Friday, October 9, 2020

OECD talk -- rebuilding institutions in the wake of Covid-19

Friday morning I had the pleasure of participating in a session at the OECD, as part of their program on Confronting Planetary Emergencies - Solving Human Problems. I had the tough job of following brilliant remarks by Acting CEA chair Tyler Goodspeed and Ken Rogoff, and discussing great questions all starting at 5 AM. 

FYI here is the text of my prepared remarks. My focus is how to rebuild the competence of our institutions, which failed dismally in this crisis. 

(Update: Video of the event including Tyler Goodspeed's amazing critique,  plus Ken Rogoff's insightful talk. Thanks to Fahim M. from the comment below. Unknown says the audio is available on the main page, but I couldn't find it. )  

Covid and Beyond

John H. Cochrane

Remarks at the OECD, October 9, 2020

I very much appreciate the opportunity to speak today. Looking at some of the background documents, and listening to Tyler, I recognize that our panel is decidedly contrarian to the main views the OECD is pursuing, and those of the stars that you invited for previous panels. It says good things about the OECD that you want to listen to and understand heretical views.

I will try to answer to your question — what lessons should we take from the Covid experience? Many people say that “Covid changes everything.” I do not think the lesson is so radical. But the Covid  experience does, I think, bring to the fore and make urgent underlying problems that we need to address sooner rather than later. My “we” is global, and international institutions such as the OECD have a key role to play in this institutional regeneration. 

My theme is that we witnessed an outcome of grand institutional failure. We must reform our institutions, restore their basic competence, and thereby trust in that competence. We must de-politicize our institutions and insist that they return to the narrow focus of their competence. Trust must be earned. 

This erosion of our institutions has been going on for a long time now. in my view, the populist eruption, as well perhaps as much of the left-wing authoritarian woke eruption, stems from the view that elites don’t know why they are doing. That was laid bare in financial crisis, in many foreign policy misadventures, and laid bare by covid once again.

We are in a "planetary emergency." It is an emergency coming from the decay, or decadence if you will, of our governing institutions. They need to restore basic competence, not to embark on grand new adventures.  

The disease will pass, likely sooner rather than later due to the extraordinary inventiveness of our pharmaceutical and scientific institutions. The heroic efforts of doctors, and the speed with which they have learned to treat covid is remarkable. Diseases always have passed. And economies and societies returned to normal.

Covid -19 is, however, a fire drill, a wakeup call, a warning sign. It is almost perfectly designed to that purpose. It is just serious enough to get our attention, in a way that H1N1, SARS, and Ebola, were not.  But compared to plague, smallpox, typhus, cholera, 1918 influenza, the death rate is tiny.  

There is a virus out there, natural or engineered, that spreads like this one and kills 20% or more of the population. It will come sooner than we think. And we are wildly unprepared.  Ken Rogoff rightly points to a range of other tail events that we are wildly unprepared for. Antibiotic resistant bacteria.   Massive computer failure. Even a small nuclear war. 

Let us look somewhat chronologically at the list of failures in the last year.

Public health  

Pandemics are supposed to be stopped by public health. Monitoring, testing, tracing, quarantining, making sure sick people don’t get on planes and perhaps most of all providing real time unbiased information so people, businesses, and schools can make informed decisions. The public health bureaucracy has previously done amazing work, perhaps lulling us into somnolence, for example wiping out smallpox. 

Public health institutions failed, and demonstrated massive incompetence, at all levels: The WHO, national organizations such as the US CDC and FDA, state and local public health. The CDC delayed tests for a monty. We never got N95 mask production up, banning sales and importation. It never occurred to US authorities to take temperatures of people who get on planes. The WHO notoriously covered up for China. The dysfunction continues to this day, for example with the CDC only last week admitting that aerosol transmission is possible, the FDA still banning tests outside of hospital settings.   

Part of the failure comes from mission creep. The CDC had moved far beyond its basic mission to control infectious disease, and spent most of its money on lifestyle, mental health, and addiction. And when the CDC proclaimed that Americans do not need to pay rent, just what biological science backs that up? How will we trust the next CDC statement? 

