Private inflation expectations: where irrational comes from

Correctly guide the Libertarians non-rational inlation expectations Wen/Wang Yong during the National Day holiday during the period of the home purchase heat, car heat, buy gold hot behind, in fact, with the rise of inflation expectations have a great relationship, This expectation, before it becomes reality, expands rapidly in the private sector and begins to affect all aspects.　　Non-rational inflation expectation is unfavorable to the recovery of our economy, so we should guide it correctly in time.　　One important inducement is the traditional destructive power of inflation that induces allergic reactions. Inflation expectations, to put it simply, are a psychological projection of the timing, probability and extent of inflation in the future. It is divided into rational anticipation and irrational expectation. Rational expectations argue that inflation is a monetary phenomenon. As the central bank keeps increasing its money supply, too much money will eventually be reflected in rising prices. But the central bank's increased supply of money and the release of liquidity do not necessarily lead to inflation, and the key depends on market absorption and economic performance. The irrational expectation is that monetary policy stimulates the economy, actually by fooling the public. By increasing the money supply and adopting monetary policies that devalue the currency, the central bank has made people think that the value of money is unchanged, and then let people increase demand for money to stimulate the economy. But the public will be very sober, as the central bank continues to use the same strokes to be seen through the essence of it, so the so-called "hedging" or hedging action is taken quickly.　　The above-mentioned phenomenon is "hedging" or the example of the value-keeping action. So at present, the inflation expectation that the folk breed is a typical irrational expectation. And the inflationary tradition of destructive allergic reaction is an important inducement to produce this irrational expectation. Previous inflation practices have shown that inflation is a mismatch in resource formation. In the complex social and economic life, because the currency plays an important role in it, so, once the inflation, will be caused by the destruction of the currency price system disorder, thus disrupting the market mechanism of all effective order, interference with the transmission of market signals and distortion of the signal, resulting in imbalance in resource allocation, Reduce economic efficiency and destabilize the economy. Inflation can also lead to a mismatch in labour. Inflation creates some false demand, disrupts relative prices and wage systems, and gives the workforce a lot of misinformation that is temporarily attracting them to some jobs. The continued employment of these misguided workers depends on whether inflation continues. The longer inflation lasts, the greater the number of workers whose work relies on sustained and accelerated inflation.　　As a result, sustained inflation has led to even greater unemployment, and a sharp increase in unemployment has caused more inflation.　　Second, the internal periphery liquidity release causes irrational anticipation. As far as the periphery is concerned, inflationary pressures from liquidity releases are interlinked. First, the global economy injected huge amounts of liquidity into the bailout, with a cumulative injection of $ trillions of trillion. Second, Europe and the United States "quantitative easing" monetary policy spread, the formation of beautyThe devaluation of the yuan has spawned a global inflationary threat. This year, Europe and the United States have started quantitative easing monetary policy, because after the implementation of the zero interest rate policy, the central bank still need to buy government debt to the large-scale launch of the currency. Third, the international market commodity prices rebounded rapidly, especially oil, gold, non-ferrous metals and other gains such as the rainbow. The four is the strong rebound of global stock market, especially the European and American stock market performance Most outstanding. This series of phenomena, such as Europe and the United States to implement the "debt monetization" results. To save the economy, the United States, the European Union and Japan have adopted debt monetization, which is to stimulate inflation by buying bonds directly, thus defusing government and corporate debt. They hope that, by increasing the flow of money and allowing credit to spread, the deflationary factors will eventually dissipate and inflation expectations are coming ahead. This inflationary expectation has led to a change in supply and demand. In anticipation, inflation has a self-fulfilling function. Commodities, basic raw materials, not only have industrial attributes, but also have more and more strong financial attributes of investment goods. Commodity prices are often determined not by both the supply and demand sides, but by the trading bodies, namely, financial capital, hedge funds, and the shadow banking system.　　