (laughter)! If the renminbi adopts the Western non anchored currency system, I am sure that all the liberalization of the exchange rate will be thrown into a corner. The land of China has its own uniqueness: our great motherland is in the dark today. Without anchor floating, the speculators in the field will be busy.