Wednesday, August 30, 2017

Yellen at Jackson Hole

Fed Chair Janet Yellen gave a thoughtful speech at the Jackson Hole conference.

The choice of topic, financial stability and the Fed's role in financial regulation and supervision, says a lot. Financial regulation, supervision, and other tinkering, is much more centrally a part of what the Fed is and does these days than standard monetary policy. Whether overnight interest rates go up or down a quarter of a percentage point may be the subject with the greatest ratio of talk to action, and of commentary to actual effect, in all of economics. Interest rates are likely to stay around 1% for the foreseeable future. Get used to it. But the Fed is deeply involved in running the financial system, and all the talk points to more. 

Rather unsurprisingly, she did not give the speech I might have given, or that some of the others campaigning for her job have given, bemoaning the current state of affairs. She's been in charge, after all. If she viewed the Dodd-Frank act as a grossly complex Rube Goldberg contraption, and the Fed only following silly rule-making dictates to comply with the law, she would have said so loudly long before this. Whether with an eye to reappointment, to write the first draft of history, or -- my sense of Ms. Yellen -- out of forthright Jon Snow-like irrepressible honesty, one should not have expected a stunning critique.  Moreover, her speech is dead-center of the world in which she lives, that of international policy and regulatory organizations. It would be a lot to expect a Fed chair to lead intellectually and to strike out far from the consensus of the bubble.

Still, I am disappointed. Even accepting her view of the crisis, and the current slow growth era, there are far more "Remaining Challenges" than her three paragraphs. There are far more questions to be asked, paths to choose, and fundamental choices to be made.

Which deregulation? 

The call to roll back our regulatory structure can be read two ways: 1) Reduce the insanely complex rules, and the even more intrusive discretionary supervisory regime, and replace it with even higher capital standards. 2) Reduce capital and leverage ratios, keep the lovely anti-competitive complex rules in place, slowly capture the discretionary regulators, keep the wink-wink bailout regime in place, risk on, dividends out. (An earlier post on the Trump executive order on financial regulation.)

You can guess which one I favor. I sense Ms. Yellen is mostly pushing back on the second, especially the desire by big banks for less capital and more trading freedom. But aside from
"There may be benefits to simplifying aspects of the Volcker rule... and to reviewing the interaction of the enhanced supplementary leverage ratio with risk-based capital requirements, " 
she concludes that
"any adjustments to the regulatory framework should be modest,"   
which sounds like a rather uncritical defense of everything put in place. Really? Is every provision of the Dodd-Frank act wise? Is there no room, after 10 years, and a lot of experience, for a thoughtful retrospective evaluation and revision of the tens of thousands of pages of rules?


The most important question, really: Is the system in fact safer, more "resilient," ready to deal with the next crisis, especially if that crisis comes from a new source -- say pensions, student debt, or worst of all, a global sovereign debt crisis?

Ms. Yellen asserts, that yes:
"reforms have boosted the resilience of the financial system. Banks are safer. The risk of runs owing to maturity transformation is reduced. Efforts to enhance the resolvability of systemic firms have promoted market discipline and reduced the problem of too-big-to-fail. And a system is in place to more effectively monitor and address risks that arise outside the regulatory perimeter."
Really? How and why?
"Loss-absorbing capacity among the largest banks is significantly higher, with Tier 1 common equity capital more than doubling from early 2009 to now. The annual stress-testing exercises in recent years have led to improvements in the capital positions and risk-management processes among participating banks. Large banks have cut their reliance on short-term wholesale funding essentially in half and hold significantly more high-quality, liquid assets."
."..Economic research provides further support for the notion that reforms have made the system safer. Studies have demonstrated that higher levels of bank capital mitigate the risk and adverse effects of financial crises. Moreover, researchers have highlighted how liquidity regulation supports financial stability by complementing capital regulation."
Yes!  Capital, capital, capital, and the more the merrier. But we don't need ten thousand pages of regulations, nor annual stress tests to just demand more capital. Moreover, just how much capital, and how measured? That alone could have made a good, and quite long, speech.

The rest is less encouraging:
Assets under management at prime institutional money market funds that proved susceptible to runs in the crisis have decreased substantially. 
That assets under management have decreased is not a good sign. Money market funds are easy to fix -- float NAV, change to ETF structure, or add equity cushions. Capital and fixing run-prone liability structures substitutes for intrusive asset regulation, a point that seems to be missed entirely.
"Credit default swaps for the large banks also suggest that market participants assign a low probability to the distress of a large U.S. banking firm." 
CDS tell us about the probability of an imminent crisis, not about the resilience of banks if one should come.