The trading bodies, driven by inflationary expectations, have pushed up commodity prices. From the domestic situation, the irrational inflation expectation mainly comes from the large amount of money in the market. After last year's 4 trillion stimulus package, new policies have been introduced, with no exception to expansionary monetary or fiscal policies. Especially since the beginning of this year, the monetary credit over the market has formed a liquidity-rich pattern, the first three quarters of this year, the new credit scale has reached 8.5 trillion. From 2003 to 2007, the first half of the commercial bank loan volume accounted for the annual average of 60%70%,5 down is 65.5%. According to this ratio, the total amount of credit this year is expected to reach 9.5 trillion 10 trillion yuan, the year to maintain nearly 30% of the loan growth rate. Such rapid credit growth will naturally increase inflationary pressures. Although some industries have overcapacity and commodity prices do not go on for a while, they may buy houses and stocks without buying goods, triggering a housing and stock market rally, which in turn affects the rise in general commodity prices.　　It can be said that at present, the market has been quite ample liquidity, the formation of irrational inflationary expectations of the private sector has a direct empirical support. Austerity policies in some countries exacerbate inflation fears as early as June this year, IMF chairman Dominique Strauss-Kahn and World Bank President Robert Zoellick said they should avoid rising inflation and other risks that could lead to runaway recovery as the world economy shows an encouraging "green shoots" to show that the worst of the crisis may be over.　　Mr Strauss-Kahn reminded policymakers to help them get out of the crisis, and in the future, with the gradual withdrawal of fiscal and monetary policy, they could pay the high price of inflation. Perhaps an early reaction to inflationary expectations, or an attempt to curb possible inflation, October 6, the RBA announced a benchmark interest rate of 3%Increased to 3.25%, the first time Australia has raised interest rates since March 2008, and Australia has become the first country in the group of 20 to start withdrawing from its stimulus package. The decision triggered a ripple effect in global commodity markets and financial markets, suggesting that the move would be a prelude to interest rate hikes, and that Australia's lead rate hike would herald a failure to synchronize the world's exit plans. Just as the world's bailout measures were inconsistent at the start of the crisis, countries ' stimulus policies struggled to agree on the timing of their exit. The consensus reached at the International Conference is not universally binding on countries around the world, and the need for their economies remains the primary consideration for policy.　　But the "demonstration effect" that Australia takes the lead in raising interest rates cannot be ignored. In a recent study, Saberaman, a senior economist for Nomura Securities in Asia, said some Asian central banks had begun to take pre-emptive monetary tightening measures outside interest rates. With the retreat of risk aversion, he argues, very loose macro policies and good economic fundamentals provide the right environment for asset prices to rise again. Asia's growth is stronger and its economic fundamentals are good compared to other regions, which appears to be attracting more capital inflows, which in turn has put upward pressure on Asian currencies. However, the rapid appreciation of Asian currencies may erode the region's export competitiveness, even as the major advanced economies embark on a sustained recovery trajectory. As a result, Asian central banks are regaining their usual foreign-exchange intervention policies. Saberaman predicts that some of the Asian central banks will take more counter-cyclical prudential or tax measures in the recent past, including lower loan and valuation ratios, tighter bank capital ratios and bad debt provisioning requirements, higher bank reserve ratios and higher stamp duty or taxes on asset sales or capital gains. And as the economy recovers more momentum, Asian central banks will start to normalize interest rates sooner than the market expects: South Korea may raise interest rates this November, while China, India, Indonesia and the Philippines will raise interest rates in the first quarter of next year.　　All this has further increased the affirmation of irrational inflation expectations about the correctness of their inflation expectations and concerns about the process and effectiveness of the Government's economic stimulus plan.　　However, the irrational expectations of the public, and the growing inflation phobia, are just a disturbance to the economic and financial order and policy. First, irrational inflation expectations lead to self-fulfilling inflation. Under the effect of irrational inflation expectation, as two kinds of most important market subjects, producers will actively demand higher wages, resulting in higher labor costs. At the same time, business operators due to the increase in labor costs, on the other hand, expected future commodity prices will rise, will also improve the price of products.　　