As Paul Romer has been advocating for months, we can stop this disease cold with widespread testing, at a cost (say, $100 billion ) of at least an order of magnitude less than the budgetary and economic costs of the pandemic. It’s not happening. The OECD could be championing it. Stopping the winter wave via testing, as we will not have a vaccine in time, would be more valuable than any economic intervention on the table.  

The politicians who sit atop did not distinguish themselves either, but as the wisest politician cannot substitute for a well trained military if you are invaded, cannot tell each soldier how to shoot, nor can he or she substitute for a well-run public health bureaucracy when a pandemic breaks out. And in fact there was not much difference in how politicians behaved, across the world and across political orientation. The places that did well, like South Korea, had a good bureaucracy in place. 

Bureaucracy is not a bad word. We need effective bureaucracy. That’s what public health, and so much more, is made of. The OECD is a bureaucracy.  Our job is to make bureaucracy more effective.

So, the first thing we need is a thorough investigation of how things went so wrong, a bottom to top reform of our public health bureaucracy, and steps to keep it functional through the years before the next pandemic. After 9/11, there were investigations and a commission in the US, and much global cooperation to improve terrorism response. After the financial crisis there was a wave of investigation and reform. It wasn’t perfect, but at least we tried. 

We need to acknowledge and investigate the abject failure of our public health bureaucracy and institute similar reforms. We don’t just need another commission to produce  a pretty report power point slides. The US had about a dozen pandemic plans. None cited the others. None were even pulled off the shelves. 

We need implementation, and constant practice, to guard against complacency during the quiet years until the next pandemic. After H1N1, California put in an excellent mobile hospital system. A few years later our governor canceled $5 million a year it took to keep it up, in order to contribute to his $80 billion high speed train. When we needed it it wasn’t there. 

I don’t see now acknowledgement of this massive failure, or interest or the will to do this reform. The agencies themselves will not do it — they are busy defending their past actions and their future budgets.  Politicians who lived through the crisis are mostly interested in writing first drafts of history in which they are glorious saviors. 

International institutions could be on the vanguard of demanding this reform. There is a good job for the OECD. 


Next, our politicians, in desperation, locked down economies.  We tend to rationalize that whatever we did last time must be the right thing, so confronted with new outbreaks I am afraid that all they can think to do is lock down again. 

Economic lockdowns are what you do in an absolute panic, when a virus is totally out of control and any attempt at rational policy has totally failed. The cost has been tremendous. And let us remember, it is mostly borne by hard working lower income people, not by comfortable academics and policy analysts like us who can just zoom all day and order from Amazon. 

We must not enshrine economic lockdown as the default answer. There is no reason an auto body paint shop needs to be closed because of covid. There is no reason Italians can’t take their dogs for walks. 

We need to build the capacity to flexibly regulate dangerous behavior not just business per se, to achieve a reproduction rate below one without killing the economy. That too cannot be done on the fly. It is a institutional capacity that needs investment, and the OECD can help to spread best practices. 

Central banks and financial policy

Next, our central banks stepped in. In 2008, we had a financial crisis,. Central banks broke all the rules,  with creditor bailouts, propping up asset prices to keep investors from losing money, buying unprecedented assets. Well, you can’t worry about moral hazard in a crisis they said, but we’ll fix this, so it won’t happen again.

Again. 10 years later the bailouts are about 5 times bigger than last time. The US Fed bought a trillion of treasurys to keep their prices up, after dealers ran out of money due to perfectly understood failures of their regulations. The Fed went on to prop up the prices of corporate bonds, and municipal bonds. We bailed out airlines, or rather airline bondholders.  

Once again, a huge vat of debt had built up; once again nobody kept any cash around for bad times, once again the government stepped in and offered an enormous put option, just as, arguably everyone expected.  

This time, however, I don’t even hear the promise to clean up the moral hazard. We are, apparently permanently in a financial system in which people should load up on debt and risky assets in good times, and the government will buy them up should prices ever waver.  Private gain, public loss. 

Obviously, this can’t last. We need a financial regulatory regime in which people can and do bear risk, and have incentive to be there to buy at the bottom. Many of us have written how to do this: reduce debt and especially short term debt, encourage equity financing. Simple streamlined financial regulation is economically simple, it takes only will to take on the hubris of regulators who enjoy an ever-expanding mandate. The inevitable alternative is an entirely government run financial system. 

The OECD could champion this path. 

