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By Marshall Auerback, a portfolio strategist and hedge fund manager. Cross posted from New Economic Perspectives.
The markets are again in free-fall and, once again, a lazy Mediterranean profligate is to blame. This time, it’s an Italian, rather than a Greek. No, not Silvio Berlusconi, but his fellow countryman, Mario Draghi, the new head of the increasingly spineless European Central Bank.
At least the Alice in Wonderland quality of the markets has finally dissipated. It was extraordinary to observe the euphoric reaction to the formation of the European Financial Stability Forum a few weeks ago, along with the “voluntary” 50% haircut on Greek debt (which has turned out to be as ‘voluntary’ as a bank teller opening up a vault and surrendering money to someone sticking a gun in his/her face). To anybody with a modicum of understanding of modern money, it was obvious that the CDO like scam created via the EFSF would never end well and that the absence of a substantive role for the European Central Bank would prove to be its undoing.
As far as the haircuts went, the façade of voluntarism had to be maintained in order to avoid triggering a series of credit default swaps written on Greek debt, which again highlights the feckless quality of our global regulators being hoisted on their own petard, given their reluctance to eliminate these Frankenstein-like financial innovations in the aftermath of the 2008 disaster.
What is required is a “back to the future” approach to banking: In the old days, a banker “hedged” his credit risk by doing (shock!) CREDIT ANALYSIS. If the customer was deemed to be a poor credit risk, no loan was made.
It goes back to a point we have made many times: creditworthiness precedes credit. You need policies designed to promote job growth, higher incomes and a corresponding ability to service debt before you can expect a borrower take on a loan or a banker to extend one. And, as Minsky used to point out, in the old days, banking was a fundamentally optimistic activity, because the success of the lender was tied up with the success of the borrower; in other words, we didn’t have the spectacle of vampire-like squids betting against the success of their clients via instruments such as credit default swaps.
Credit default swaps themselves are to “hedging” credit exposure what nuclear weapons are to “hedging” national defence requirements. In theory, they both sound like reasonable deterrents to mitigate disaster, but use them and everything blows up. At least one decent by-product of the eurocrats’ incompetent handling of this national solvency disaster has been the likely discrediting of CDSs as a hedging instrument in the future. Note that 5 year CDSs on Italian debt have not blown out to new highs today in spite of bond yields rising over 7%, because the markets are slowly but surely coming to the recognition that they are ineffective hedging instruments – although they have been very useful in terms of lining the pockets of the likes of JP Morgan and Goldman Sachs.
Say what you will about Silvio Berlusconi (and there’s LOTS one can say about the man as any reader of the NY Post can attest). But he was right to oppose to a crude political ploy being foisted on him by the ECB, the French and Germans to accept an irrational and economically counterproductive program fiscal austerity program in exchange for “support” from the likes of the IMF. All Berlusconi had to do was cast his eyes to the other side of the Adriatic to see the likely effect of that. The markets’ reaction to his resignation was surreal: akin to turkeys voting for Thanksgiving. The overriding imperative in Euroland (indeed, in the entire global economy) should be to stimulate economic growth to ensure that there are enough jobs for all who want them.
Private spending is very flat and so they need to replace it with public spending or GDP will decline further. The eurocrats seem incapable of understanding that even if the budget deficit rises in the short-run, it will always come down again as GDP grows because more people pay taxes and less people warrant government welfare support.
As for Italy itself, this is a sordid case of the Europe’s mandarins subverting yet another democracy, through crude economic blackmail. Already one government has been destroyed this way: In the words of Fintan O’Toole of the Irish Times:
Firstly, it was made explicit that the most reckless, irresponsible and ultimately impermissible thing a government could do was to seek the consent of its own people to decisions that would shape their lives. And, indeed, even if it had gone ahead, the Greek referendum would have been largely meaningless. As one Greek MP put it, the question would have been: do you want to take your own life or to be killed? Secondly, there was open and shameless intervention by European leaders (Angela Merkel and Nicolas Sarkozy) in the internal affairs of another state. Sarkozy hailed the “courageous and responsible” stance of the main Greek opposition party – in effect a call for the replacement of the elected Greek government.
