SINCE over thirty years ago a meeting of governors of central banks and financial, finance ministers, teachers, National Park Wyoming, USA is celebrated these days. The event is organized by the bank of the Federal Reserve Bank of Kansas, and has become famous because in the worst years of the crisis, Ben Bernanke, chairman of the Federal Reserve, announced there exceptional measures to lower interest rates to levels never seen, and undertake a program of buying government and private debt, which continues today.
This year’s theme, Reassessing the dynamics of the labor market , can not be of more interest to us. It was time that the reality of the job holder who had occupied the finance; not surprisingly, the organization of Jackson Hole is proud that the meeting is not a showcase, as occurs in Davos and working with seriousness and depth. In announcing the meeting, he remarks that he made in a national park without any frills, and where all the participants, including the press, have to pay a sum of one thousand dollars, which is something, but nowhere near the exorbitant amount it costs to participate in Davos.
In the meeting can draw four conclusions. First, however much you want to read between the lines, there are more than political analysis. Janet Yellen, president of the Federal Reserve maintains its judgment and see the labor market as being poor with a fall in the share of labor, low average wages, and persistent lack of demand for low-skilled jobs. Do not impressed that the unemployment rate has fallen to 6.2%, considering that the growth potential and the American labor market have suffered from the crisis, and current conditions lead to an impoverishment of the middle classes low and low. Second, there is an obvious concern for the stability of financial markets, due to the conditions of very low interest rates and unlimited liquidity, have the characteristics of a bubble bags and markets very expensive public and private debt and the raw materials. The US stock markets, for example, have been rising steadily since 2009
Third, the balance of the Federal Reserve has increased from 900,000 million in 2007 to over 4.4 billion in Today. And the European Central Bank, 1.15 billion euros in 2007 to 3.1 billion in June 2012, dropping to 2.1 today. These huge numbers have led to the asset bubble that we have mentioned; however, contrary to popular belief, has not been funded by money creation, but with deposits and bank reserves, so it does not cause inflation of consumer prices. The President Yellen does not announce a major change of policy, but at some point will have to reduce the volume of balance, rather than raising rates. President Draghi reiterated that the ECB is detached from what the Fed does, and maintain a state of emergency on the types and liquidity for a period that you can not put date. It can not be otherwise, since Eurozone unemployment is over 11%, almost double the rate in the United States.
A fourth issue is the proper review of the labor market. No more to do analyzes that have been done in Spain, focusing only on the market itself, and interpreting that wage reductions and facilities for dismissal would generate demand for labor to realize the technical weakness of this reasoning. This naive and simplistic view of market has put aside permanent damage to our workers, unable to return to work, the lack of alternatives to the construction industry has been wiped out, and the impact of the lack of demand and capacity Payment. In the United States has acted not only monetary policy but the industrial impetus given the controversial gas exploitation, and huge multiplier effects in machinery and transport; but in the European Union, and less in Spain, there is no production or new technology that creates jobs.
Viewing presentations of Jackson Hole, the leaders of the Spanish economic policy can draw two lessons. One is that monetary policy can partly solve the problem of public debt, the mortgaged favor, support banks, but is limited even to create credit. One thing is to take the horse to water ‘said Milton Friedman, and get another drink. And second, that the employment policy, as seen in Jackson Hole, is too important to make rest only in the financial markets, or leave to chance the labor market itself, with all the reforms made in the same .
Gumersindo Ruiz is Professor of Economics at the University of Málaga.
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