Article/Wang Yongli, columnist of Sina Financial Opinion Leader
The Reuters/Jefferies Commodity Research Bureau Index (RJ/CRB), which includes the prices of major commodities, has shown an obvious "V" trend since 2020, falling rapidly from 185.57 at the beginning of 2020 to 106.28 on April 21. Then it continued to rise, reaching the level of 167.83 on December 31. By February 12, 2021, it will reach 185.29, basically recovering the "lost land" in 2020. It closed at 219.23 on August 31, more than 18% higher than the level at the beginning of 2020. At present, this index still keeps rising. Accordingly, PPI and CPI in most countries will continue to rise after May 2020. The inflation rate (CPI growth rate) in many countries has greatly exceeded the target and has continued for more than a quarter. However, the variation of the COVID-19 epidemic has not yet been lifted, and social employment and economic growth are still unstable, How to grasp the main reasons for the continuous rise of global prices and the corresponding macro response policies have become a major headache for major economies in the near future.
Many people attribute the fundamental reason for the continuous rise in prices to the fact that major economies such as the United States, Europe and Japan have implemented large-scale quantitative easing monetary policies in response to the impact of the COVID-19 epidemic, and the central bank has invested a large amount of base currency and monetized the fiscal deficit, resulting in the oversupply of money and the overflow of liquidity. But in fact, this may be the reverse of the order: the implementation of the large-scale quantitative easing monetary policy is precisely because of the helpless choice after the global pandemic of COVID-19 has brought huge impact on the financial market and economic and social operations, although the resulting liquidity easing and the expansion of the total amount of money will also, to a certain extent, promote price inflation.
The root cause of this global price rise after the first decline is actually the stagnation or contraction of production and consumption caused by the serious global new coronal epidemic, which severely hindered the economic and social operation. At the beginning, with the support of the original inventory, the lack of demand pushed the price down rapidly, and forced the United States, Europe, Japan and other countries to implement strong stimulus macro policies to respond. However, the COVID-19 epidemic broke the basic pattern of the global industrial chain and supply chain and the basic situation of the global supply and demand relationship that had been formed before, causing serious obstacles to production, especially transportation, in a large number of countries. By April and May last year, the inventory was exhausted, and after the rapid rebound of production and consumption under the policy stimulus, there was an abnormal situation of serious supply exceeding demand, Prices continued to rise. But this is only a short-term special result caused by special reasons, not a long-term sustainable result of the fundamental reversal of global supply and demand.
In the face of the impact of a major global epidemic, it was originally necessary to strengthen the coordination and cooperation of the world, especially the major economies, and take joint action to jointly respond. Unfortunately, the actions of the United States and other countries have seriously deviated. Instead of taking strong measures to promote their own countries and major economies to jointly fight against the epidemic, they took advantage of the problems and transferred contradictions to the outside world, It seriously undermines international cooperation and has a greater impact on epidemic prevention and control and economic recovery. In some countries where domestic industries are monotonous and economic development and social employment depend heavily on international trade and services, the impact of ineffective epidemic control is even more prominent. The loading and unloading of international shipping and shipping in some countries is difficult to support, resulting in a large number of goods being loaded at ports, resulting in an extreme shortage of containers worldwide, and the transportation and storage costs rising significantly (even making the freight rate higher than the price of the goods themselves), which has promoted the continuous and rapid rise of PPI to CPI in many countries. In this case, if we do not implement large-scale social assistance and economic stimulus, and promote interest rate reduction and implement large-scale quantitative easing monetary policy, the economy and society will inevitably face huge crisis challenges. Because of this, although this year's CPI in the United States, Europe and many other countries has risen by far more than 2% year on year (of course, the data in the same period last year is not normal due to the epidemic, and the reasonable approach should be to compare it with the average value of the previous two years, and the results of this comparison are not high), the central bank did not dare to reduce the scale of bond purchases and reduce liquidity, We dare not easily raise interest rates to implement tight monetary policy.
This situation has indeed brought great controversy to the orientation and strength of macro policies. However, if we cannot grasp the special causes of the current price rise, and habitually switch to the macro policy orientation after the inflation rate continues to exceed the expected target for a quarter, we will mainly deal with inflation, which may make the effect of the earlier implementation of stimulating macro policies disappear, trigger severe economic, financial and social turbulence, and cause greater harm. On the contrary, it is necessary to maintain full employment and economic and social stability as the primary goal of macro policies. Even if prices rise significantly, but employment and consumption cannot meet expectations, it is still necessary to maintain sufficient social assistance and economic stimulus, maintain sufficient fiscal deficits and government debt scale, and maintain corresponding low interest rates and loose monetary policies.
It can be confirmed that before the COVID-19 epidemic has not been fundamentally controlled globally and the new industrial chain, supply chain construction and global supply and demand relationship in major countries have been stabilized, the prevention and control of the epidemic, the promotion of employment and the maintenance of economic and social stability are still the primary objectives of the macro policies of major economies, and it is difficult for the stimulus macro policies to turn around quickly, The trend of global price rise will continue, and the duration of the "stagflation" state of the economy may be much longer than previously expected. The level of employment and economic growth has become a decisive factor in the grasp of macro policies.
For China, during the global pandemic of COVID-19, China relied on its institutional advantages and took extreme measures to effectively control the spread and impact of the epidemic. It has become a country with a very low proportion of confirmed cases and deaths in the total population among major economies, and has also become the country with the best economic growth among major economies since the outbreak of COVID-19, It has made great contributions to the global fight against the epidemic and economic stability. Its international influence has been further strengthened. The pressure and expansion of fiscal and monetary policies are far lower than that of major economies such as the United States, Europe and Japan. However, as the COVID-19 epidemic has had a huge impact on the global industrial chain and supply chain, accelerating the evolution of the world's unprecedented changes in a century, Sino US relations have become more tense, and industrial involution, trade protection, and technical blockade in major countries have significantly increased. After the epidemic, the problem of global overcapacity and insufficient demand will be more serious than before, China's international trade and investment are likely to shrink significantly. In addition, China has put more emphasis on comprehensive development, common prosperity, national security, industrial restructuring, economic transformation, carbon reduction and emission reduction. Promoting growth, stabilizing employment, and maintaining stability may face far greater challenges than before, which must be highly vigilant. In an extraordinary period of profound changes at home and abroad, when economic and social adjustment and transformation have entered a key node, we need to do a good job of overall coordination, adhere to the principle of seeking progress while maintaining stability, prevent hasty advances, comprehensively balance and grasp the time efficiency of various macro policies, and enhance the overall accuracy and effectiveness of policies. We should actively promote the construction of a new development pattern with the domestic macro cycle as the main body and the domestic and international dual cycle mutually reinforcing, create a good business environment, fully stimulate domestic demand and open innovation, and promote high-quality economic and social development.
(About the author: former Vice President of Bank of China)