The third part of this moment of clarity was what happened in Ireland: the payment of a billion dollars to unsecured Anglo Irish Bank bondholders. Apart from its obvious obscenity, the most striking aspect of this was that, for the first time, we had a government performing an action it openly declared to be wrong. Michael Noonan wasn’t handing over these vast sums of cash from a bankrupt nation to vulture capitalist gamblers because he thought it was a good idea. He was doing it because there was a gun to his head. The threat came from the European Central Bank and it was as crude as it was brutal: give the spivs your taxpayers’ money or we’ll bring down your banking system.
Of course, this is nothing new for the EU, as any Irishman or Portuguese citizen can attest. Vote the “wrong” way in a national referendum and the result is ignored by the eurocrats until the silly peasants realize the egregious errors of their ways and re-vote the right way. If it takes two, or even three, referenda, so be it. Politically, the interpretation of any aspect of the Treaties relating to European governance have always been largely left in the hands of unelected bureaucrats, operating out of institutions which are devoid of any kind of democratic legitimacy. This, in turn, has led to an increasing sense of political alienation and a corresponding move toward extremist parties hostile to any kind of political and monetary union in other parts of Europe. Under politically charged circumstances, these extremist parties might become the mainstream.
As for Italy itself, the country runs a primary fiscal surplus. As George Soros has noted: “Italy is indebted, but it isn’t insolvent.” Its fiscal deficit to GDP ratio is 60% of the OECD average. It is less than the euro area average. Its ratio of non-financial private debt to GDP is very low relative to other OECD economies.
It is not at all like Greece. It has a vibrant tradeable goods sector. It sells things the rest of the world wants. You introduce austerity at this juncture, and you will cause even slower economic growth, higher public debt, thereby creating the very type of Greek style national insolvency crisis that Europe is ostensibly seeking to avoid. And then it will move to France, and ultimately to Germany itself. No passenger is safe when the Titanic hits the iceberg.
The entire euro zone is already in severe recession (depression, in fact, is not too strong a word), yet the ECB, the Germans, the French and virtually every single policy maker in the core continue to advocate the economic equivalent of mediaeval blood-letting via ongoing fiscal austerity. And, surprise, surprise, the public deficits continue to grow.
Here’s another interesting thing: in the 1990s, a number of countries, including Italy, engaged deliberately in transactions which had no economic justification, other than to mask their public debt levels in order to secure entry into the euro (see an excellent paper on this by Professor Gustavo Piga, “Derivatives and Public Debt Management”, which documents this practice). Italy actively exploited ambiguity in accounting rules for swap transactions in order to mislead EU institutions, other EU national governments, and its own public as to the true size of its budget deficit.
And Eurostat signed off on these transactions. And who worked at the Italian Treasury at that time? That’s right: “Super Mario” Draghi, who was director general of the Italian Treasury from 1991-2001 when all this was going on, and then joined Goldman Sachs (2002-2005), when the privatisations came up. Interesting that he is now the guy who has to deal with the ultimate fall-out. Karmic justice.
Virtually everybody has lied about their figures (Spain is a notable offender today), so listening to Europe’s high priests of monetary chastity is akin to listening to someone coming out of a brothel proclaiming his continued virginity.
Is there a solution? Of course there is. But the eurozone’s chief policy makers continue to avoid utilizing the one institution – the European Central Bank – which has the capacity to create unlimited euros, and therefore provides the only credible backstop to markets which continue to query the solvency of individual nation states within the euro zone. They are, as Professor Paul de Grauwe suggests, like generals who refuse to go into combat fully armed (“European Summits in Ivory Towers”):
The generals….announce that they actually hate the whole thing and that they will limit the shooting as much as possible. Some of the generals are so upset by the prospect of going to war that they resign from the army. The remaining generals then tell the enemy that the shooting will only be temporary, and that the army will go home as soon as possible. What is the likely outcome of this war? You guessed it. Utter defeat by the enemy.