As the Wall Street Journal notes compactly in response to Ms. Yellen's overall claim of safety
"Banks are safer, but they should be after eight years of modest expansion. The real test of financial stability comes in times of economic stress, when interest rates rise or investors get nervous and rush to safer assets."  
Ms. Yellen recognizes the narrow point,
"To be sure, market-based measures may not reflect true risks--they certainly did not in the mid-2000s--and hence the observed improvements should not be overemphasized."
But not, I think, the larger point. All the banks looked perfectly safe to everyone who was looking in 2006, including the Fed. Yes,
 "supervisory metrics are not perfect, either."
The big banks passed their regulatory standards through the crisis. So did Lehman Brothers. Ms. Yellen concludes only that
"policymakers and investors should continue to monitor a range of supervisory and market-based indicators of financial system resilience."
Pay attention to a lot of signals none of which indicated the last crisis? And then do what? As the WSJ put it,
"You have to ignore history to believe that regulators are suddenly so wise that they know the current regulatory regime will prevent the next crisis. ... Fed officials Ben Bernanke and Tim Geithner then underestimated the financial risks in early 2008 when the stresses were already apparent."
Ms. Yellen herself, in another context, recognizes the fact
And yet the discussion here at Jackson Hole in August 2007, with a few notable exceptions, was fairly optimistic about the possible economic fallout from the stresses apparent in the financial system.
In a nutshell, just how much better is Ms. Yellen's feeling that the banking system is safe than was Mr. Bernanke's in 2007, and on what basis?  More deeply, what justifies her faith, reflecting that in all the regulatory community, that this time, "policymakers" by monitoring "a range of supervisory and market-based indicators of financial system resilience" will see the crisis coming, and do something about it? Shouldn't the screaming lesson of the last crisis be, that we need a resilient system, not clairvoyant "policymakers" (I hate that word) "monitoring" and by implication guiding, the system?

Regulation vs. supervision

That is another huge question going forward -- what is the emphasis on regulation vs. supervision? On rules vs. discretion? On process vs. outcome?

Most people just use "regulation" to mean both things, but the nature of regulation is one of the central issues. Does the Fed set rules of the game, or does the Fed actively tell banks what to do? And is the Fed's "systemic" effort best spent on rules -- more capital -- or on efforts to improve its clairvoyance, see crises before they happen, to monitor the decisions of individual banks and actively take action?

An analogy: The highway patrol, DMV, and department of transportation are in charge of highway safety. By and large they set rules -- drive 55 mph here, and 35 mph there; stop at red lights; freeway lane markers must look so and so. They do not ask, "submit your plan to drive to LA for approval," nor do they put an employee in the back seat to tell you it's time to pull over and rest, as the Fed has over a hundred employees embedded in each big bank. We tend to call both activities "regulation," but "supervision" is a better polite word for the latter. There are many impolite words.

So, the big question: Is the Fed's job to set up stable rules of the game, standards like capital, so that the system is "resilient" on its own? Is it in charge of the fire code, and how many sprinklers and extinguishers are in each house? Or is the Fed's job to be the fire department, spotting fires as they break out, rushing to the rescue, and sending its employees to watch over how you cook dinner?

The view that next time, they will really see it coming, and do something about it, pervades this speech. A small example is faith in the "resolution authority."
"the ability of regulators to resolve a large institution has improved, reflecting both new authorities and tangible steps taken by institutions to adjust their organizational and capital structure in a manner that enhances their resolvability and significantly reduces the problem of too-big-to-fail.
To my mind, the idea that the Fed chair and Treasury secretary will quickly and painlessly "resolve" a big bank, that owes a lot of other big banks money, and that is too complex for bankruptcy court to handle, in the panicked environment of a developing crisis,  without a big creditor bailout, is a pipe dream. Really? If you had resolution authority, you would have closed Citi and AIG, forcing losses on creditors?