Debt and deficits 

The fiscal response in the US is nearly 5 times larger than it was in the financial crisis. Now, this was and is the time to borrow or print money and spend it — but spend it wisely. Protect the most vulnerable, invest heavily in testing and public health, yes. But shoveling money out the window in the name of stimulus does no good. You can give people as much money as you like, they are not going to bars, restaurants and traveling by air — even if those have not been shut down by government. Stimulus is like a capuccino. It doesn’t do much good if you have a virus. 

Here too, nobody seems to be talking about consequences. At least the Obama administration nodded that they planed a return to fiscal probity when the crisis is over. MMT seems to have infected Washington. In Washington, nobody even bothers to worry about who will pay for spending, or what the spending is for. Our politicians are like drunks making trillion dollar bets in a bar — $2 trillion! No, I bet $3 trillion!  And they talk about amounts, not what they want to spend it on, and why that will do any good, other than to "help" various constituencies. 

The United States used to borrow in bad times, recessions and wars, and slowly pay it back or grow out of it in good times, with steady small primary surpluses. Now we run $1 trillion dollar deficits in good times, and $5 trillion in bad times. We economists spend a lot of time on r vs. g sustainability arguments.  They are irrelevant here. Nobody — nobody — thinks we can double the debt/GDP ratio every 10 years, when each crisis comes, especially with, in the US unreformed entitlement promises and a tax system that cannot pay for them. (Europe is much better on this score, both handling its debt since the crisis and funding its entitlement promises.) 

At this rate, sooner or later, a sovereign wealth crisis will hit the dollar, and any other country that behaves similarly. It must result in default, sharp inflation, economy-ruining taxation, and a catastrophic crisis of the financial system that relies on the sanctity of US debt. 

You may think a global sovereign debt crisis is unthinkable, or so unlikely as not to worry about. Well, last year you probably thought a global pandemic was so unlikely as not to worry about. Covid should teach us to pay more attention to the unlikely but disastrous tail events that we know are out there waiting to happen, and to the little trembles (H1N1, SARS, Greece) that warn of earthquake faults below. 

The OECD can help. Sound the alarm worldwide — spend only wisely, reform tax systems to simple, transparent, growth-oriented, and provide  adequate revenues. Encourage governments and central banks to lengthen the maturity structures of debt to avoid crisis dynamics. 

Above, all, we need to return to solid, long-run growth. That comes from only one place, productivity led by innovation and ruthless competition. Low and predictable marginal tax rates, especially on capital, stable institutions and property rights, pervasive reform of regulatory barriers and government barriers to competition. The last 4 years in the US saw growth several percentage points above all forecasts, from relatively small cuts in marginal rates and a valiant but slow deregulation effort, even in the face of anti-growth immigration and trade policies. And we saw the greatest decline in inequality, rises in wages and decline in unemployment among low income, low skill and majorities in decades  One can do much more.

Yeah, I know. Old hat neoliberalism. So out of fashion. Nobody gets to be the toast of Davos cocktail parties for saying that. Lord give us structural reform, but not quite yet. Well, our need right now is institutional repair, fostering resilience, avoiding the next, inevitably larger, crisis, not grand schemes that make you the toast of Davos. 

Institutional repair 

We need, crucially, narrow-focus institutions. All of our institutions have expanded their mandates, tried to do too much, and ended up deep in politics and incompetent at their basic jobs. 

Central banks are prime examples. Once they were in charge of inflation, with concern over unemployment, and they manipulated only short term interest rates. They could be quite independent and technocratic in these limited tasks. 

Now central banks are buying trillions of assets, and thereby allocating credit — to housing, to green projects, to bankrupt state and local governments, to the peripheral sovereigns and low quality corporate investments in Europe. This is fiscal policy. Central banks are using regulatory power to policy ends ever more strongly. The regulatory powers of the post crisis era morphed to a desire to become “macro-prudential” regulators, to manage all asset prices, to allocate the flow of credit over time and space. 

On the eve of covid, central banks and the international institutions that support them started to take on climate change and inequality — and not just these goals, but a particular, politically potent narrow set of policies:  climate change via abandoning fossil fuels before alternatives are in and via large subsidized projects, not nuclear, not carbon taxes, not adaptation, not carbon capture; income inequality via taxation and social program spending, not via opportunity and growth. Since the short-term interest rate doesn’t have much to do with carbon, they naturally turn to regulatory pressure — forcing banks to stop financing fossil fuel companies , or in the IMF case conditioning aid on green projects and social spending — or subsidy via asset purchases. 

