Stagflation : une histoire parallèle à la demande ou à l’offre ? – Anti-K

Traduction automatique d'un billet de Michael Roberts

2021-10-11 16:37:07 Michael Roberts Blog

Les réunions semestrielles du FMI et de la Banque mondiale commencent aujourd’hui, au cours desquelles les ministres des Finances et les banquiers centraux se réuniront lors de réunions allégées mais en personne à Washington.  Cette réunion risque d’être éclipsée par le scandale impliquant la directrice du FMI Kristalina Georgieva , qui pourrait bien avoir été contrainte de démissionner au moment où j’écris après un rapport dévastateur sur les machinations de hauts responsables de la Banque mondiale il y a plusieurs années. Georgieva a été accusée d’avoir manipulé des données sur « Doing Business » pour favoriser la Chine, l’Arabie saoudite et d’autres États alors qu’elle était à la Banque mondiale il y a plusieurs années. Le scandale a divisé les membres du FMI, les États-Unis faisant pression pour qu’elle parte et les puissances européennes voulant qu’elle reste.

Mais plus important que même si nous pouvons jamais compter sur l’honnêteté scientifique de la Banque mondiale et du FMI, c’est ce qui arrive à l’économie mondiale alors que ces agences internationales se réunissent pour examiner les progrès de la reprise après le marasme pandémique en 2020.

Plus tôt dans l’année, la plupart des prévisions dominantes pour la croissance, l’emploi, l’investissement et l’inflation étaient optimistes, avec l’espoir d’une reprise en forme de V basée sur le déploiement de la vaccination COVID, le reflux des cas de virus et le coup de pouce à de nombreuses économies grâce aux dépenses budgétaires de gouvernements et injections de crédit par les banques centrales. Mais ces derniers mois, cet optimisme sans vergogne a commencé à s’estomper.  Juste avant la réunion FMI-Banque mondiale, Georgieva a déclaré que « nous sommes confrontés à une reprise mondiale qui reste « entravée » par la pandémie et son impact. Nous ne pouvons pas avancer correctement, c’est comme marcher avec des pierres dans nos chaussures !

Elle a souligné les trois pierres de ses chaussures . Le premier était la croissance. Lors de la réunion, le FMI devrait abaisser ses prévisions de croissance mondiale en 2021 et s’attend à ce que l’écart entre le Nord global plus riche et le Sud global plus pauvre s’élargisse. Le deuxième était l’inflation : « Une préoccupation particulière concernant l’inflation est la hausse des prix alimentaires mondiaux, en hausse de plus de 30 % au cours de l’année écoulée. »  Et le troisième était la dette : « nous estimons que la dette publique mondiale a augmenté à près de 100 % du PIB ». (Pas de mention de la dette du secteur privé, qui est beaucoup plus importante et à des sommets historiques).

Georgieva posait le risque de ce qu’on appelle la « stagflation », c’est-à-dire une croissance faible ou nulle parallèlement à une inflation élevée ou en hausse. C’est le cauchemar ultime pour les grandes économies capitalistes – et bien sûr, le pire scénario possible pour les travailleurs qui supporteraient de plein fouet la hausse des prix des ménages alors que la croissance des revenus reste faible ; entraînant une baisse des revenus réels. 

C’était l’histoire des années 1970. Alors, la stagflation revient-elle en 2022 ? Examinons d’abord la croissance du PIB. Les preuves s’accumulent que la reprise de la « ruée vers le sucre » dans les principales économies après la fin des blocages pandémiques et après l’impact des dépenses budgétaires et de l’argent facile s’estompe. Par exemple, au troisième trimestre 2021 qui vient de se terminer, le PIB de la Fed d’Atlanta maintenant! les prévisions pour l’économie américaine suggèrent un net ralentissement (par rapport aux appels du consensus) à seulement 1,3% en taux annuel. Et le quatrième trimestre risque d’être pire. Après la « ruée vers le sucre », vient la fatigue.

Les enquêtes d’activité « haute fréquence » appelées indices des directeurs d’achat (PMI) montrent également un net ralentissement dans la plupart des régions par rapport aux pics de l’été. 

And in the US, the latest official data showed the jobs recovery stalled for a second consecutive month in September.  Coupled with lower business and consumer confidence, this suggests the ‘sugar rush’ there is also over.  In China, the government is grappling with sporadic outbreaks of the Delta coronavirus variant and the risk of a property debt implosion along with an energy shortage. Strong growth over the summer appears to have slowed sharply in the eurozone and UK.

