30+mba-第49部分

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occurred　in　Germany　in　1923；　when　prices　rose　2；500％　in　one　month　
and　in　Zimbabwe　in　April　2008　when　the　annual　inflation　rate　hit　
165；000％。　
。　Stagflation　is　the　bination　of　high　economic　stagnation　with　inflation；　
such　as　happened　in　industrialized　countries　during　the　1970s；　
when　OPEC　raised　oil　prices。
206　The　Thirty…Day　MBA　
INTEREST　RATES　
Around　half　the　money　used　to　finance　businesses　is　borrowed　and　private　
individuals　use　mortgages；　hire　purchase　and　credit　cards　to　fund　many　
of　their　purchases。　Governments　too　have　to　use　debt　through　the　sale　of　
bonds；　when　taxes　are　insufficient　to　meet　their　spending　plans。　The　‘price’　
of　borrowed　money　is　the　interest　paid。　Governments　can　stimulate　both　
business　and　consumer　expenditure　by　lowering　interest　rates　or　choke　off　
demand　（see　‘Micro　vs　macroeconomics’；　above）　by　raising　it。　Interest　rates　
are　the　favourite　tool　of　central　banks　to　control　inflation　as　it　can　be　used　
to　bring　supply　and　demand　back　into　balance。　
Interest　rates　also　have　a　direct　bearing　on　a　country’s　exchange　rate。　If　
it　is　higher　than　that　in　other　parable　economies　it　will　tend　to　support　
the　exchange　rate　at　a　higher　rate；　and　if　lower；　the　currency　will　tend　to　be　
weaker　（see　also　‘The　exchange　rate’）。　There　are；　however；　several　different　
interest　rates　and　governments　do　not　directly　control　them　all：　
。　Bank　Base　Rate：　This　is　the　interest　set　by　governments；　for　example　
by　the　Bank　of　England’s　monetary　mi。。ee；　the　US　Federal　Reserve　
and　the　European　Central　Bank。　It　is　a　reference　point　from　which　other　
interest　rates　are　set；　but　is　not　the　actual　interest　rate　charged　by　clearing　
banks　to　their　many　and　varied　clients。　
。　Libor　（London　Inter…bank　Offered　Rate）：　This　is　the　rate　of　interest　at　
which　banks　borrow　funds　from　each　other；　an　essential　activity　to　
facilitate　global　trade　and　to　se。。le　contracts　on　futures　and　options　
exchanges。　As　such；　it　is　the　primary　benchmark　for　short…term　interest　
rates　globally。　The　rate　is　set　by　a　panel　representing　around　500　banks　
and　depends　on　a　number　of　factors；　including　local　interest　rates；　
expectations　of　future　rate　movements　and　the　prevailing　banking　
climate。　Usually　the　Libor　rate　is　lower　than　the　rate　set　by　central　
banks　to　allow　banks　a　small　margin。　But　if　banks　lose　confidence　in　
their　peers’　ability　to　repay　then　either　they　stop　lending　or　they　charge　
a　premium　over　the　Bank　Base　Rate。　This　was　the　case　during　the　subprime　
crisis　in　2007/08。　Libor　is　both　sensitive　and　plex。　Rates　are　set　
in　10　currencies　and　for　15　different　maturity　dates；　from　an　‘overnight’　
rate　maturing　tomorrow；　a　‘spot/next’　rate　that　covers　the　period　to　the　
day　a。。er　tomorrow；　through　weeks　and　months　out　as　far　as　（but　never　
further　than）　one　year。　
。　Lending　Rate：　This　is　the　rate　at　which　banks　will　lend　to　businesses　
and　private　individuals。　It　can　be　anything　from　a　fraction　of　a　percent　
above　either　Bank　Base　Rate　or　Libor　（whichever　is　the　higher）　for　blue　
chip　firms；　a　percent　or　two　above　for　mortgages；　and　up　to　15％　above　
for　credit　card　loans；　the　higher　the　perceived　risk　the　higher　the　rate。
Economics　207　
ECONOMIC　POLICY　AND　TOOLS　
Keeping　the　economy　growing；　holding　inflation　in　check　and　a。。empting　to　
both　anticipate　and　mitigate　the　worst　effects　of　downturns　in　the　business　