The ECB has been behaving like the generals. When it announced its programme of government bond buying it made it known to the financial markets (the enemy) that it thoroughly dislikes it and that it will discontinue it as soon as possible. Some members of the Governing Council of the ECB resigned in disgust at the prospect of having to buy bad bonds. Like the army, the ECB has overwhelming (in fact unlimited) firepower but it made it clear that it is not prepared to use the full strength of its money-creating capacity. What is the likely outcome of such a programme? You guessed it. Defeat by the financial markets.
The ECB should, as De Grauwe suggests, be using the ecoomic equivalent of the Powell Doctrine: when a nation is engaging in war, every resource and tool should be used to achieve decisive force against the enemy, minimizing casualties and ending the conflict quickly by forcing the weaker force to capitulate.
The ECB is the monopoly supplier of currency. They can set the price on the rates, (obviously not the supply) so if they set a level (say, Italy at 5%) why should there be a default? Capitulating to the markets, or entering the battle half-heartedly not only ensures more economic collateral damage, but effectively emboldens the speculators by granting them a free put option on every nation in the euro zone. They’ll line them up, one by one, starting with Greece and ending with Germany.
The ECB continues to hide behind legalisms to justify its inaction, ironic, considering the extent to which national accounting fraud has long been tolerated in the euro zone since its inception. The notion that it cannot act as lender of last resort is disingenuous: The ECB does have the legal mandate under its “financial stability” mandate which was provided under the Treaty of Maastricht.
True it is fair to say that the whole Treaty of Maastricht is full of ambiguity. The institutional policy framework within which the euro has been introduced and operates (Article 11 of Protocol on the Statute of the European System of Central Banks (ESCB) and of the European Central Bank) has several key elements.
One notable feature of the operation of the ESCB is the apparent absence of the lender of last resort facility, which is an issue raised by the WSJ today, and which Draghi uses to justify his inaction. But it’s not as clear-cut as suggested: The Protocols under which the ECB is established enables, but does not require, the ECB to act as a lender of last resort.
Proof that the ECB exploits these ambiguities when it suits them is evident in its bond buying program. The ECB articles say it cannot buy government bonds in the primary market. And this rule was once used as an excuse not to backstop national government bonds at all. But this changed in early 2010, when it began to buy them in the secondary market.
The ECB also has a mandate to maintain financial stability. It is buying government bonds in the secondary market under the financial stability mandate. And it could continue to do so, or so one might argue that it could. True there is now great disagreement about this within the ECB. It has been turned over to the legal department, which itself is in disagreement, which ultimately suggests that this is a political judgement, and politics is what is driving Italy (and soon France) toward the brink.
In fact, given the 50% “voluntary” haircut imposed on holders of Greek debt, arguably the ECB is the only entity that can buy these national government bonds today. As Warren Mosler has noted, it is hard to see how anyone with fiduciary responsibility can buy Italian debt or any other member nation debt after EU officials announced the plan for 50% haircuts on Greek bonds held by the private sector:
Yes, all governments have the authority, one way or another, to confiscate an investors funds. But they don’t, and work to establish credibility that they won’t.
But now that the EU has actually announced they are going to do it, as a fiduciary you’d have to be a darn fool to support investing any client funds in any member nation debt.
The last buyer standing is and was always to be the ECB, which will now be buying most all new member nation debt as there is no alternative that includes survival of the union.
And when this happens there will be a massive relief response, as the solvency issue will be behind them, with the euro firming as well.
Of course, we will still have to deal with the reality of a major recession in Europe so long as the faith based cult of Austerians continues to dominate policy making. Sadly, that’s unlikely to change until people are shot on the streets of Madrid or Rome. But at the very least, let’s get this silly national solvency problem addressed once and for all in the only credible way possible. Mario Draghi, you have the chance to redeem yourself and your country. Don’t waste the opportunity.
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Nice post, and lovely to know that Draghi is such a swell guy. Having said that, do you know anything more about whether — and if so to what extent or using what rationale — Eurostat was created to be impotent by design? I am curious whether they were aware of the issues but looking the other way, or clueless entirely. (I mean, it seems sort of unlikely that they missed them, given how fundamental the problems baked into Maastricht are, but still.)
