The U.S. authorities are prisoners of their own theories

The U.S. authorities are in thrall to their theoriesIn the near future senior bureaucrats Fed act intensively in the press and at various conferences and forums. And, obviously, not all of these actions need to comment. However, some of these performances stand out from the crowd, and, of course, it makes sense to teach. Prerequisites such phenomenon is not very clear to me: or is it — the inner "Fronde" officials who do not agree with the general line of the Federal Reserve, or the agreed line, aimed at the gradual change in public opinion. Or maybe something else … In any case, the last such trivial speech said Tuesday the head of the Federal reserve Bank of Kansas City, Thomas Hoenig.

Formally, it was dedicated, of course, the dilemma arrangements Republicans and Democrats on the debt limit, and Hoenig said that the lack of agreement on its merits does increase uncertainty for businesses and hurting the South American nation. He noted that the uncertainty constraint on the ability of business owners to decide on the next steps of their own, and repeated past fear about the size of government debt.

Further, in general, he departed from classical rhetoric in the last days of his own manager Bernanke and criticized the government for the favorites is that they do not plan to reduce the debt load the U.S.. "We just give it all to fall down like an anchor falls to the bottom of the ocean" — figuratively Hoenig said. Note that even the above is enough to realize that he is a critic of Bernanke's policies aimed at stimulating the economy by the issue (and here I was with him almost all agree), but that no one has the illusion, he said, of his own claims directly.

The program purchases of government securities, Hoenig said, will ensure the growth of inflation in the long term. Previously, he warned of the growth potential of a "bubble" of agricultural prices, which this year have risen, but refrained from estimates of the "bubbles" in other sectors. "Zero interest rates make the conditions, and you are watching them," — he said. In the coming year or two, the U.S. economy will show very modest growth, continued Hoenig. The growth will be between 2.5 to 3% this year, and maybe in the future.

But then he said, very, very exciting thing. According to him, the main factor of economic growth is not growth in the labor market, and the creation of "the ability to create products and services that people will take here and around the world." He added that the monetary authorities can no longer rely on consumers in the hope that they will increase their costs. Note that in the current time U.S. consumer spending forms the order of 70% of GDP, exceeding the average historical levels of 66-67%, but it is not fundamentally as the possibility for consumers to waste money. Specifically for this reason Hoenig words are so important.

The fact that one of the economic theories, which, in general, now holds the majority of economists, is that virtually all of the product is consumed, which is made, and therefore provoke the need to create, and nothing more. Obviously, this is — very lightweight presentation, but the essence of it, though, goes reddish thread through all economic construction, made in the framework of this theory.

But our concept, which, in fact, a theory of crisis, says that now must be given to the value of demand. Since last 30 years he has intensively stimulated (first through a loan, but also used sparingly, and tax incentives not to mention the commercials), and now stood elephant in the room provoke it further. An ancient mechanism, the loan is no longer running, economical, even if I turn it on, what is called, in the fullest, can only partly make up for the loss of the credit and all other — propaganda that works exclusively in the criteria for the presence of the people means. And they are not.

At the theoretical level, it is particularly necessary now and open a discussion professionals and currency to U.S. authorities. But they are prisoners of their own theories and replaced in order to decide what to do with demand, trying to provoke the establishment. More precisely, the Obama administration is trying to provoke the growth of budget expenditures demand, but in-1's, it's — only half-measure, and in-2, as the right say, why is it increases costs, it can not, then here is faced with neuvvyazkami.

Fed Governor Bernanke believes that the case can assist issue, and there is a severe opponents (and Hoenig — among them), the more likely they are right. As a result, the situation has come to a standstill. Foremost, the essence of problems — what to do with demand — no discussions are, and countless discussions about everything else just pulled decision on further and further, with a constant deterioration of the economic situation.

In this sense, the performance Hoenig (albeit at a conference farmers) have an excellent break. It is the first time at the highest level so spoke about the importance of demand, while, in fact, came to the conclusion that it is unrealistic to increment. Recall that the logic of the Bernanke utility issue consists in the fact that it will inevitably increase the Tipo personal demand. This topic we have already discussed, so I will not repeat it, but the words Hoenig need something else to add. Namely that 70% of GDP — is the scale of the stimulated demand. And given the scale of the stimulus — about $ 3 trillion a year, it turns out that demand should fall somewhere in the 25% just because of this mechanism. As well as the income will fall on such a decrease in demand (and production cuts), the scale of the fall of the U.S. economy will be quite impressionable.

So here, without going into graphs and numbers: while in the U.S. there will be no policy which recognizes the scale of the fall of the economy, there are no positive changes will occur. Whatever or whoever or read.

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