Also, there is the Brookings-FT Tracking Index for the Global Economic Recovery (Tiger) which compares indicators of real activity, financial markets and confidence with their historical averages, both for the global economy and individual countries, capturing the extent to which data in the current period is normal. The latest twice-yearly update shows a sharp snapback in growth since March across advanced and emerging economies.

On the other side of the stagflation scenario, inflation rates are rising everywhere.  Back in December last year the US Fed’s median forecast for inflation in 2021 was 1.8%. In March that was nudged up to 2.4% and then in June up to 3.4%. It is now 4.2%. Over the same period their median forecast for 2022 has risen from 1.9% to 2.2%. The Bank of England’s and the ECB’s numbers have followed a similar path.

Global grocery bills are rocketing.

And energy prices have taken off.

What is causing this rise in inflation generally and in food and energy, in particular?  The standard macroeconomics view is that there ‘excess demand’.  During COVID, consumers built up huge stashes of savings that they could not spend.  But now that economies are opening up again, households are spending heavily at a time when global supply chains have been disrupted by the COVID pandemic.

This is the view of financial analysts, Jefferies: “the $2.5tn in excess household cash is an important buffer against stagflation, and we show that excess savings are distributed across the entire income distribution. To date, there has been very little evidence of demand destruction. Real spending is still close to cycle highs for most discretionary spending categories, despite significant price increases…A more rigorous analysis of price and volume changes by the San Francisco Fed shows that demand effects are the dominant driver of inflation at the moment, contributing 1.1% to y/y core PCE as of August. In contrast, supply-side effects contributed only 0.2%. This flies in the face of the prevailing narrative which attributes most of the price increases to supply chain disruptions. Yes, product shortages and supply bottlenecks are real, but they are largely a function of excess demand, rather than supply outages.”

So the Jefferies view is that this situation is just temporary or ‘transitional’, to use Fed Chair Powell’s expression.  Once production, employment and investment get going and international supply chain blockages ease, then inflation pressure will also ease and things will get back to ‘normal’.

There are serious doubts about this rosy scenario.  First on the demand side, is it really true that released pent up demand is the cause of rising prices?  The idea that ‘excess cash’ will simply ‘sop up’ the extra costs of gas and food prices seems unlikely.  After all, in the major economies this ‘excess cash’ is mostly in the pockets of the rich, who tend to save rather than spend.  Higher prices are more likely to lead to reductions in spending in so-called ‘discretionary items’ as working-class households try to meet the rising costs of food and energy.

Moreover, accelerating inflation in essential goods and services is more likely to be the result of a ‘supply-side’ shock rather than excess demand.  “We are not dealing with demand-push inflation. What we are really going through right now is a massive supply shock,” said Jean Boivin, a former Bank of Canada deputy governor now at the BlackRock Investment Institute. “The way to deal with this is not as straightforward as just dealing with inflation.” 

On the supply side, there are those who argue that the 2020s are not like the 1970s with its stagflation, but more like the 1950s, when inflation incurred from the disruption and spending during the Korean war gave way to rising investment and profitability, so that industrial output and real GDP growth rates rose and inflation subsided.  “With supply shortages set to persist for the next 6 to 12 months, the current period of “stagflation-lite” will persist a while longer. But it is likely to remain a pale imitation of the 1970s stagflation episode. Meanwhile, we do not share the pessimism of those who think that the current supply shortages are just one of a series of stagflationary shocks likely to hit the economy in the coming years.”

But are the 2020s going to be a new ‘golden age’ for capitalism like the 1950s with high profit rates and investment, real wage rises, full employment and low inflation?  I doubt it; first, because the current supply-side ‘shock’ is really a continuation of the slowdown in industrial output, international trade, business investment and real GDP growth that was setting in in 2019 before the pandemic broke.  That was happening because the profitability of capitalist investment in the major economies had dropped to near historic lows, and as readers of this blog know, it is profitability that ultimately drives investment and growth in capitalist economies.

In previous posts, I have provided the evidence of the decline in profitability in the US and elsewhere.  Brian Green has a new analysis of UK business profitability which gets a similar result “before the UK entered the pandemic, the rate of profit had fallen sharply to stand 20% below the last mini peak in 2015.”

Again, you could even argue that the supply-side shock will remain not just because of low profitability and investment, but also because of the hugely increasing costs of dealing with climate change.  This has led to sharp cutbacks in investment in fossil fuel energy exploration and production, putting many economies at risk of an energy supply crisis.  This is the irony of market solutions to the global warming problem: driving up carbon emission prices and taxes merely causes a severe reduction in energy production because planning for the replacement of fossil fuel production with alternatives is non-existent.

