Bancos centrais não param de acumular ouro. Tendência deve manter-se no próximo ano

[Karamba]

Esta questão (reflation trade) não é seguramente a especialidade do Roach. Quando há pouco tempo ele se mostrou muuuiiito bullish nos bonds, achei estranho, mas enfim, também está no direito de dar uns palpites.

É um super economista . Tem tido uma visão extraordinária sobre a evolução da economia a nível global.
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I’ve been bearish for so long, they’ve removed the "plus key" from my laptop. I am still of the view that the risks to this US-centric global economy remain decidedly on the downside of consensus expectations. I also believe that there’s more to come on the deflation watch. But this once heretical view has now caught the attention of policy makers around the world. They have jumped on the anti-deflation bandwagon as never before. While I am dubious that the medicine will work, I suspect that most investors don’t share my skepticism. There is deep belief in the time-honored magic of "policy traction." That, in fact was a key conclusion of our annual global investment conference held last month (see my 18 November dispatch, "Beyond the Fix" in the Global Economic Forum). All this spells a bullish reflation trade in world equity markets in the months ahead, in my view.

America’s Federal Reserve has led the way. The Fed has clearly gotten religion on the deflation watch. The first inklings of this conversion were evident in the form of a seemingly obscure staff research paper published by the Federal Reserve Board last June (see A. Ahearne, et. al., "Preventing Deflation: Lessons from Japan’s Experience in the 1990s," International Finance Discussion Papers, No. 729, June 2002). This thinly veiled effort purportedly focused on the lessons of Japan’s wrenching deflationary experience. But, in reality, it laid out the game plan for the Fed’s drill to deal with the unthinkable in the United States. The basic message from the Ahearne paper is that deflationary risks must be taken more seriously than deflationary evidence. A radical script flows from this simple realization: Inasmuch as traditional stabilization policies lose their effectiveness in deflationary periods, the authorities must be early and aggressive in avoiding such an endgame. That means if the probability of deflation rises into the "non-trivial" zone -- say anything above 25% -- then policy makers are obligated to treat this outcome as their central case. The consequences of a policy error at low levels of inflation are not to be feared -- central banks long to return to their comfort zone as inflation fighters and would relish the chance to do battle with an inflation rate of say 3-4%.

I have long felt that the Fed was laying the groundwork at the time for an anti-deflationary assault in the United States (see my 15 July 2002 dispatch, "Asymmetrical Risks" in the Global Economic Forum). And that’s exactly what has happened. The Fed threw down the gauntlet, with its larger than expected 50-basis-point monetary easing on 6 November. The ink was barely dry on the policy statement of that action, when Chairman Alan Greenspan went public on the deflation debate in front of the US Congress. That was followed by a seminal speech by newly installed Governor Ben Bernanke, which dispelled any lingering doubts over the Fed’s concerns over deflation (see his 21 November remarks before the National Economists Club, "Deflation: Make Sure ‘It’ Doesn’t Happen Here"). Sure Fed officials continue to couch the possibility of deflation as "remote." Their shift to a neutral policy bias after the early November easing was intended to send a confident message that all was under control -- that the appropriate medicine had now been administered. That’s standard operating procedure for policy makers wishing to calm financial markets. Yet courtesy of the just-released minutes of the early November FOMC meeting, there is little question as to what the Fed is really up to: "…a faltering economic performance would increase the odds of a cumulatively weakening economy and possibly even attendant deflation. An effort to offset such a development, should it appear to be materializing, would present difficult policy implementation problems." Their words -- not mine. I rest my case.

In other words, America’s Federal Reserve -- the icon of global policy supremacy -- has now given the official seal of approval for authorities at home and abroad to fight deflation. America’s fiscal authorities have certainly taken the hint. As measured in the national income accounts, the federal budget has already swung from a 2.3% surplus (as a share of GDP) in 1Q00 to a 1.8% deficit in 3Q02. And the Bush administration is getting ready to roll out another installment to the fiscal stimulus saga in early 2003. Add in the defense expenditures associated with a war in Iraq, and a 2.5% to 3.0% deficit is more likely than not. This would put the swing in America’s fiscal policy stance in the 4.5 to 5.0 percentage point range over a three-year period -- a record by standards of the past 50 years. And that’s exactly what the anti-deflation game plan would deem to be appropriate under the circumstances.