The rise in consumer prices will further corroborate and reinforce producer inflation expectations, which constitutes a positive feedback cycle, making inflation spiral and increasingly unmanageable, the self-fulfilling process of inflationary expectations. Second, irrational inflationary expectations will leadThe surge in asset prices has led to an upsurge in speculative sentiment. When people expect higher inflation, they buy assets such as real estate, making it a reality that asset prices have risen sharply.　　It can be seen that irrational inflation is expected to disrupt market price signals, making the economic environment more complex and the economic recovery process more slow and tortuous. Third, irrational inflation expectations make the uneven heat and cold between different markets and industries, which can make monetary policy lose its vane.　　In addition, the global irrational inflationary expectations have also pushed up the prices of commodities such as crude oil, non-ferrous metals and so on, raising the production costs of enterprises and reducing the investment will of enterprises, which is also detrimental to the recovery of the real economy. Correct guidance is the key through publicity to let the public understand that China's inflation is neither worries nor foresight. The reason is five: first, despite this year's volume of credit, unleashed excessive liquidity, but this is the necessary credit overshoot in the special context of coping with the international financial crisis, where excess credit will not quickly form inflation during the economic recovery; and at least until the global economy enters a sustained recovery, There is no inflation in the world or in China, even after the global economy has entered a sustained recovery, this risk will be greatly reduced by the readjustment of the existing global imbalances; third, although China's economy has been in a stable recovery period, but the foundation of economic recovery is not stable, stimulus plan can not be withdrawn　　Four is CPI, PPI still double negative, there is still much work to be done to stabilize prices. Five, for a long time, China's central bank has accumulated a successful experience in curbing inflation and deflation, and according to the situation, the central bank will close the liquidity faucet at the right time node to curb inflation by skillfully operating a price-or quantitative monetary policy. It must be sobering to see that irrational expectations of inflation are most likely to form a "herding effect". Because the public because of the fragile mentality of inflation, the slightest hint of trouble, will change from worry to direct concern, and quickly take a risk-averse action, such hedge funds and speculative funds, the first to become the resource prices soared. At first, only a few prescient people, first of all aware of the importance of the influx of resource-type commodities, when more and more persons into which, it is easy to trigger "herding effect."　　The "herding effect", once formed, will lead to a large number of followers, and the blind obedience can easily lead to the loss of rationality and the situation out of control. It must be understood that, in reality, moderate inflationary expectations are beneficial to economic recovery, while inflation scares only disrupt economic order. Controlling the path of future inflation is a prerequisite for the effective monetary policy.　　It is therefore necessary for governments and central banks to further demonstrate their willingness and ability to control inflation, for example, the Fed should declare inflation targets and keep future inflation at the 2%3% level, and our central bank will also have to grasp the dynamics and tempo of monetary policy implementation, prepare for inflation control and avoid the spread of inflation panic. In a certain period, the stability and continuity of monetary policy should be maintained. Related theoryIt is proved that in monetary policy formulation, the camera choice approach will make the policy less credible, so that people's expectations of the policy is worse, which leads to less effective policy than the central bank's commitment to implement monetary policy under a certain rule. If monetary policy changes too frequently, it will inevitably leave a changeable impression on the public, making it hard to believe the central bank's determination and ability to control low inflation.　　At a time when the economy is stabilising, the central bank should change its frequent and drastic adjustment of monetary policy to maintain a relatively stable monetary policy environment. It is important to boost the recovery as a four-quarter job. At present, the public is most worried about whether the economic stimulus and easy monetary policy can take effect. If it comes into effect, the "tap" of liquidity will gradually tighten and the risk of inflation will not be too large; It can be seen that the inflation scare is not so much a fear of inflation as a hope for a government stimulus plan.　　So it is imperative that the stimulus recovery continue to be the top job of the four quarter. (The author is the director of the Center for Reform and Development of the Bank of China, Zhengzhou Training Institute)