This fall, our Federal Reserve is moving aggressively to broaden its mandate to inequality, and social, gender and racial justice. Since the short term interest rate does not have much to do with these either, one can expect that the actions will come primarily through regulatory power and channeling money to institutions that are perceived to advance the cause. 

This will end badly. All of these activities are by their nature political. In a democracy, an  institution like a central bank may stay independent and technocratic, free of what some call political meddling and others call political accountability, only if it acts with limited scope and stays out of politics. If central banks wade in these waters, they must lose their autonomy, their independence from electoral politics — and any trust in their technocratic competence. 

This observation is doubly true of international institutions. IMF, BIS, World Bank, OECD, are only effective when they have the reputation for impartial, a-political, technocratic competence. If they wade into politics it may feel great at first, but the politicians will demand their due when the winds change, and the institutions will lose their core competence, trust, and authority to actually fix crises.

I do not dispute these goals. But even if one agrees completely with the goals, it does not follow that every institution must focus itself on advancing these goals. 

A word to those who set policy in these institutions: You may believe climate change, inequality, and social racial and gender justice are imminent crises. You may believe that every effort of our society should address them right now. Good for you. Work for politically accountable organizations that advance those causes. Become an activist. Run for office. Take orders and preach. But do not run a central bank or other independent, technocratic, a-poltiical  institution. We need those to work in the next crisis, and for people to trust them. 


In the subsequent discussion, “fake news” and a desire to “control” the internet came up. I added the following point. 

Free speech is also a vital piece of systemic resilience in the face of crisis. How many times were our experts wrong? And how many times was it dissent, multiplied and verified on the internet, that set them right? The CDC proclaimed masks did no good. The WHO and CDC denied aerosol transmission. The amazing worldwide communication of trial and error of how to treat the disease happened over the internet. If the internet were censored, we’d be stuck at Feburary levels of understanding. And the internet is censored — twitter and youtube have taken down statements by the US President’s chief Covid adviser, because it disagreed with WHO policy. The best antidote to fake news is its correction, and lots of honest news — something the OECD is well suited to provide. 

This is a subject too big to explore now, as there are limits — riots are being organized on facebook too. But censorship, only allowing views consistent with those promulgated by specific organizations, will disastrously impede the resilience we need to address the next crisis. 


Tyler Goodspeed was terrific. He did his homework, read the underlying documents such as the “New Approaches to Economic Challenges”— a document whose grand vision is more chilling than anything I accused the OECD of. (Update to a previous post -- one of the jobs of CEA chair is to interface with these kinds of efforts at the alphabet soup of international economic institutions.) I will post his speech as it becomes available. Ken Rogoff’s remarks were also terrific, though I don’t think he wrote them down. Ken agrees, spend now on mitigation but not stimulus, be careful of debt, and he delivered a stirring ovation to the importance of free speech, how it is in danger, and how even the Federal Reserve is bowing to the twitter mob.



  1. I plan on writing on this later, but I am afraid that depoliticizing such high level institutions is not really possible. What we can hope for is balancing political forces. When this is done satisfactorily, we get the impression that it has been depoliticized. This is why parliamentary countries fare pretty well while several institutions which aim to be purely technocratic do not.
    International institutions should reflect the underlying distribution of international power in their votes, so that their votes convey something actually meaningful. This formula has worked for a long time, and should continue to work. We must only remember to apply it consistently.

  2. "Above, all, we need to return to solid, long-run growth."

    Yes. We've traded away long term stability for short terms gains and risk. Life is pretty miserable under that trade-off, and the pandemic has laid this truth bare all to see. We will reap what we sow. The hat top to Augustine was nice, too, as he is a hero of mine.


  3. It's also available on video starting at about 41:00 here, in case anyone wants to listen to it while doing something else.

  4. The recorded webcast is available here:

  5. John,

    "Many of us have written how to do this: reduce debt and especially short term debt, encourage equity financing."

    FULL STOP. Equity financing must start at the very top - the federal government. You can't make companies or banks sell equity in lieu of borrowing and you can't make people buy equity shares in lieu of bonds.

