英文原文：Fighting the next recession
AT THE start of most years in the past decade, the list of worries about the world economy has seemed longer than that of reasons for hope. The first few weeks of 2016 have upheld this new tradition. Many emerging markets are wrestling with excessive debts, slow growth, plunging currencies and rising inflation. China, the world's second-largest economy, is a source of a peculiarly intractable anxiety. If its growth falters, it stokes worries about the prospects for other emerging markets; if activity holds up, though, concerns shift to the ever-rising debt that makes such feats possible, but not necessarily sustainable. The euro area's troubles are no longer acute; but a chronic condition with an uncertain prognosis is a hard thing from which to take much cheer.
The one big hope has tended to be the American economy. Some indicators there remain robust. The housing market shows few signs of weakness. New jobs are still being added. But despite this, signs of impending recession are now piling up. Economic growth seems to have stalled in the final quarter of 2015. Corporate profits are falling. Stock levels are above normal. Lending standards on bank loans to big firms have tightened, according to the Federal Reserve. A closely watched index from the Institute for Supply Management （ISM） shows that activity in manufacturing fell for the fourth consecutive month in January （see article）. The malaise is not confined to factories: the ISM non-manufacturing index is at its lowest for almost two years.
The growing anxiety is mirrored in financial markets. Stockmarket indexes have fallen, dragged down in particular by bank stocks, which have lost 16% of their value （in America） since the start of the year. America’s economy is not strong enough to buoy the world economy up; it may not even be strong enough to keep itself afloat.
Pessimism among investors reflects not just the indicators pointing towards recession. There is a deeper concern that, if or when that recession comes, policymakers will have very few options for dealing with it. Short-term interest rates are close to zero in most of the rich world. The scope for adding further pep through quantitative easing, （QE, the purchase of government bonds using central-bank money） is limited. Long-term interest rates are already low; driving them lower with another round of QE is unlikely to invigorate aggregate demand much more. Tax cuts or increases in public spending could still be effective in fighting recession. But investors worry that there is little scope or appetite for financing a fiscal stimulus with yet more debt. Public debt in America rose from 64% of GDP in 2008 to 104% by 2015; in the euro area, it rose from 66% to 93%; in Japan, from 176% to 237%.
If policymakers appear defenceless in the face of a fresh threat to the world economy, it is in part because they have so little to show for their past efforts. The balance-sheets of the rich world's main central banks have been pumped up to between 20% and 25% of GDP by the successive bouts of QE with which they have injected money into their economies （see chart 1）. The Bank of Japan’s assets are a whopping 77% of GDP. Yet inflation has been persistently below the 2% goal that central banks aim for. In America, Britain and Japan, unemployment has fallen close to pre-crisis levels. But the productivity of those in work has grown at a dismal rate, meaning overall GDP growth has been sluggish. That limits the scope for increases in real wages and in the tax receipts needed to service government debt.
It is tempting to put this disappointing return down to the untested policy instruments wielded by central banks which played so prominent a role in the response to the previous recession. But this prominence, as Mohamed El-Erian, an economist, argues in his new book, “The Only Game in Town”, was forced upon them by inaction elsewhere. “This was not a power grab,” Mr El-Erian writes; central banks had to buy time until the political system got its act together－which by and large it didn’t. Far too little effort went into economic policies to work with the grain of monetary easing, and thus to amplify its effects. Such policies would require governments to make decisions that they would rather duck, either with an eye to reforming the structure of the economy－and thus removing some entrenched privileges－or to increasing deficit spending.
If that remains the case, central bankers will have to reach yet further up their sleeves for radical new tricks with which to respond to the recession to come. But even if they do so, they will still require additional help－some of which, in a world of low interest rates, governments could more easily afford to offer. And if the problem runs deeper than a single recession－if, as Larry Summers, a Harvard economist, and others fear, rich nations are condemned to a long period of weak growth because of a persistent shortfall in demand－the need for bold new policies will become even greater.
Accentuate the negative
The menu of policy options comes in two parts. The first covers efforts to ensure that central-bank actions give their economies a bigger jolt. Second come well-targeted and flexible fiscal measures. Carefully chosen structural reforms can both complement such stimuli in the short term and sustain their good effects in the longer term by helping the recovery sustain itself. All these measures can be given more oomph if they are co-ordinated with similar efforts in other countries.
Start with monetary policy. The scope for asset purchases by central banks is, in theory, unlimited. In a crisis such as that of 2008 the Federal Reserve can buy commercial paper issued by banks and companies or mortgage-backed securities. But it, or any central bank, could also buy an even broader range of assets, including high-yield bonds or stocks or even buildings, should financial markets go into free fall.
Textbooks will tell you that, because they create new money, such purchases will eventually give central banks the inflation rates they want. But the experience of QE since 2008 suggests that this is too slow a road to reflation to justify the way that it distorts asset prices and upsets currency markets. Critics of QE argue that its main effect has been to boost shares and to flood emerging markets with cheap money, driving a debt cycle the downward leg of which is now hurting rich-world economies.
Perhaps other unconventional monetary policies might work better. Last month Japan’s central bank joined its peers in Switzerland, Sweden, Denmark and the euro area by setting a negative interest rate－in Japan’s case, levying a 0.1% charge on a portion of the reserves that commercial banks deposit with it. In Europe, where the lowest deposit rate set by central banks acts as a floor for interest rates in money markets, and thus for rates on loans more generally, the benchmark for borrowing rates has never been so low. In Germany government-bond yields have turned negative for terms of up to eight years （see chart 2）.
Yet even if the boundary for interest rates is not zero, as people once tended to assume, it is not all that much less than zero. If interest rates were to go deep into negative terrain, depositors would switch to cash, which pays no interest but doesn't charge any either. And negative rates are not good for banks; deposit rates cannot be pushed down as hard as lending rates for fear that small savers might switch to cash, an effect which is squeezing bank profits in Europe. Such a squeeze hurts the banks' ability to rebuild the capital buffers that make them safe.
Since the existence of cash is a limit on how low interest rates can go, Andy Haldane, the chief economist of the Bank of England, and Ken Rogoff of Harvard University have proposed abolishing it altogether. But even if such radicalism were to prove feasible in a few countries, its effects might be limited. Savers would find alternative stores of value, such as precious metals or foreign banknotes, or pass on the cost of having money in the bank to others by making payments early.
One reason central-bank policy has been less effective than the bankers would like is that low interest rates have not led to more borrowing and spending. Credit growth outside America has been feeble （see chart 3）. The central banks have tried to deal with this. The Bank of England’s funding for lending scheme of 2012 made the provision of cheap central-bank financing conditional on banks writing more loans to companies and householders. The European Central Bank （ECB） has come up with similar wheezes to try to induce banks to lend more freely. But their attempts have seen little success.
The precise choice of policies, and the degree of radicalism, will vary from country to country and according to the nature of the threat. A garden-variety recession in which output falls as existing stocks are run down would require a less drastic response than a bigger systemic shock, such as a Chinese hard landing. It would be wise for governments to work harder on improving public infrastructure or reforming taxes even in less uncertain times.
But the growing constraints on monetary policy mean that fiscal fixes and structural reforms that work with the grain of stimulus policies are more urgent than ever. Big and long-running programmes of public capital spending would give private firms greater confidence about future demand and make a sustained recovery more likely. Simpler tax codes would provide a sounder basis for the sort of shifts in tax rates that will be needed in future to counter the business cycle. Central banks have done their bit. Although more work from them will be vital, it is now time for governments to be bolder.