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Stiglitz: so disturbs growth of world economy?
Material posted: Publication date: 24-02-2016
In 2015, seven years later the ambassador of the global financial crisis which burst in 2008, the world economy continued to teeter on the brink. The allocated appendices. According to the United Nations report "the World economic situation and prospects of 2016", average rates of growth of economy in developed countries after crisis have decreased more than on 54 %. About 44 million persons in these countries are the unemployed that approximately on 12 million more than in 2007; thus inflation has reached the lowest level since crisis.

That rates of economic growth in developed countries became more volatilnymi is even more disturbing. It is surprising, as, possessing the developed economy with completely open capital accounts, these countries should win from free movement of the capital and the international distribution of risks and by that to feel only insignificant macroeconomic volatility. Besides, social payments, including unemployment benefits, should help to households to stabilise a consumption level.

However, as Nobel prize winner Joseph Stiglits, the policy dominating in the postcrisis period writes in the article on Project Syndicate (fiscal compression and the measures of quantitative mitigation undertaken by the basic central banks) practically in any way has not helped to stimulate consumption by households, and also investments and economy growth. On the contrary, it has led only to situation deterioration.

"In the USA quantitative mitigation (QE) has not led to an expansion in consumption and investments partially that the lion's share of additional liquidity has returned back to central banks in the form of excessive reserves. The law of 2006 on mitigation of adjustment of financial services which has permitted FRS to pay percent on obligatory and excessive reserves, has actually undermined key sense of policy QE.

Moreover, when the financial sector has appeared on the verge of crash, the law on extreme economic stabilisation 2008 which have moved a date started of payments of percent on bank reserves for three years (for October, 1st, 2008 instead of 2011) has been passed. As a result excessive reserves of banks in FRS have sharply grown - from the average level $200 billion in 2000-2008 to $1,6 trln in 2009-2015 Monetary institutions have preferred to hold money in FRS, instead of to credit real economy, having earned without any risks within last five years almost $30 billion

It is possible to name it generous (and generally hidden) grant FRS to financial sector. And thanks to recent increase FRS of interest rates the size of this grant will grow this year on $13 billion

Incorrect stimulus are only one of the reasons of that numerous expected benefits from low interest rates and were not materialised. Thanking the politician of quantitative mitigation interest rates remained at the level close to zero, throughout almost seven years, and it should stimulate the governments of developed countries more to occupy for investments into an infrastructure, formations and social sector. Increase of social transfers during the postcrisis period could expand cumulative demand and soften changes in dynamics of consumption.

The United Nations report also makes it clear that also private investments into the countries of the developed world did not grow those rates which could be expected against ultralow interest rates. In 17 of 20 largest developed countries rates of growth of investments into the period after 2008 remained more low, than in pre-crisis years, and five countries have faced decrease in level of investments into 2010-2015

At the same time the quantity of the debt securities issued by not financial corporations which as it is supposed, should be engaged in capital investments worldwide has considerably grown. As one would expect, many not financial corporations have borrowed money, using benefits of low interest rates. However, instead of investing, they have spent the received money for the redemption of own shares or purchasing of other financial assets. Thereby the policy of quantitative mitigation promoted sharp growth of level zakreditovannosti, and also to increase in capitalisation of the market and profitableness of financial sector.

And again anything from this has not appeared it is useful for real economy. Clearly that restraint of interest rates at the level close to zero, unessentially leads to increase of level of crediting or investments. If liberty of choice is given banks, they choose bezriskovuju profit or even financial gamble, instead of crediting which could help the decision of an important task of economic growth.

Meanwhile, if the World bank or the International currency fund give cheap money to developing states, they name conditions that with this money it is possible to do. For achievement of desirable effect of the politician of quantitative mitigation it should be accompanied not only official measures on restoration oslabshih crediting channels (especially intended for small and average enterprises), but also determination of concrete target indicators of crediting for banks. Instead of actual stimulation of banks to credit it is less, FRS followed punish them for excessive reserves.

Ultralow interest rates have brought not enough advantage to developed countries, but they have cost much to developing states. (Though also expected) a consequence of monetary mitigation sharp growth of transboundary movement of capitals became inadvertent. General inflow of the capital to developing states has increased about approximately $20 billion in 2008 to more $600 billion in 2010

Those years many developing states hardly coped with sudden and scale inflow of the capital. Only small unit of these means went to long-term investment projects. Moreover, during the postcrisis period growth of investments in developing states was considerably slowed down. And this year developing states (in the sum), predictably, for the first time since 2006 will fix pure outflow of the capital which will reach $615 billion

Neither the monetary authorities, nor financial sector do not do that from them is expected. It seems that the liquidity sea in the disproportionate sizes has gone on creation of financial accumulatings and naduvanie bubbles in the markets of assets, instead of on strengthening of real economy. And though worldwide stock quotes have sharply fallen, the market capitalisation measured as a share of world gross national product, remains high. So, it is impossible to ignore threat of one more financial crisis.

There is other policy giving hope of restoration steady and inkljuzivnogo of economic growth. She begins with copying of rules of market economy to warrant on purpose bolshee equality and long-term thinking, and also from bridling of the financial markets by effective adjustment and corresponding structure of stimulus.

However the considerable increase of the state investments into an infrastructure, formation and technologies is so necessary. They should be financed (at least partially) at the expense of entering of ecological taxes, including carbon taxes, taxes to monopolies and other kinds of the rent become too extended in market economy and actively promoting hobby too extended in market economy of an inequality and slackening to growth of economy ".
Source: http://www.vestifinance.ru/articles/67290

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