cycle　are　the　primary　economic　goals　of　government。　Dials　showing　the　GDP　
growth　rate　and　inflation　are　on　every　government’s　economy　management　
dashboard。　But　these　are　not　the　only　factors　that　affect　an　economy；　nor　is　
se。。ing　interest　rates　the　only　club　in　a　central　banker’s　locker。　
Policy　options　
The　UK’s　1981　Budget；　designed　to　remove　several　billion　pounds　from　
the　economy　when　the　UK　was　in　the　depths　of　recession；　provoked　an　
unprecedented　le。。er　from　364　economists　published　in　The　Times　stating：　
‘There　is　no　basis　in　economic　theory　or　supporting　evidence　for　the　
government’s　present　policies。’　In　fact　the　UK　economy　recovered　and　
eventually　prospered。　Even　today；　no　politician；　yet　alone　economist；　can　
agree　on　whether　the　364　economists　were　right　or　Lady　Thatcher’s　then　
Chancellor　of　the　Exchequer；　Sir　Geoffrey；　now　Lord；　Howe。　Although　
economists　disagree　on　almost　everything；　they　do　accept　that　there　are　
two　broad　categories　of　policy；　fiscal　and　monetary。　
Monetary　policy　
Monetarists；　as　the　adherents　of　this　school　of　thought　are　known；　believe　
that　as　the　economy　runs　on　money；　controlling　the　supply　of　the　amount　
of　money　in　circulation　is　the　key　to　achieving　growth　without　inflation。　
If　the　supply　of　money　grows　faster　than　the　economy；　inflation　will　rise　
as　too　much　money　will　be　chasing　too　few　goods；　too　slow　and　growth　is　
stifled。　There　are　a　number　of　difficulties　in　actually　executing　monetary　
policies：　
。　Measuring　money：　In　the　first　place；　agreement　has　to　be　reached　on　
what　exactly　money　is。　There　are　at　least　five　different　and　to　some　
extent　overlapping　measurements；　all　a。。empting　to　measure　the　liquid　
assets　at　large　in　an　economy。　Designated　with　the　prefix　M；　these　
measures　range　from　M0；　the　narrowest　definition　which　includes　only　
the　cash　held　in　banks　and　in　circulation；　through　to　M5；　the　broadest　
measure　which　extends　to　a　wide　range　of　other　short…term　highly　
liquid　financial　assets　held　as　a　substitute　for　deposits。　Not　content　
with　these　five　measures；　some　now　have　le。。er　prefixes　to　subdivide　
further　the　types　of　liquid　assets　included。　If　you　can　imagine　trying　
to　drive　a　car　with　several　speedometers　you　will　get　a　feeling　for　the　
problem。　In　the　world　boom　of　1972–73；　for　example；　the　UK’s　M3　and　
208　The　Thirty…Day　MBA　
M4　grew　at　nearly　25％　per　annum；　M5　grew　at　over　20％；　yet　M1　grew　
at　only　10％。　
。　Velocity　of　circulation：　Money’s　use　is　as　a　medium　of　exchange；　we　
swap　it　for　goods　and　services；　which　in　turn　create　the　value　in　an　
economy　that　result　ultimately　in　GDP。　Over　any　interval　of　time；　the　
money　one　person　spends　can　be　used　later　by　the　recipients　of　that　
money　to　purchase　other　goods　and　services；　the　suppliers　of　which　
can　then　themselves　spend　the　same　cash　again。　The　more　times　cash　
circulates　each　year　the　higher　the　velocity　and　hence　the　money　supply　
available　to　fuel　GDP。　To　measure　money　supply　we　need　to　know　the　
velocity　of　circulation　but　it　is　notoriously　difficult　to　do；　is　different　for　
each　of　the　Ms　and　can　change　over　time。　
Central　bankers　have　three　tools　to　help　control　the　amount　of　money　in　
circulation：　
。　Open　market　operations　are　where　the　central　bank　sells　government　
securities　to　banks；　leaving　them　with　less　cash　to　lend。　
