Mr. Tregunter ｜ Finance ｜ Daily News ｜ Big Chess Game ｜ Columns ｜ Columns ｜ 20201201

Recently, the business community has begun to debate whether or not asset prices should be included in the inflation rate calculation. Maybe you all feel the same way: for the public, the official inflation rate has taken off. The official inflation rate is so low that there are even slight signs of deflation, but the public believes that food, racing and property purchases are all more expensive than before.The official inflation rate is like a time and one space parallels.

The problem lies in the calculation of the inflation rate, for example asset prices are not included in the calculation of the inflation rate. Taking the United States as an example, rent is calculated for housing, divided into rents for personal property and equivalent rents for owned property. In short, if the property is rented out, estimate the rental value rather than calculating it on the basis of the market rental value. The core inflation rate excludes food and energy. The methods of calculating inflation rates in other countries are similar.

Do you want to include asset prices when calculating the inflation rate? The current monetary policy of global central banks is a system of inflation targets, i.e. the central bank sets an inflation target, such as 2%, and therefore various policies and measures follow this direction. However, after the financial tsunami, operations such as QE and OT distort the market The most obvious reason is that there is too much hot money and asset prices are rising, but the official inflation calculation has not increased.

In the past it was necessary to reach the inflation target, for example the Federal Reserve followed the Phillips curve for a long time, that is, if the unemployment rate is low, inflation will be high and vice versa. However, before the epidemic in the United States, the unemployment rate was low, and it was the lowest in history, but inflation was on the rise; after the outbreak, there was infinite QE, but inflation had no trace yet.

The time has come

Former New York Fed Chairman Dudley pointed out that the current situation is strange. Monetary easing has pushed bonds to skyrocketing prices. The yield on 10-year bonds in the United States is below the expected inflation rate, making pension funds insufficient to pay for pensions. As a result, the government will raise taxes and increase savings. Reduce consumption to respond. Enter the deflationary vortex in disguise.

In this way, it is not difficult to understand that the inflation rate of asset prices will naturally become colored. The calculation of the yield of various financial products or the interest rate of the loan takes into account the inflation rate. The depressed inflation rate will naturally bury others and affect the entire body. Is it enough to change the definition to change the current situation?

Judging by various signs, the global central bank is actually not sure what to do. The Fed changed the lower bound of the zero interest rate to the lower bound of the effective interest rate and the inflation target to an average inflation target. The Bank of England changed its statement and did not deny negative interest rates. China has also demanded that asset prices be included in the inflation rate calculation, but clearly does not know how to include it. The two sets of international orders established in the 1970s and 1980s, the United States supported China’s alliance with China to control the Soviet Union’s international relations and, following the collapse of the Bretton Woods system, the US-led financial order is facing a major impact. Economic changes will affect people’s values ​​and even the political structure and other superstructures. We are between the destruction of an era and the rise of an era, and the time has come.

Mr. Tregunter