Japan, of course, doesn’t need to be convinced by the Fed that deflation is its number-one enemy. As measured by its GDP deflator, the Japanese economy has been in outright deflation in seven out of the past eight years, and our forecast sees no end in sight through 2004. Japan, of course, is the quintessential example of what the Fed means when it speaks of being "too late" in countering deflation. The Japanese authorities are now flirting with yet another option to counter deflation -- a depreciation of the yen. This comes from its Ministry of Finance, which has long voiced frustrations with the anti-deflationary campaign of the Bank of Japan (see the recent opinion piece from Haruhiko Kuroda, the Japanese MOF vice minister for international affairs, in the Financial Times, "Time for a Switch to Global Reflation," published on 1 December 2002). Currency depreciation tactics, in conjunction with the latest dose of Japanese fiscal stimulus just introduced by the Koizumi government, are yet another installment in the global reflation saga. As I see it, the Fed’s seal of approval makes it easier for the world to swallow such actions.

A similar drill is now under way in Europe. The ECB’s larger than expected 50 basis point rate cut on 5 December didn’t materialize out of thin air. While Europe’s backward-looking price data -- a 2.2% increase in the pan-regional CPI in November -- show the region further from deflation than the US, forward-looking inflation risks are now being perceived differently. In the statement following the ECB’s latest policy action, President Wim Duisenberg noted, "…when looking beyond the short term, we consider that both the overall economic environment and the euro exchange rate, which has strengthened since early this year, will contribute further towards reducing inflationary pressure." Policy setting with an eye toward prospective trends on the inflation front is close to a breakthrough for the ECB.

The Fed’s seal of approval in fighting deflation may be just the foil the ECB needed. The risks of deflation, in my view, are very much a global phenomenon. With those risks spreading from Asia to the US, a structurally rigid European economy can hardly be expected to be immune to such pressures. That’s especially the case in Germany, where cyclical pressures have shifted sharply to the downside. The ECB’s recent change of heart may also be a prelude to a similar rethinking of Euro fiscal policy. While the so-called Stability Pact effectively eliminates that option for a region that is already bumping its 3% deficit ceiling, I fully suspect that the debate will shift to a possible suspension of this unworkable policy framework.

So there you have it -- a full-scale frontal assault on the perils of deflation by the world’s major monetary and fiscal authorities. This is precisely the type of ammunition that has spurred major recoveries in the global economy in the past. Add in the possibility of a quick and "clean" war in Iraq and it’s easy to see financial markets drawing considerable sustenance from the reflation trade. Stocks would rally on the hopes of a powerful revival in GDP growth and earnings, and bonds -- especially sovereign debt -- would correct sharply under the presumption of a return to inflation. The Teflon-like dollar would probably hold its own during the euphoric stages of any such rally.

All this begs the critical question as to whether the policies of reflation will ultimately work. For what it’s worth, I continue to have my doubts. Policy traction is an art, not a science. And I continue to fear that the artistes have lost sight of the canvas -- a dangerously US-centric world that still finds its principal growth engine in the throes of a wrenching post-bubble shakeout. Policy traction in America typically falls to three sectors -- consumer durables, homebuilding, and business capital spending. With all three sectors having gone to extreme excess in recent years, I still fear the impact of policy stimulus could be surprisingly muted. And barring the emergence of a new engine of global growth, the world would flounder in response to the inevitable next relapse in America’s post-bubble workout.

But I concede that the financial markets probably won’t see it that way -- at least for a while. The fix is on, and this is the medicine that has always worked in the past. It brings back all the glories of investor jingoism -- don’t fight the Fed and, above all, don’t have the audacity to believe that this time is different. The great bear market of our lifetime has dished out enough punishment. The recent pullback in equity markets after an eight-week surge off the early October lows has the appeal of an intriguing entry point. I suspect we’re about to enjoy a long overdue respite -- albeit a temporary one at that. If that qualifies me as bullish, so be it. It’s a good trade