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Este blog trata basicamente de ideias, se possível inteligentes, para pessoas inteligentes. Ele também se ocupa de ideias aplicadas à política, em especial à política econômica. Ele constitui uma tentativa de manter um pensamento crítico e independente sobre livros, sobre questões culturais em geral, focando numa discussão bem informada sobre temas de relações internacionais e de política externa do Brasil. Para meus livros e ensaios ver o website: www.pralmeida.org.
quarta-feira, 10 de fevereiro de 2016
Comparando duas crises: Barry Eichengreen sobre a Grande Depressao e a Grande Recessão - book Review
Published by EH.Net (February 2016)
Barry Eichengreen, Hall of Mirrors: The Great Depression, the Great Recession, and the Uses — and Misuses — of History. New York: Oxford University Press, 2015. vi + 512 pp. $30 (hardcover), ISBN: 978-0-19-939200-1.
Reviewed for EH.Net by Hugh Rockoff, Department of Economics, Rutgers University.
Barry Eichengreen knows as much or more about the financial history of the Great Depression as any living economic historian, and it shows in this splendid new book which compares the Great Recession with the Great Depression. The U.S. story, on which I will focus here, is the centerpiece, but as might be expected from Eichengreen, what happened in the rest of the world is also explored in detail. Eichengreen’s thesis is straightforward. In 2008 the United States, and with it the rest of the world, was headed for another Great Depression. Thanks to strong doses of monetary and fiscal stimulus, and lender-of-last-resort operations, especially in the United States, a second Great Depression was averted. Ideas were important: Much of the success can be attributed to John Maynard Keynes, Milton Friedman, and Anna Schwartz, and the lessons they drew from the Great Depression. But there was a downside to success. Because of the severity of the crisis in the 1930s the financial system underwent a massive reform that put it in a tough but effective straightjacket. The Great Recession was milder; politicians and lobbyists who opposed strict regulation regrouped, and the reforms were moderate at best. The Great Depression and the Great Recession were separated by eighty years, a long period of financial stability produced, according to Eichengreen, by New Deal financial reforms. But, he concludes, because the damage done by deregulation was only partly undone, “we are likely to see another such crisis in less than eighty years (p. 387).”
The analysis in the book is rigorous. Nevertheless, Eichengreen has written a book that can be read by policy makers, journalists, and the famous, and hopefully numerous, intelligent layperson. There are no charts, tables, or equations. Indeed, it would make a good textbook for an undergraduate course on the financial crisis. Eichengreen writes clearly. And he has sprinkled the text with biographical snippets that both inform and entertain. We meet William Jennings Bryan in the 1920s when he is using his oratorical skills to sell real estate in Florida; and we meet Charles Dawes, prominent banker, Vice President, Nobel Peace Prize winner (for his work on German Reparations), and composer of the melody for “It’s All in the Game.”
To make his case that the two crises were similar except for actions taken by governments, Eichengreen recounts both crises and identifies one parallel after another. The 1920s had Charles Ponzi; we had Bernie Madoff. In the 1920s the head of the Bank of England, Montagu Norman, was given, perhaps unconsciously, to “constructive ambiguity” (p. 23); we had Alan Greenspan. The 1920s witnessed the Florida land boom; we had subprime mortgages. Charles Dawes’s bank got needed assistance from the Reconstruction Finance Corporation, but the Guardian Group in Detroit was allowed to fail; we had Bear Stearns and Lehman Brothers. And this is just a taste. Eichengreen adds many, many more. Indeed, the parallels come so thick and fast that one is reminded of the phrase Albert Einstein used to describe two distant particles that were thought to be entangled: \”spooky action at a distance.\”
The book is divided into four parts. Part I, “The Best of Times,” consists of six chapters that cover the 1920s and the first decade of our century. Here we learn (without attempting to be exhaustive) about real estate booms in the twenties, the attempt after World War I to reconstruct the gold standard, the repeated attempts to solve the German reparations problem, the Smoot-Hawley tariff, and the U.S. Stock market bubble. Then Eichengreen turns to our era and describes financial deregulation, the subprime mortgage boom, the expansion of the shadow banking sector, and the spread of this type of banking to Europe. Eichengreen doesn’t present new, controversial interpretations of events. Rather he presents conclusions based on careful readings of the available literature including the latest work by economic historians. What is new is the web of parallels he draws between the two crises. Others, of course, have noted the similarities, not the least Ben Bernanke as he wrestled with the crisis; but no one has created such a large catalog of parallels.
In Part II, “The Worst of Times,” nine chapters in all, we learn first about the stock market crash in 1929, the banking crises of 1930-33, and the spread of the Great Depression to Europe. Then he turns to the Great Recession: Bear Stearns, Lehman Brothers, AIG and all that, and the spread of the crisis to Europe.