The problems baked into Masstricht are small, mostly a few ambiguities as Marshall points out. The treaty was not designed to undercut unions or the social contract, which is THE ‘project’ that is ongoing today. In fact when an addendum to the treaty was put up for vote several years ago to introduce hard core neoliberal ‘rules’ for the EZ, the French and Danes rejected it to the extent that, despite the fact it had been passed in a majority of countries, the addendum-by-referendum was dropped from the neoliberals game plan.
Now comes an economic crisis that gives another chance to disempower unions and to undo the social contract. This time they are not going to fail if they can just prevent any country’s citizens from voting their will. No referendums – anywhere. The last time neoliberals lost with that strategy. This time it appears they won’t. The neoliberals who control the EC and ECB will even tolerate some blood in the streets of Rome, Athens, Paris in order to become “like the United States”.
I agree with your analysis. The EU and the US are being treated to a Shock Doctrine event and so far the masses are mostly lethargic. The brainwashing seems to be holding so far.
I wonder if and when folks are going to figure out that the same folks behind the puppets in the EU are behind the puppets in the US?
Are we talking about the same Maastricht Treaty, with its the convergence criteria which are the fundaments of the “Stability and Growth Pact” that underlies the Eurozone’s economic policy rules? Because I would be hesitant to say that those things have caused “small” problems.
The neoliberals will fail in Europe because they are economic morons.
A “little” blood in the streets? Their proposed policies, if actually carried out (which they won’t be, the governments will be overthrown first) would lead to a full-fledged French or Russian style revolution. The people are already demonstrating the limits of their tolerance for abuse.
It is well known and not often reported that Eurostat is perhaps THE most corrupt entity of the EU, incompetent to boot!? Hell, Why not put some yellow icing on that crap cake.
A few years back the EU did a report on corruption, which the members of parliament could read – one at a time, under guard, in an isolated room, note-taking e.t.c. prohibited and one had to sign an NDA beforehand. … and it probably got you in the black book also. EU transparency and democracy at its finest.
Same song, different rhyme (the American twist on “profligate” southerners — but deadbeat sovereigns aren’t confined to the south):
Bloomberg
Jefferson County Files Biggest U.S. Municipal Bankruptcy
Jefferson County, Alabama, filed the biggest U.S. municipal bankruptcy after an agreement among elected officials and investors to refinance $3.1 billion in sewer bonds fell apart.
[…]
“There was an impasse reached,” Klee said in an interview today. “None of the creditors — zero — signed up to the deal that we have been negotiating for six weeks.”
[…]
Jefferson County is the 12th entity to file a Chapter 9 bankruptcy this year. Three of those filings were by small municipalities: Boise County, Idaho; Central Falls, Rhode Island, and Harrisburg, Pennsylvania. The rest were special purpose districts, or public-benefit corporations eligible to use Chapter 9 of the U.S. Bankruptcy Code.
Jefferson County supplanted Orange County, California, as the largest municipal bankruptcy. Orange County entered court protection in 1994 after losing $1.7 billion on interest-rate bets. While its petition initially listed more debt than Jefferson County, most of that liability was reduced in the early weeks of the case.
http://www.bloomberg.com/news/2011-11-09/alabama-s-jefferson-county-files-for-u-s-s-biggest-municipal-bankruptcy.html
Don’t miss the companion piece. It’s rich!
Jefferson County’s Path From Scandal to U.S. Bankruptcy Filing: Timeline
[…]
“February 2008: Standard & Poor’s rates Jefferson’s sewer bonds below investment grade. “Once we got cut to junk status, we couldn’t go any lower without just leaving the scene and turning over a corpse to somebody,” then County Commissioner Jim Carns said.
Bankruptcy became a possibility…”
http://www.bloomberg.com/news/2011-11-09/jefferson-county-s-path-from-scandal-to-u-s-bankruptcy-filing-timeline.html
I don’t know if you haven’t read Marshall’s posts before but any reference to “lazy Mediterraneans” or anything similar is to be taken an ironic dig at the dominant narrative of the EU crisis. He doesn’t follow that line of moralizing disguised as economic analysis at all.