The Wall Street Journal agrees with the general rules vs. discretion view:
"That’s one reason to support a financial regime with high levels of capital to defend against potential losses but with less regulatory micro-managing."
More deeply, it charges
"Fed officials are launching a political campaign to retain their vast discretionary control over the American financial system."   
I think that's a bit harsh and unduly conspiratorial. The government and chattering classes pretty much asked the Fed to become the great financial dirigiste, the Fed fills the role uncomplainingly. One slips into discretionary financial dirigisme naturally and slowly. Fed officials live largely in an international bubble of self-described "policy makers", where the idea that central banks should actively direct all facets of the financial system is just taken for granted. But however one views the motivation, the outcome is the same.

Macro-Prudential Policy

This buzzword really captures that big question going forward. Interest rates will be stuck low for a while, and appear increasingly ineffective. Central banks are the giant discretionary financial regulator, making little distinction between sit-back-and-make-rules vs. decree actions and outcomes. Surely, then, regulation, supervision, and policy activities should merge. When a little "stimulus" is needed, just tell banks to lend, or push up some asset prices. If a "bubble" is diagnosed, tell them to cut back, tighten regulations, sell some assets.

A tiny but revealing item on this agenda came my way last month at the excellent Stanford SITE conference. (I hope to review some of the other papers later.) This little story helps to explain the mindset in the bubble, and how one does not need to see politicization to see how the Fed slips in to financial dirigisme. Marco DiMaggio presented "How QE works: Evidence on the Refinancing Channel." (Paper with  Christopher Palmer and Amir Kerman). They found that when the Fed purchased mortgage-backed securities in QE, that funded lots of cash-out mortgage refinancing, and then people spent the money. Stimulus!

OK, that seems like a reasonable though unanticipated effect of the policy. Then, their policy conclusions: 
Overall, our results imply that central banks could most effectively provide unconventional monetary stimulus by supporting the origination of debt that would not be originated otherwise. appears preferable for LSAPs to purchase MBS directly instead of Treasuries during times when banks are reluctant to lend on their own. Related, central-bank interventions could be more effective by providing more direct funding to banks for lending to small business and households.
You see the natural progression. A financial market intervention by the Fed has an effect on the economy. Ergo, the Fed should get ready to use it next time. FOMC discussions previously about the path of interest rates now should include "if we buy some MBS, we can get people to cash out refi, and buy new cars."

I don't mean to pick on Marco and coauthors. This is one sentence of an otherwise excellent paper. Had they written "could" instead of "should" I would have no objection. Their paper is not about constitutional questions of central banking!

 My point: this kind of thinking pervades the policy-maker bubble. Hundreds and hundreds of papers find that the central bank can affect this or that by buying securities, changing bank regulations, changing financial regulations. They, and conference participants, segue into "policy conclusions" that central banks should use this dandy new tool. Practically nobody stops to ask, just because the central bank can affect the economy through its regulatory or asset purchase powers, should it do so?  The question, "do we really want an independent central bank routinely dialing up and down levers of cash-out refinancing, with an eye to raising or lowering stimulus" just never occurs to anyone.

That constitutional question is the big one we all should be asking as central banks move to financial regulation and discretionary supervision. Ms. Yellen could have asked it. We seem to have this new power to direct the financial system. Do you really want us to use it? She did not. That's not surprising. Essentially nobody inside the central banking bubble asks this question. It's not "political" in the WSJ sense, though any large discretionary power will soon be politicized. (Many central banks around the world allocate credit to politically popular constituencies.)

What's systemic anyway? 

Just what is a "systemic" crisis anyway? That would seem to be a foundational question that a Fed chair should weigh in on, and Ms. Yellen writes (as usual for the policy-maker world) as if we all knew exactly what it is. Yet the answer is decidedly muddy.

It bears on policy. For example. right now, there is a movement around the world to declare that asset managers are systemic dangers. How is that possible? The manager buys and sells your stocks. If he or she invests in a stock and it goes down, you can't demand your money back; you can't run, you can't force the manager into bankruptcy. Shouldn't asset managers get a non-systemic gold star, for not issuing run-prone securities? Well, the story goes, they might "herd" or be prone to "behavioral biases," and, heaven forbid, sell stocks, which  might go down.  I guess, and a hyper-leveraged bank might get in trouble (despite all of Ms. Yellen's assurances)?  "Financial stability" now seems to mean nobody should ever sell anything and stocks should never go down. Except we want lots of "liquidity" so people can sell things fast (to who?) in a crisis...The intellectual quicksand is rising fast.