In the seven chapters of Part III, “Toward Better Times,” we learn about Roosevelt’s attempts to revive the economy: the National Industrial Recovery Act, the Reconstruction Finance Corporation, Federal Reserve Policy in the 1930s, and Roosevelt’s conflicted ideas about budget deficits. European responses to the crisis are also discussed at length, and Japan’s Korekiyo Takahashi is celebrated as the finance minister who got it right. Takahashi, aided it must be said by costly Japanese military adventures, authorized a heavy dose of money-financed deficit spending and the result was the best economic performance among the industrial nations. Eichengreen then turns to our crisis: zero interest rates, quantitative easing, bailouts, and the fiscal stimulus. The argument is usually that what the government did helped, but more should have been done.
In Part IV, “Avoiding the Next Time,” Eichengreen focusses particularly on Dodd-Frank and the Euro. His main efforts are directed at explaining why so little was done to prevent another crisis. A number of potential reforms get favorable mentions: consolidation of regulatory agencies, higher capital requirements for financial institutions, and regulations that limit risk taking. But Eichengreen doesn’t rank possible reforms or explain in detail how they would work. Here I wanted Eichengreen to go on a bit, and tell us more about his ideas on what should have and presumably still can be done to prevent another crisis. His approach to Glass-Steagall is an example of his above the fray stance toward regulation. Eichengreen mentions Glass-Steagall, and the separation of commercial from investment banking many times — one chapter is titled “Shattered Glass.” He rejects the argument made mostly forcefully by Andrew Ross Sorkin (2012) — although it is one that must have occurred to many observers — that ending the separation of commercial and investment banking didn’t have much to do with causing the crisis. After all, Merrill Lynch, Bear Stearns, and Lehman brothers were not branches of commercial banks when they went off the rails. And AIG was an insurance company. Eichengreen tells us that ending Glass Steagall was “indicative of a trend” (p. 424), which it surely was, but he seems to feel that it was more than that. Here I would have liked to learn more about Eichengreen’s ideas about how ending Glass-Steagall undermined the system. Did it create moral hazard, because firms knew they could merge with a bank if they got in trouble? Or was it some other mechanism? And more urgently, I would have liked to have read more about Eichengreen’s views on how high a priority restoring Glass-Steagall should be, and where the lines should be drawn.
Comment and Conclusion
Eichengreen’s book is a synthesis. It pulls together an enormous body of studies by economic historians, policy makers, and journalists. Specialists in financial history will be familiar with many parts of the story. But I doubt there are any who will not learn a great deal from reading Eichengreen’s account. While I was persuaded by most of Eichengreen’s arguments I did have a recurring concern about how far we can go as social scientists, as opposed to policy advocates, in making assertions about what would have happened if alternative policies had been followed on the basis of two observations. It is one thing to claim that without aggressive monetary and fiscal actions and bailouts we might have ended up in another Great Depression. And for me, as I suspect for most of us, that possibility justifies much of what was done. Even, say, a one-third chance of another Great Depression makes pulling out the stops worthwhile. But that claim is very different from the claim that we would have ended up in a Great Depression if less had been done. The truth is that we can’t be sure what path the economy would have followed if less had been done, or where we would be today.
Consider the following table which shows unemployment after four financial panics. When you compare 2008 only with 1930, it seems clear that we did a lot a better after the panic of 2008, and the things we did in 2008 “worked” at least up to a point: We avoided a Great Depression. On the other hand, we did, arguably, worse after 2008 than after the panic of 1907 when help for the economy was provided mainly through the circumscribed lender-of last-resort actions undertaken by J.P. Morgan. And we did almost exactly the same as after the crisis of 1893, when only some limited stimulus came well after the crisis in the form of gold inflows and spending on the Spanish-American War. In fact, the 2008 and 1893 unemployment rates are so similar that it looks like another case of “spooky action at a distance.”
Source: Historical Statistics of the United States, Millennial Edition: Volume 2, Work and Welfare, series Ba475 for 1893, 1907, and 1930 (pp. 2-82 and 2-83), and the standard Bureau of Labor Statistics series for 2008.
My point is not that 1893 is necessarily a better analog than 1930. One could argue the point, but I don’t think we know. Constructing a counterfactual macroeconomic history of a financial crisis and recession is essentially an exercise in forecasting, and we economists are just not very good at macroeconomic forecasting. We are in the position, I believe, of physicians in days gone by: we have some drugs that experience tells us sometimes relieve pain and suffering. But how they work and why they work in some cases and not in others, and what the long-run side effects are – we have some ideas we can discuss, or more likely debate, but the bottom line is that we don’t know.
