The national “two sessions” will be held soon, and the fiscal policy package that was determined in the previous period, such as the appropriate expansion of the fiscal deficit, the issuance of special national bonds, and the expansion of the local government ’s special debt are expected to be clear in the “two sessions”. Recently, discussions about the monetization of the fiscal deficit are heating up. Some financial experts believe that the current monetization of the fiscal deficit is reasonable, feasible and effective, and it is recommended that if the central bank directly purchases special treasury bonds, it will not only avoid the crowding-out effect of treasury bonds issued to the market, but also produce and central bank expansion of currency Supply different effects.
Monetization of the fiscal deficit is not a new topic. In the past, the industry has rarely talked about this issue, mainly because unrestricted fiscal discipline once caused some countries to be vicious The painful mud of inflation has even caused serious social problems. As a result, in the past, many countries emphasized the independence of the central bank and could not become a “money bag” of fiscal policy. The “People’s Bank of China Law” clearly states that the People’s Bank of China shall not overdraft government finances, and shall not directly subscribe for or underwrite government bonds and other government bonds.
However, after the financial crisis, with the implementation of large-scale quantitative easing in Japan, the United States and other countries, inflation has not been triggered, making modern currency theory (MMT) in recent years Start to be popular. One of the essence of MMT is the monetization of fiscal deficits. It is claimed that for countries that can borrow in their own currencies, fiscal deficits are not terrible because they can be monetized.
The epidemic has swept the world, and major developed economies such as Europe and the United States have once again launched a new round of monetization of fiscal deficits. For example, the British government announced the temporary expansion of the Ministry of Finance ’s overdraft account at the central bank to an unrestricted amount. Some domestic experts believe that China can also implement the monetization of the fiscal deficit and let the central bank directly purchase government bonds. The reason is that foreign experience has shown that the monetization of the fiscal deficit will no longer cause inflation, because the status of the entire currency operation has undergone a qualitative change, the possibility of inflation is very small; the traditional monetary policy transmission efficiency is reduced, The easing effect of existing monetary easing policies on the real economy is weakening.
The author believes that, on the one hand, the implementation of the monetization of fiscal deficits abroad does not mean that it is suitable for the current national conditions of our country; on the other hand, only the monetization of foreign fiscal deficits is seen Without inducing inflation, but ignoring the widening gap between the rich and the poor in Europe and the United States in the past decade, it is one-sided and not objective.
First of all, developed economies such as Europe and the United States have adopted quantitative easing stimulus policies during the last financial crisis, and their monetary policies have basically no room for normal operation and have to be adopted. Monetization of the fiscal deficit, which has the oppositeTo allow residents and businesses to survive. But for China, the tools for macro-cyclical counter-cyclical regulation are relatively abundant. Whether it is monetary policy or fiscal policy, there is still room for maneuver in the normal operating space, which has not yet reached a last resort. The monetary policy of our central bank can support fiscal stimulus policies in a more market-oriented way without breaking through existing laws.
Secondly, in the more than ten years since the financial crisis, Monetization of fiscal deficits used by developed economies such as Europe and the United States has not caused inflation, but the rich have benefited It is an indisputable fact that the prices of equity assets have soared all the way, and the differentiation between the rich and the poor has intensified. Blindly using fiscal and monetary stimulus methods while ignoring structural reforms is a common problem faced by countries such as Europe and the United States. For China, the current price level presents structural problems. On the one hand, food price inflation and industrial product price deflation; on the other hand, in China’s current statistical caliber, house price changes are not included in the statistics, and inflation data is not perfect.
It is necessary to expand the fiscal deficit during the recession, but while fiscal stimulus saves the economy, it must take into account fiscal discipline and long-term institutional constraints. Although the monetization of the fiscal deficit will bring the sweetness of economic stabilization and stable market confidence in the short term, such policies are betting on the future and must be cautious about this issue. More importantly, fiscal and monetary stimulus policies cannot replace structural reforms, which are the important forces that promote the improvement of total factor productivity and long-term economic development.
(Originally titled “Monetization of Fiscal Deficit Needs to Be Cautious”)