Are insurance companies "systemic?" Are retirement plans "systemic?" Just who gets saved when?

What is a crisis anyway? Is it just a bunch of bankruptcies? What is the nature of "contagion?" Is it dominoes -- A fails, A owes B money, B fails? Is it (my view) a run -- A fails, so people question B and pull out run-prone assets? The system seems to handle even big bankruptcies fine at sometimes, and not at others. What makes those times different? How do you "resolve" in a crisis?

Ms. Yellen points to "liquidity" being a problem in a crisis, and her Fed now encourages institutions to have lots of "liquid" assets to sell in the event of losses. But to who? Isn't there something deeply wrong about a system in which everyone's risk management plan is to sell assets in the event of price declines?

Ms. Yellen's account of the crisis, though a nice capsule history, is not at all insightful on this point. She speaks of "liquidity" and "solvency" and "vulnerabilities." But moving from  what happened to  why, she writes only a familiar story of behavioral excess -- much of it, curiously, squarely blaming past central bankers, though cloaked in passive voice -- with no mention of mechanics. Yet her job is to fix the machine, not to wish for smarter people
"Financial institutions had assumed too much risk, especially related to the housing market, through mortgage lending standards that were far too lax and contributed to substantial overborrowing. Repeating a familiar pattern, the "madness of crowds" had contributed to a bubble, in which investors and households expected rapid appreciation in house prices. The long period of economic stability beginning in the 1980s had led to complacency about potential risks, and the buildup of risk was not widely recognized. As a result, market and supervisory discipline was lacking, and financial institutions were allowed to take on high levels of leverage. This leverage was facilitated by short-term wholesale borrowing, owing in part to market-based vehicles, such as money market mutual funds and asset-backed commercial paper programs that allowed the rapid expansion of liquidity transformation outside of the regulated depository sector. Finally, a self-reinforcing loop developed, in which all of the factors I have just cited intensified as investors sought ways to gain exposure to the rising prices of assets linked to housing and the financial sector. As a result, securitization and the development of complex derivatives products distributed risk across institutions in ways that were opaque and ultimately destabilizing."
That's not an encouragingly insightful description of what's wrong with the machine. And when you read it, if it's all "madness of crowds", including (admirably) madness of regulators, there is absolutely nothing in the new regime to stop it from happening again.

A last nice word. 

If Ms. Yellen is not reappointed, will her successor do better? Well, that depends who it is, of course, but parts of the speech show just how high that bar will be.

The speech is detailed, and knowledgeable. In most of her points, Ms. Yellen makes deep contact with academic literature, much of it conducted at the Fed. As our leaders consider whether she should continue or who and what kind of person should replace her, this is worth keeping in mind. A banker or professional policy type is unlikely to be able to assimilate this wide resource thoughtfully and critically. 

Now, academic economics doesn't have a great popular image these days, and you may react, "so much the better if our next Fed chair doesn't listen to a bunch of pointy-headed geeks." I think the pointy-headed geeks have got a lot of things wrong too, and tend to write papers that please the upper echelons. I disagree with much of the literature she cites. But this is the expertise we have. A thousand well-trained minds thinking about the issues, and absorbing the facts we have, is better than none.

While we may wish for a Fed chair, or a president, or any other leader, with a great "gut instinct" and "experience," the history of the Fed shows that just about every major disaster has been one of wrong gut instincts and misleading experience. America works with great institutions that guide imperfect and sometimes mediocre people, not by hoping for wiser aristocrats.

Moreover, Ms. Yellen knows to be skeptical. When staff come in with a model or regression that shows this or that, she knows where the bodies are buried.  Though I have made fun of the academic-policy-maker bubble, someone too far outside of the bubble will either be bamboozled by the BS or unaware of the wisdom. Neither is good. 

Good bankers know how to run banks, but not a banking system. Things that are great for a bank -- more leverage, less competition,  more bailouts -- are not so good for a banking system. Good political appointees know about politics and policy, but are not likely to answer my questions with any more clarity, and also to be befuddled by the confusing issues. Yes, economists don't understand "systemic" and "liquidity" and "contagion" very well. But practitioners, even those who know how to make money on them, understand their mechanisms even less.