If rising inflation is being driven by the weak supply-side rather than an excessively strong demand side, monetary policy won’t work.  Monetary policy works by trying to raise or lower demand. If spending is growing too fast and generating inflation, higher interest rates supposedly dampen the willingness of companies and households to consume or invest by increasing the cost of borrowing.  But even if this theory were correct, it does not apply when prices are rising because supply chains have broken, energy prices are increasing or there are labour shortages.  As Andrew Bailey, governor of the Bank of England, has said: “Monetary policy will not increase the supply of semiconductor chips, it will not increase the amount of wind (no, really), and nor will it produce more HGV drivers.”

Indeed, as I have argued ad nauseum on this blog, pumping cash or credit into the financial system with ‘quantitative easing’ does not work to boost the economy if the ‘supply-side’ is not growing through lack of profitability.  You can take a horse to water, but you cannot make it drink.  That disconnection applies just as much when central banks tighten policy (ie withdraw credit and raise policy interest rates).  Reducing demand will do little if supply is stagnant for other reasons.

Nevertheless, central banks are starting to tighten.  Interest rates have already risen in Norway and in many emerging economies, while the US Federal Reserve and the Bank of England have made moves to tighten monetary policy.  This won’t get inflation rates down, but merely increase the risk of a recession as debt servicing costs rise for companies already low on profits.  That’s the dilemma for central banks and governments as they debate the issue of stagflation this week in Washington.

But let me finish this long post by reminding readers that mainstream economics has no coherent theory of inflation.  As Charles Goodhart, a professor at the LSE and former member of the Bank of England’s monetary policy committee, remarked: “the world at the moment is in a really a rather extraordinary state because we have no general theory of inflation”. The two main theories offered: the monetarist theory that money supply drives inflation; and the Keynesian theory that inflation is caused by tight labour markets driving up wage costs, have been debunked by the evidence.

So the mainstream has fallen back on a theory of inflation based on ‘expectations’.  As Goodhart remarks, this is “a bootstrap theory of inflation”; that as long as inflation expectations remain anchored, inflation itself will remain anchored. But expectations depend on where inflation already is and so provide no predictive power.  Indeed, a new paper by Jeremy Rudd at the Federal Reserve concludes; “Economists and economic policymakers believe that households’ and firms’ expectations of future inflation are a key determinant of actual inflation. A review of the relevant theoretical and empirical literature suggests that this belief rests on extremely shaky foundations, and a case is made that adhering to it uncritically could easily lead to serious policy errors.”

As regular readers of this blog may know, G Carchedi and I have been developing an alternative Marxian theory of inflation. The gist of our theory is that inflation in modern capitalist economies has a long-term tendency to fall because wages decline as a share of total value-added; and profits are squeezed by a rising organic composition of capital (ie more investment in machinery and technology relative to employees).  But this tendency can be countered by the monetary authorities boosting money supply so that money price of goods and services rise, even though there is a tendency for the growth in the value of goods and services to fall.

We have tested this theory during the COVID pandemic slump for US inflation. During the year of the COVID, corporate profitability and profits fell sharply. Wage bills also fell. As our theory predicted, the results were deflationary. But the Fed pumped in more money.  US M2 money supply was up 40% in 2020.  So US inflation, after dropping nearly to zero in the first half of 2020, moved back up to 1.5% by year end.

In slumps, the velocity of money, which is the pace of turnover of the existing money supply in an economy, falls.  People and businesses make fewer transactions and instead tend to ‘hoard’ money.  That was certainly the case in 2020, where the velocity fell to a 60-year low.  Such a fall is hugely deflationary.  But in 2021, the velocity of money stopped falling.

In 2021, all the factors that led to a near zero inflation rate in the US in mid-2020 began to reverse.  At that time last year, we made a forecast that if profits and wages began to rise (wages, say by 5-10%; money supply by about 10%, then our model suggested that US inflation of goods and services would rise, perhaps to about 3.0-3.5% by end 2021.  Actually, money supply has continued to rise faster than we forecast.  And so US inflation is now over 4%, not 3.0-3.5% as we forecast.

What our theory of inflation suggests that the US economy over the next few years is more likely to suffer from stagflation ie 3%-plus inflation with less than 2% growth, than from either deflation or inflationary ‘overheating’ (4%-plus).

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