    The one thing the federal government can do is make the equity that they sell more attractive than the bonds that they sell administratively.

    "Above, all, we need to return to solid, long-run growth. That comes from only one place, productivity led by innovation and ruthless competition. Low and predictable marginal tax rates..."

    Again FULL STOP. Your focus on tax rates is misleading. Tax policy must be adjustable in a predictable way that does not run up the federal debt during either good times OR bad. This is accomplished by having the federal government sell tax breaks (equity) through the U. S. Treasury Department rather than Congress giving them away to favored constituencies.

    The potential rate of return on these risk assets are adjusted administratively by the Treasury in response to economic conditions - the price of risk assets sold by the U. S. Treasury is administratively adjusted downwards during a recession and adjusted upwards during a boom - countercyclical economic policy.

  6. " And when the CDC proclaimed that Americans do not need to pay rent, just what biological science backs that up?"

    If you are referring to the ban on evictions, the science is that living homeless is not healthy.

  7. The CDC became something like the Federal Reserve was pre-2008. Somewhere along the line, it turned from a public health preparedness organization into an extension of academic departments at universities doing public health research.

    Love it or hate it at least the Fed's current approach of bail out everyone works to stop crises. They showed that they have the operational know-how to make that happen incredibly quickly unlike in 2008.

    The CDC has absolutely no idea how to react to an actual pandemic. They need to become less of an academic sponsor and more like a fire department.

    1. Anonymous,

      "Love it or hate it at least the Fed's current approach of bail out everyone works to stop crises."

      And that's when the "crises" become more exaggerated. Why should I work when instead I can extort money from the Fed by threatening to blow up a building (or derail the economy in some other way). I create a crisis that the Fed must solve by throwing some money my way.

      Oh, wait a minute - only real criminals use extortion, not political operatives.

      The problem with that approach is that it concentrates risk into a single security (the dollar currency) rather than dispersing it. Yes, the minor risks are removed, but the larger risk becomes more pronounced.

  8. John,

    Thanks again for participating in our NAEC debate at the OECD.

    Your message about sticking to one’s silo is worth thinking about, but I can almost hear my friends, who are epidemiologists, asking how come this economist is barging into our silo?
    Incidentally, how would you consider the OECD’s position which has always been in favour of universal health care, and where only one member I believe does not have such a policy? `This used not to be considered as a political issue in the past but seems now to have become one. Recall the words of Hayek in a Road to Serfdom:

    “There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”

    Tyler’s enthusiastic endorsement of fracking will, I suspect, encounter resentment from another silo, that where climatologists, geoscientists and ecologists cohabit.

    On another subject and one on which I think we agree, iot is always easier to find a scapegoat for some catastrophe rather than our own governance, and, in this case, China seems to be the choice and no doubt some of the handling of the Wuhan crisis was far from up to scratch. But, we should not confuse dislike for the regime with responsibility. As to the origin of Covid some things are worth remembering. There is evidence of the presence of Covid 19 in Europe in November 2019, in Milan, Paris and possibly Barcelona. Where it came from is a moot question. That the Chinese authorities played it down is also not in doubt, but as someone said when you lock a city like Wuhan down it can hardly go unnoticed. Why did we not react? We could have gained well over a month.

    On another point, perhaps we might have had a little recognition of the contribution of public institutions to innovation, as Mariana Mazzucato is fond of pointing out. If you look at the list of potential vaccines, you cannot miss Imperial College, and Oxford University, both public institutions, the Institut Pasteur also public and the partnership with the NIH in the U.S. And I was sorry to see that much of the blame for the pandemic being put on the bumbling bureaucrats of the public health systems. Following the rules for testing new treatments and vaccines does not seem to be just bureaucratic, these rules came from somewhere. I, personally, would not accept to be vaccinated with a vaccine that had been accelerated through the testing stages. Already 25% of people in a recent poll would not accept to be vaccinated against Covid, so an error and bad consequences from a new vaccine could radically undermine confidence in the health system.

    In any event many thanks for taking part in the debate and ensuring that we could have a clear and informed discussion.