A good Fed chair needs a deep, yet skeptical knowledge of Ms. Yellen's footnotes, together with lessons of experience, a deep knowledge of financial and economic history, and now an understanding of financial economics and the economic, legal, and institutional architecture of the financial system, along with the ability to run a sprawling institution, political acumen, and that ineffable characteristic, wisdom. 


  1. "Practically nobody stops to ask, just because the central bank can affect the economy through its regulatory or asset purchase powers, should it do so? The question, "do we really want an independent central bank routinely dialing up and down levers of cash-out refinancing, with an eye to raising or lowering stimulus" just never occurs to anyone."
    Thank you for an incredibly penetrating piece. But it is also incredibly depressing. The above quote from your piece hits the nail on the head. Unfortunately the answer is: these are complicated and abstract matters that discourage serious attempts by political policymakers to understand the problems created by excessive regulation. The few that try are often reluctant to take the bull by the horns as the chances of success are slim. Regulations have never been and never will be substitutes for robust capital. But as long as the banks are among the biggest campaign contributors it is hard to see substantive progress in the future.
    Just more boom and bust and boom and....

  2. Valter Buffo, Recce'd, MilanAugust 30, 2017 at 11:55 AM

    Thank you John, in my view this piece is a great contrubution to the understanding of these topics: which, as you say, is not always full, even at the highes decisional levels. Just one brief comment: you write "Hundreds and hundreds of papers find that the central bank can affect this or that by buying securities, changing bank regulations, changing financial regulations. They, and conference participants, segue into "policy conclusions" that central banks should use this dandy new tool. Practically nobody stops to ask, just because the central bank can affect the economy through its regulatory or asset purchase powers, should it do so? The question, "do we really want an independent central bank routinely dialing up and down levers of cash-out refinancing, with an eye to raising or lowering stimulus" just never occurs to anyone." I would add a few questions: WHO gets the "refi money"? Why them, and not others? Why MBSs and not other categories of debt? Why now and not then? When does an Institution become of "systemic" relevance, and why?

  3. Good to have you back. "Credit default swaps for the large banks also suggest that market participants assign a low probability to the distress of a large U.S. banking firm." Of course they assign a low p to this event. They know from past experience, taxpayer wealth and income will bail them out. Reasonable policy change Ms. Yellen. Tell the markets they are on their own. TBTF is no more. As for "discretion" versus rules based, Fed decisions seem ~ N(0,dt).

  4. The sooner this big government control freak goes, the better for the country.

  5. I think proper planning and govt. taking initiative in most beginning is all need.

  6. Glad to have such a substantial commentary. One small quibble: in early 2008 Geithner was President of the Federal Reserve Bank of NY.

    1. Thanks! Fixed. And in retrospect, how presumptuous of me to think the WSJ fact checkers would get something so obvious wrong.

  7. Unfortunately your post contained one critical blunder that irreversibly spoiled what would have otherwise been impressive commentary: "out of forthright Jon Snow-like irrepressible honesty[.]"

    The man's name is John Targaryen! Your Lannister-esque bullying of those with nontraditional family backgrounds is unacceptable. You should be ashamed of yourself.

    Seriously though, this was a great/thoughtful piece.

    1. Actually, that's Aegon Targaryen, right? Oh, the dangers of Game of Thrones references...

    2. My understanding is that in Westeros 1st names are assigned, whereas last names follow a fairly rigid (and at times nonsensical) set of rules. So I think the first name stays, while the last name changes. Or not. I guess we'll find out in 2019.

      Either way, immediately after I posted the above I regretted it, realizing I may have just inadvertently created the most unlikely location for "GOT spoiler" in the history of GOT spoilers (most people probably figure an econ blog is safe). So while this was amusing (at least to me), you should probably delete these entries.

  8. John, excellent, thoughtful and much needed economic analysis of what is wrong with Dodd-Frank. Question: the large regionals and universal banks remain opposed to higher equity capital requirements because models show that a preferred equity raise would destroy earnings per share (assuming those proceeds are used to pay down 90% of long-term debt). What say you?

    1. The banks are right. If you lever up, you raise earnings per share and mean returns. You also raise the volatility of returns, so there is a bit of a fallacy here. If you want more earnings per share and more volatility, you can leverage up an investment outside the bank too.

      With tax deductible interest and bailout guarantees, leverage is great for the individual bank. It is not so great for the banking system and society as a whole. So, if we're going to make debt tax deductible (less important) and offer creditor guarantees including deposit insurance, bailouts, and the Fed propping up bond prices, we need to force banks to issue more capital and less short term debt

    2. Fully agree. I'd like to see a model showing exact numbers on genuine asset-side (of balance sheet) regulatory compliance cost reduction.

