This kind of shock does not cause inflation

The case began poorly. "A debate on the inflation that is in full battle against the risk of deflation" "Draw attention to a problem which does not arise, it is an idea of journalist", attacked Olivier Pastré, Professor at Paris VIII, author of multiple books including "The novel true financial crisis", co-authored with journalist Jean-Marc Sylvestre and recently crowned by the price of the circle Turgot. The journalist tried to argue that the hundreds of billions of dollars spilled today in the economic machine by central banks, the IMF and States might one day generate inflation or at least that one could ask the question. "Out of the crisis as before the crisis, the overcapacity of the global labour will continue to make work pay, therefore the prices down", races Pastré. And Jacques-Henri David, Inspector of finance, President of the Deutsche bank France group, who was head of the Department of studies and research of the France Bank, adding: "while central banks are flooding the world of liquidity, which goes hand in hand with the rise of the public debt." But this is a reversible process; they can repeat them when required. The day where we will have to worry of inflation we will be well pleased.

Yes but, with purchase of receivables, the balance sheet of the EDF was multiplied by two in a year. Come day, will be on the courage to withdraw these liquidity, at the risk of breaking the resumption This is the question of Nicolas Bouzou, Economist, founding Director of Asterés. Without categorically ruling on what will be out of the crisis regime he noted that the dreaded deflation emerges not for the time and the disinflation, precisely by that the having much fears, everything was made to avoid it. The movement of disinflation has been due exclusively so far in the fall of the price of raw materials. "Out food and energy, underlying inflation declined by 1.6 per year to 1.4 per year in the euro area". It is not illegitimate to ask how it is going out of the crisis; and indeed it is a question that many businesses are beginning to ask, adds Nicolas Bouzou. We are going out of the crisis, find with a regime of growth that is going to be much more inflationary than it has been. Indeed, if one considers that inflation is the increase of monetary and any mass which may result, including the increase in the prices of the assets (shares, real estate...) is doing well, before the crisis, a phase of inflation. In our monetary system, it is always either inflation or deflation. In two, three or four years, inflation will return, considers.

Euthanasia of the annuitants

If the abundance of labour across the world prevents the return of inflation by wages, what is the price of raw materials when, with the recovery, large emerging economies resume to compete with the developed economies The issue arouses memories of youth in Pierre-Noël Giraud, General engineer of Mines, Professor of Economics at Mines Paris Tech: "there are inflation, requires that there be a spiral increases." For raw materials, there is not spiral. Can change the system of prices due to scarcity phenomena. You can spend $ 30 to $ 100 per barrel for oil but once it is at this level, this is sufficient to trigger investments that will allow to remain there. This kind of shock does not cause inflation.

After confirming that he has no inflation of the prices of goods and services, Pierre-Noël Giraud place the debate in a historical perspective. Are we witnessing a cyclical crisis more or will it change the financial system "What killed inflation since the beginning of the 1980s, it is the globalization of the economy and the parallel globalization of financial markets outside the intermediation of banks; capital were able to move freely through the country where there is no inflation.

It recalls the formula of Keynes, which characterized the periods of the 20th century where, on the contrary, inflation had been losing their value to the accumulated capital: "Euthanasia of the annuitants." When the baby boomers have become savers themselves, therefore "annuitants", they have reversed the mechanism, said Giraud. Is whether if the following generations will arrive to take "revenge". They have several ways to do so, including the decrease of the retirement of baby boomers, but inflation may be a. "It is a way to get rid of the debts." Can the system purge of the overvaluation of assets was the inflation in the 1970s and became the krack again inflation To do so, it should be recloisonner financial systems, said Giraud. Otherwise, it should be that all countries coordinate their policies to make them inflationary. This seems unlikely. "There is agreement that it would take inflation out of the crisis to pump this liquidity, but how do you reasonable inflation",

for example questions Olivier Pastré. Fault of international coordination of inflationary policies, that may find this rather strong fluctuations of exchange rates, considers Giraud. Jacques-Henri David is abundant. We will have three currency areas (dollar, Europe, Asia) and it might return to the competition by the currency between these areas, the undervaluation of the currency can be a very effective way to promote exports.

Not content to broaden the debate at the societal level, Giraud was therefore to introduce a level of additional complexity. The exchange rate can obviously affect as much as inflation on the value of the currency held by an economic agent. How will including behave the dollar against other major currencies This is the big question avoided at the G20 in London.

The job of central banks

The other complexity is the very definition of inflation. When the abundance of liquidity leads to higher price of the shares of real estate or art, this inflation Giraud, it is no doubt of the inflation of asset prices and this one he in does not return out of the crisis.

It will return a debate on the role of central banks which already restless economists after September 11, 2001, believe participants. The Fed then injected lots of liquidity in the economy as at this time. Without causing a rise in the price of goods and services. But we will again have the asset price inflation, which is an issue that we talked to the g-20: "what is the job of central banks." Should they be restricted to monitor prices or should they also attempt to regulate the price of assets, including shares Jacques-Henri David, confident in these institutions he knows well, there is no concern. Central banks know learn and this lesson is now integrated.

Of course, said Giraud, but this question, Greenspan is it was already raised openly when he spoke, on 5 December 1996, in his speech "irrational exuberance of the markets". There was a very thorough debate. The central question was: "that is what allows me to me, Greenspan, whether if it is overvalued or not" This objection remains true. For goods and services, they are given a simple monitoring instrument, the price index. How to formulate objectives for central banks in the price of the shares or real estate In addition, if the Fed goes back interest rates in the short term by explaining that it considers the level of the "irrational" scholarship award will collapse. How can central banks - it regulate the price of assets without alternating boom and krack The value of the assets as determined by "processes of anticipation auto validantes" it is not doing, find Giraud.

The financial system does not change

Jacques-Henri David notes that markets remain very active. What has disappeared, they are sophisticated products. Has been a little banking re-intermediation, although the jurisdiction of the markets is still there. Basically, the mode of organization of financial intermediation has no reason to be upset. Markets are evidence of resilience. Which responds in part to one of the above questions: there is not a true change of financial system.

In this perspective, how behave actions How return on this inflation by assets, thus to the rising prices. Olivier Pastré notes that we are reconstructing the excess liquidity. Which prevents even the stock rally mini take too large proportions, it is the aversion to risk. Jacques-Henri David, is also the attitude of the international organizations, which send contradictory signals. On the one hand, they warn against the existence of billions of dollars of toxic assets that would still be to deal with. On the other hand, they announce the resumption in 2010. Until then, was little discussed real estate. Nicolas Bouzou, purging of real estate is still before us. It will be a sharp decline, but it will be followed by a strong rebound in the logic of what has been said previously. There is an excess of liquidity "For the moment, it is stored", said Jacques-Henri David it will go somewhere, but it is difficult to know where and when.

The value of the bonds is it than long rates. May they go back much under the influence of the debt and huge needs for funding of the States Long rates rising edge already, but should remain limited. This is not a "true subject" for the participants. For large countries, it should remain moderate and, if other countries have problems, the IMF will come to their rescue. "So we are not changing system." Pierre-Noël Giraud said the consensus that seems to be. Barriers to the inflation of the prices of goods and services remain in place. However, it will be seen back in the 1980s inflation by the price of real assets. But then, how to pay baby boomers if there is no strong rise in the price Perhaps it will not happen", concludes Giraud, baby-boomer himself, in the form of joke.