    Alan Kirman

    1. Big comment.
      1) Silos. I offer writing, opinion sometimes backed up by fact and logic. I do not regulate what anyone can do, nor move around trillions of dollars of money. I have no legal power to do anything. Intellectual silos should not be respected. Politically accountable parts of government may act broadly. Independent, not accountable, regulators and central banks must act with limited scope in a democracy if they wish to stay independent.
      2) I'm all for universal health care -- as I am for universal access to everything, bought and sold on the free market. I believe you mean government provided and taxpayer supported health care, extended to all the population. Actually most countries still have private insurance on top of a rotten social safety net. And the OECD should be about spreading good ideas, not extending whatever bad ideas lots of countries have to everyone. In 1790 all of the word were monarchies. By this logic, the OECD should say to the US, get yourself a king.
      3) Fracking has led the US to the greatest decline in CO2 emissions of any country, especially if you count imported energy.
      4) I don't think there is any disagreement that failure to contain covid belongs everywhere, not just to China. Or that public investment in basic science can be enormously productive.
      Thanks for writing

    2. Silos: You are free to ignore me. Nobody is free to ignore central bank regulation.

    3. Mr. Kirman, I have questions regarding the basic social safety net you're positing here. I'm a physician by training, so you'll forgive my ignorant questions. Is there evidence that a social safety net works profitably in an economy like ours? I've seen research out of Harvard about the expansion of Medicaid services (prior to the ACA) to indigent Oregonians. I believe that after some brief period of time (3 years or 5 years), the data resulted in that these beneficiaries of public largess, despite having "access" ostensibly to preventive care, did not decrease emergency department utilization, did not decrease total healthcare dollar expenditure, and did not necessarily have significant improvements in their healthcare outcomes. I don't know of data since the ACA has been passed that talk about broad outcomes, utilization, or anything beyond "access." If there is data suggesting that social safety nets are a cost effective way of utilizing healthcare dollars, I'm not aware of it. Perhaps you'd like to share. I'm not in the camp of "everyone else does it, so we should do it too" even if I'm underwhelmed at the current quality of U.S. healthcare per dollar.

      The second question is "why do we lump healthcare in with food, shelter, and clothing?" Ostensibly, if we did most of the first three correctly, the latter would only require emergent care coverage, which we have via EMTALA. There are two complaints to this. First, if you're saying that you and everyone else has a right to healthcare, that necessitates a right to my ability to practice medicine and nurses' abilities to practice nursing, therapists, hospital food service providers, EMTs, CNAs, physician assistants, scrub techs, etc, etc. How does someone else presume so highly as to look at each of these people and say that that person has a claim to quite literally a portion of the healthcare workers' life's hours and education? Indeed, is it not *my* right to expend my life's hours as I see fit? If your response, though it be an indirect one, would be something to the effect of "well, we'll pay you" then what leverage do I have if the government tells me I must do something? What if you propose to pay me 60% of my going rate? I will tell you quickly that I plan to change careers. With average medical school graduate debt topping 200K in the States; you would force physicians into the undesirable position of choosing to not go into medicine at all but rather some other profession where the barriers to entry are comparatively lower and recompense proportionally higher...say economics? Wouldn't it be thrilling if thousands of highly-intelligent and motivated people flooded your preferred industry and drastically lowered pay via competition. The irony would be delicious, but I digress.

      Last, what other professions are we as a society to lay collective claim to once we've figured out that they are a "basic human right?" Internet access means we should go after telecoms. The ability to search that internet is paramount, so there goes google/alphabet. We've experienced via COVID that shortages of household commodities do occur, so naturally we should control production of these. I'll take procter and gamble now, thank you! We're in need of education via these internet connections, so I'll appropriate the Ivy Leagues. Oh Harvard is so forward thinking; they wouldn't mind if if I required their erudite professors to impart their collective body of learning for say, 60K per year per professor? If we are guaranteeing them jobs via the government, then what need has Harvard for that grand endowment! Surely, it would be better served providing universal basic income to the poor children of Appalachia or the Ozarks or Oakland or Flint?

  9. Mr. Cochrane writes: "Once again, a huge vat of debt had built up; once again nobody kept any cash around for bad times, once again the government stepped in and offered an enormous put option, just as, arguably everyone expected."
    This quote is used by George Will in his Washington Post column.
    Not being an economist, I'm baffled by the reference to "an enormous put option." Is there a way to express this that a layman would understand?


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