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2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]
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2007 01 white presentation at barclays capital in florida 28 30 january 2007 [mode de compatibilité]

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  • 1. Place Client LogoHere Globalisation and the convergence of inflation rates William R White Economic Adviser and Head of MED, Bank for International Settlements Presentation at Barclays Capital 11th Annual Global Inflation-Linked Conference, Key Biscayne, Florida 28-30 January 2007
  • 2. A presentation in four parts The facts about inflation Alternative explanations Prospects and exposures Implications for policy regimes
  • 3. Part 1: The facts Inflation has fallen globally So too has inflation volatility And the inflation process has changed
  • 4. Inflation and volatility have fallen
  • 5. The inflation process has changed Inflation expectations seem better anchored Persistence has declined Pass-through is lower The responsiveness of inflation to domestic slack is down While the responsiveness to global slack seems to have risen
  • 6. Part 2: Alternative explanations Effective central bank policy? The “savings glut”? “globalisation of markets”, including labour? Puzzles and the need to pull it all together!
  • 7. Effective central bank policy? Central banks in industrial countries learned from the 1970s Central banks in emerging markets learned from the industrial countries (IT frameworks) But two puzzles remain: (1) common outcome in spite of widely divergent national circumstances (2) Low inflation in spite of exceptionally easy monetary policy
  • 8. Real interest rates and credit growth
  • 9. The “savings glut”? High savings rates outside the US have suppressed global demand and inflation But again puzzles remain: (1) Global saving has not risen, though investment has fallen (2) And global growth remains exceptionally high
  • 10. Globalisation? Loss of pricing power But still high profits Wages take the hit
  • 11. Loss of pricing power
  • 12. But wages take the hit
  • 13. Wage suppression Through diverse channels (1) Immigration (2) Import penetration (3) Relocation and contestability
  • 14. But again puzzles remain Globalisation cannot explain the rise of inflation in the 1970s Nor the long lag before EMEs were affected A more comprehensive explanation of the facts seems necessary
  • 15. Pulling it all together? Recent low inflation needs to be explained But so too does record global growth And remarkably low interest rates The answer is, all of the above!
  • 16. Consider a global model Aggregate supply increases As aggregate demand decreases And easy money fills the gap, globally Due to essentially fixed exchange rates
  • 17. And finally the trade dimension Easy money has different effects in different countries The US and China as two extremes of (1) Low savings (US) and high savings (China) (2) Little (US) and massive (China) investment in tradables
  • 18. Part 3: Prospects and exposures Will low inflation continue? Are “financial imbalances” a threat? Could deflation be the end game?
  • 19. Will low global inflation continue? Are inflationary expectations more based on history than credibility? Is the global output gap declining? Does the US have special problems in ULC and the dollar?
  • 20. Are financial imbalances” a threat? What is meant by financial imbalances? Sources of the problem? Evidence of imbalances today? Exposures?
  • 21. What is meant by financial imbalances? Significant and sustained deviations from historical norms Such concepts play no part in the one period Keynesian model But cumulative processes were central to pre-War business cycle theory
  • 22. Sources of the problem? Very low real interest rates Repeated use of asymmetric easing A more “elastic” credit system In sum, liquidity!
  • 23. Evidence of imbalances today? High prices to buy all illiquid assets (bonds, spreads, equity, houses, art, stamps etc) Low prices to buy liquidity (implied volatility) Heavy debt levels of households Releveraging of corporations (LBOs, M&As) To say nothing of the trade imbalances
  • 24. Exposures? 1–2–3–4 If all financial imbalances have a single source, all could unwind together Better risk management will protect some, but not others Higher house prices do not increase national wealth
  • 25. Could deflation be the end game? Global recession with initially stable prices Could lead to deflation Which might or might not be a problem
  • 26. Part 4: Implications for policy regimes? History shows financial imbalances can pose serious problems If so, price stability is not enough! I believe we need a new macrofinancial stability regime But I must preach to a different audience
  • 27. Thank you!
  • 28. DisclaimerThis document has been prepared by Barclays Capital, the investment banking division of Barclays Bank PLC ("Barclays"), for information purposes only. This document is an indicative summary of the terms and conditions of thesecurities/transaction described herein and may be amended, superseded or replaced by subsequent summaries. The final terms and conditions of the securities/transaction will be set out in full in the applicable offering document(s) or bindingtransaction document(s).This document shall not constitute an underwriting commitment, an offer of financing, an offer to sell, or the solicitation of an offer to buy any securities described herein, which shall be subject to Barclays’ internal approvals. No transaction orservices related thereto is contemplated without Barclays subsequent formal agreement. Barclays is acting solely as principal and not as advisor or fiduciary. Accordingly you must independently determine, with your own advisors, the appropriatenessfor you of the securities/transaction before investing or transacting. Barclays accepts no liability whatsoever for any consequential losses arising from the use of this document or reliance on the information contained herein.Barclays does not guarantee the accuracy or completeness of information which is contained in this document and which is stated to have been obtained from or is based upon trade and statistical services or other third party sources. Any data onpast performance, modelling or back-testing contained herein is no indication as to future performance. No representation is made as to the reasonableness of the assumptions made within or the accuracy or completeness of any modelling or back-testing. All opinions and estimates are given as of the date hereof and are subject to change. The value of any investment may fluctuate as a result of market changes. The information in this document is not intended to predict actual results andno assurances are given with respect thereto.Barclays, its affiliates and the individuals associated therewith may (in various capacities) have positions or deal in transactions or securities (or related derivatives) identical or similar to those described herein.IRS Circular 230 Disclosure: Barclays Capital and its affiliates do not provide tax advice. Please note that (i) any discussion of US tax matters contained in this communication (including any attachments) cannot be used by you for the purpose ofavoiding tax penalties; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor.BARCLAYS CAPITAL INC., THE UNITED STATES AFFILIATE OF BARCLAYS CAPITAL, THE INVESTMENT BANKING DIVISION OF BARCLAYS BANK PLC, ACCEPTS RESPONSIBILITY FOR THE DISTRIBUTION OF THISDOCUMENT IN THE UNITED STATES. ANY TRANSACTIONS BY US PERSONS IN ANY SECURITY DISCUSSED HEREIN MUST ONLY BE CARRIED OUT THROUGH BARCLAYS CAPITAL INC., 200 PARK AVENUE, NEWYORK, NY 10166.NO ACTION HAS BEEN MADE OR WILL BE TAKEN THAT WOULD PERMIT A PUBLIC OFFERING OF THE SECURITIES DESCRIBED HEREIN IN ANY JURISDICTION IN WHICH ACTION FOR THAT PURPOSE IS REQUIRED.NO OFFERS, SALES, RESALES OR DELIVERY OF THE SECURITIES DESCRIBED HEREIN OR DISTRIBUTION OF ANY OFFERING MATERIAL RELATING TO SUCH SECURITIES MAY BE MADE IN OR FROM ANYJURISDICTION EXCEPT IN CIRCUMSTANCES WHICH WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS AND WHICH WILL NOT IMPOSE ANY OBLIGATION ON BARCLAYS OR ANY OFITS AFFILIATES.THIS DOCUMENT DOES NOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ISSUES RELATED TO AN INVESTMENT IN THE SECURITIES/TRANSACTION. PRIOR TO TRANSACTING, POTENTIAL INVESTORSSHOULD ENSURE THAT THEY FULLY UNDERSTAND THE TERMS OF THE SECURITIES/TRANSACTION AND ANY APPLICABLE RISKS.

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