    3. John / Peter,

      "So, if we're going to make debt tax deductible (less important) and offer creditor guarantees including deposit insurance, bailouts, and the Fed propping up bond prices, we need to force banks to issue more capital and less short term debt."

      There are several problems with approaching this problem from a "regulate the banks" perspective:

      1. Define a bank - do we include / exclude insurance companies, mutual funds, vendors that offer financing? Are banks limited to anyone that initiates a loan agreement or do we also include firms that buy, hold, and sell debt securities 2nd hand?

      2. What is the correct amount of equity shares relative to debt outstanding (ratio of liabilities)? What is the correct amount of equity shares relative to assets held (ratio of assets)?

      3. You need a majority of 435 Representatives and 100 Senators to vote for changes in banking regulations.

      4. You then need a majority of central banks / governments around the world to agree to common banking regulations (see Basel I, II, & III). The reason is that large banks typically operate on an international basis and will shop for the best deal available. Capital adequacy requirements are too high for banks in the U. S? No problem, banks can get a better deal in Europe or Asia.

      The only thing we need to do is prevent the federal government from issuing debt of it's own.

      That would solve the bailout problem, that would inject more equity and less debt into the economy, that would lessen the total amount of creditor guarantees, that would prevent the Fed from propping up bond prices.

      1. Unlike trying to define what a bank is / is not, we all know what the federal government is and there is only one federal government.

      2. The correct amount of government debt is $0.00. The correct amount of government equity can either be limited or be set by market demands.

      3. The issuance of government equity is not a power delegated to the Congress by the U. S. Constitution. It could be initiated by the U. S. Treasury / Executive Branch of government without Congressional approval.

      4. There would not be international concerns of forum shopping. Federal government equity would only be used by the public to extinguish a tax liability in the future. As such, it would have no value to overseas buyers.

  9. Dr Cochrane, brilliant essay as usual, but a couple of points might be too subtle for the non specialists among your readers (like myself). In particular this one,

    "That assets under management have decreased is not a good sign. Money market funds are easy to fix -- float NAV, change to ETF structure, or add equity cushions. Capital and fixing run-prone liability structures substitutes for intrusive asset regulation, a point that seems to be missed entirely."

    Makes me think that I will have to spend many hours researching just to get a handle on what you are saying. It would be really excellent if you could write a blog or two on the most important points, targeted for us more pedestrian readers!

  10. Valter Buffo, Recce'd, MilanSeptember 6, 2017 at 3:04 AM

    Further to my previous comment. From today's (09/06) FT:
    Quote: "Bottom Line: Brainard is making a push to slow the pace of rate hikes. I am not sure she will be as successful as her last effort to change the course of policy. But she still has two important takeaways for investors. First, if you think interest rates will rise sharply, think again. The neutral rate of interest is too low to expect much more tightening – we need much faster growth to justify a higher estimate of the neutral rate. Second, assuming she is right and the Fed doesn’t take her advice, her colleagues are positioning themselves for a substantial policy error that would both bring the expansion to an end sooner than later and further entrench disinflationary expectations. And that would only make the Fed’s job harder in the future.
    Brainard’s argument confronts a framing challenge. “The economy and financial markets are in bad shape and we should prevent them worsening” is an easier sell than “the economy is fine but could be much better”, especially given the dogmatic fear of asset bubbles and of future blame for falling behind the curve of an inflationary spike. Fear of loss is proving to be a more powerful motivator than the hope of an uncertain gain."
    End of quote.
    Now my question: is it just me? Or is this noisy and confusing?
    First: "the dogmatic fear of asset bubbles". Were not everybody, and I mean here all central bankers, all academics, and the entire general public, fearing some sort of End of Civilization just eight years ago, due to the effects of an asset bubble?
    Second: "The neutral rate of interest is too low". What? After eight years of unprecedented monetary stimulus? And the appropriate policy response to this problem would be "more unconventional monetary stimulus"? How about "the stimuls did not stimulate?".
    Third: "we need much faster growth to justify a higher estimate of the neutral rate" Yes, right. And we need much more faster growth to explain current (unprecedented) valuations of financial assets.


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