。　Reserve　requirements　are　the　proportion　of　reserves　a　bank　must　keep　
in　relation　to　the　amount　of　money　it　can　lend。　Raising　the　level　of　
reserves　reduces　banks’　capacity　to　lend。　
。　Discount　rate　is　the　interest　rate　the　central　bank　charges　banks。　Raising　
that　rate　reduces　the　money　available　to　lend。　
Fiscal　policy　
A　government’s　approach　to　tax　and　spending　is　known　as　its　fiscal　policy。　
Cu。。ing　taxes　and　so　giving　consumers　and　businesses　more　money　to　
spend　can　stimulate　an　economy。　Alternatively；　raising　taxes　can　cool　an　
economy　down　if　it　looks　like　overheating。　Governments　can　themselves　
increase　spending；　both　by　using　taxes　and　by　borrowing　money　raised　
by　issuing　government　securities。　The　la。。er　approach　is　termed　deficit　
spending　and　has　been　understood　and　used　extensively　since　popularized　
by　Maynard　Keynes　in　the　1920s。　He　showed　how　governments　could　use　
this　aspect　of　fiscal　policy　either　to　avert　a　recession　or　to　reduce　its　effect　
on　unemployment。　
The　spending　multiplier　effect　
Keynesian　economists　deduced　that　government　expenditure　multiplies　
through　the　economy　having　a　far　greater　ripple　effect　than　the　initial　sum　
involved；　making　such　activity　more　important　than　the　sums　themselves　
may　sound。　Let’s　suppose　the　government　decides　to　embark　on　a　major　
programme　of　school　building；　resulting　in　￡100　million　of　salaries　for　
Economics　209　
construction　workers。　The　impact　of　their　salaries　on　the　economy　depends　
on　their　marginal　propensity　to　consume　（MPC）　–　in　other　words；　how　
much　of　their　salary　they　will　save　and　how　much　they　will　spend。　If　we　
suppose　that　they　will　save　10　per　cent　of　salary　（the　approximate　20…year　
average；　though　at　the　time　of　writing　it　was　less　than　6　per　cent）；　then　
they　will　spend　90　per　cent。　That　gives　an　MPC　of　0。9；　which　is　90　per　cent　
expressed　as　a　decimal：　
The　spending　multiplier　=　1　=　10　
（1　–　0。9）　
So　the　effect　of　￡100　million　of　government　spending　on　the　wider　economy　
is　10　×　￡100　million；　or　￡1；000　million；　because　each　90　per　cent　of　a　worker’s　
ine　is　spent；　which　in　turn　bees　someone　else’s　ine　of　which　
they　spend　90　per　cent；　and　so　on。　
The　tax　multiplier　
Tax　reductions　are　another　way　in　which　governments　can　affect　expenditure　
by　giving　or　taking　money　away　from　consumers；　and　that　too　has　a　
multiplier　effect。　This　formula　is　almost　identical　to　that　for　the　spending　
multiplier。　The　only　difference　is　the　inclusion　of　the　negative　marginal　
propensity　to　consume　（–MPC）。　The　MPC　is　negative　because　an　increase　
in　taxes　decreases　ine　and　hence　the　ability　to　consume。　If　we　again　
assume　that　90　per　cent　of　ine　is　spent　and　10　per　cent　saved；　we　have　
a　marginal　propensity　to　consume　of　0。9　and　a　marginal　propensity　to　save　
of　0。1。　This　gives　a　tax　multiplier　of　–9　（see　below）；　which　means　that　if　
taxes　are　raised　by　￡100　million　that　will　result　in　–9　×　￡100　million；　in　other　
words；　￡900　million　will　be　taken　out　of　consumption。　
The　tax　multiplier　=　–MPC　=　–0。9　=　–9　
MPS　0。1　
The　converse　is　of　course　true；　were　taxes　reduced　by　￡100　million；　consumption　
would　rise　by　￡900　million。　
MORE　CONCERNS　
Using　tools　and　policies　to　keep　an　economy　growing　and　inflation　low　is　
certainly　a　government’s　primary　goal；　but　they　do　have　some　other　parallel　
and　interrelated　outes　in　mind。　These　are　not　so　much　secondary　objectives；　
but　like　inflation　are　more　the　effec