(If we were entangled with the Depression of 1890s, we would want to know what happened in 1901 the year that corresponds to 2016. Among other things, 1901 began with a slide on the stock market of about 9%. Sound familiar?! Despite a spring rally the market finished the year off by about the same percentage. By the way, this is just an observation; I am not giving investment advice.)
Many excellent books and articles have been written about the financial crisis of 2008 and there will undoubtedly be many more. Gary Gorton’s papers and books and Ben Bernanke’s memoir immediately spring to mind, but the list of good books and articles is already a long one. There is nothing like a financial crisis to concentrate the minds of economists. However, if financial history is not your thing, and you want to read just one book about the financial crisis, you couldn’t do better than Hall of Mirrors.
Andrew Ross Sorkin, “Reinstating an Old Rule Is Not a Cure for Crisis” New York Times, May 21, 2012. http://dealbook.nytimes.com/2012/05/21/reinstating-an-old-rule-is-not-a-cure-for-crisis/?_r=0.
Hugh Rockoff is Distinguished Professor of Economics at Rutgers University and a Research Associate with the National Bureau of Economic Research.
Copyright (c) 2016 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (email@example.com). Published by EH.Net (February 2016). All EH.Net reviews are archived at http://eh.net/book-reviews/
terça-feira, 9 de fevereiro de 2016
Paulo Roberto de Almeida
Is the era of economic growth ending?
By Robert Romano
Americans for Limited Government, February 9, 2016
The economy of Japan has not grown nominally in 20 years, according to data published by the Statistics Bureau of Japan.
Nor has its population aged 15 to 64 —those in the prime working years of their lives — which has declined from 86.9 million in 1995 to 76.7 million today.
Inflation has barely budged, too, averaging just 1.1 percent a year the past 20 years, even with a torrent of monetary expansion by the Bank of Japan.
Interest rates have also declined on a long-term basis, from an average of 3.4 percent in 1995 to just 0.04 percent today. Those may even go negative in the near future, chief bond strategist at Tokai Tokyo Securities Co., Kazuhiko Sano, predicts. Sano accurately called the rate dropping below 0.5 percent, 0.25 percent and 0.1 percent.
Just imagine that. For the privilege of lending money to the Japanese government, it costs banks and investors money. The only way it might pay to buy the bonds is in an outright deflationary environment, prices declined even faster than the interest rates. But even then, keeping cash would seem to be a better deal.
It all coincides with the Bank of Japan charging banks for excess reserves with a negative interest rate.
Is the Bank of Japan forecasting deflation in Japan? Certainly wouldn't be the first time.
But in a broader context, do the rapidly falling interest rates project a no-growth, or slow-growth environment?
Certainly something to question over here in the U.S., where the economy has not grown above 4 percent since 2000, and not above 3 percent since 2005, according to the Bureau of Economic Analysis. As for 2015, it came in at a tepid 2.4 percent growth.
The average annual growth from 2006 to 2015 was 1.41 percent, the worst decade since the Great Depression.
U.S. 10-year treasuries stand at just 1.75 percent.
The consumer price index only increased 0.7 percent in 2015.
The working age population in the U.S. has certainly been slowing, and will be growing at an even slower pace for the next few decades.
The labor force participation rate for 16- to 64-year-olds has not been faring much better, according to data compiled by the Bureau of Labor Statistics. It peaked in 1997 at 77.37 percent and has dropped to 72.61 percent in 2015, accounting for 9.7 million people who otherwise might have been in the labor force since then but are not.
Note that excludes those of retirement age, correcting for drops in labor participation associated with Baby Boomers retiring. Yes, that has reduced the participation rate some, but so has the working age population exodus from the work force too.
What emerges is a spiral of slower growth, less asset price appreciation, lower interest rates and fewer jobs.
What's to like?
But worse still, could this point to a longer trend where the global economy itself is slowing down until, one day, it stops growing all together?
Is the era of growth ending? Never mind the degrowth movement.
Perhaps Japan and Europe, too, which is in a similar stagnation, are just windows into the future.
What is most alarming, however, may be the declines the U.S. is seeing in labor participation. Slower growth might be seen as a benign indicator if it still proportionately produced the same number of jobs.
But it is not, with the 16- to 64-year-old labor participation rate dropping to levels not seen since 1981 when women were still entering the work force. Slower growth has been toxic.
All this, after the U.S. has invested hundreds of billions of dollars in college educations with students with tens of thousands of dollars of debt predicated on the idea that there would be enough jobs for everyone. Well, there aren't, every year it keeps getting worse and we need to start asking ourselves why.
Robert Romano is the senior editor of Americans for Limited Government.