Nor, do I.
I was making a connection btw the meme used to transfer blame from profligate lenders to debtors. In the EU, it’s blame the PIIGS. In the US, it’s blame Congress for allowing subprime borrowers (read minorities and poor people) to take advantage of the banks.
NYC Mayor Michael Bloomberg:
“It was not the banks that created the mortgage crisis,” he said. “It was, plain and simple, Congress, who forced everybody to go and give mortgages to people who were on the cusp.”
This is the meme that the banksters use to ward off questions about their risk models, underwriting standards and basic intelligence.
My mistake. Poor reading comprehension on my part.
Good point BTW.
Hmm, ECB as lender of last resort, buying the bonds, like Bernanke bought toxic assets from banks under TARP. Forget about the accounting fraud; just pretend its all good. Whatever it takes to kick the can down the road and keep the bondholders, and the global financial ponzi, err, system, intact.
Do I have that right?
Somehow I think Germany won’t like that solution.
Yep, you got that right, more bailout. How about NC moving past advocacy of bailouts through monetization and get back to its “roots”: dismantling finance alchemy by turning to public/utility financing?
Oh, I forgot, Ms. Smith is a futures trader, so has some affinity with high finance speculation, no?
I believe Ms. Smith is a consultant, certainly familiar with high finance, but more importantly, she often puts up posts that she doesn’t agree with, if they are of interest. I doubt she agrees completely with David Graeber, or George Washington, or many of the contributers.
I particularly disagree with this passage from Auerback’s piece
” The overriding imperative in Euroland (indeed, in the entire global economy) should be to stimulate economic growth to ensure that there are enough jobs for all who want them.”
We need to create a system that doesn’t depend on growth for its health. We should do things that need to be done, and that people want to do, but we’ve had enough of this addictive, chaotic, rat race, glut of wasteful consumption of shoddy commodities, and it seems that “economic growth” has come to depend on this ruinous tendency. The article was informative, though, and it came from a clear point of view.
Thats fine, other blogs *occasionally* offer counterpoints, but in this case, on the day that the Italian debt crisis is all over the news, it looks like ECB intervention is the flavor of the day on Naked Capitalism between this and Ed Harrison’s piece. Disappointing, to say the least.
Concern about reducing the need for growth is good, but the problem comes when populations grow. Then there must be growth or someone is gonna starve. What? Should nations impose strict birth limits on parents and curtail immigration? Otherwise, we need growth, and we need governments to provide stimulus in that regard. Of course, in the USA, stimulus without adjusting the economy back to manufacturing and production and reducing the size of the financial sector is useless. Europe is different — not quite so screwed in some ways, more screwed in others. The problem is we have no consensus on any of this so its all going to have to collapse before people get serious. But growth, in the short to medium term, will be important. There is no way around that.
Educate women, give women legal control over their own reproduction, provide real sex education to everyone, and provide free birth control to everyone, and populations stabilize (and start to drop slowly) immediately.
Do it worldwide, problem solved.
Given that Italy is NOT Greece, has a productive economy, primary surplus and a much lower total debt to GDP ratio than others, then WHY IS IT BEING ATTACKED in the first place? Why straight to Italy skipping Portugal, Spain (or even Belgium). Seems to me for no other reason than that the top banksters believe they can extort a better deal now than if they let peoples and their representatives have time to think about just how bad these “deals” really are. If you believe it is “markets” making these destructive determinations re Italy’s prospects, then banks/bondholders seem themselves to be in both the “Austerian” and “Austrian” cults. I however, no longer believe these are “markets”. I believe the attack has been highly orchestrated since Spring for maximum asset stripping and concentration of power in unelected hands.
A high five to that. Privatization “deals” are a way for the banksters to securitize the income stream for vital public services or assets and extract the highly leveraged acquisition costs (plus fees and pay-offs) from the ratepayers.
The privatization wave, aggressively pushed by the World Bank and other IFIs, was beaten back by civil society resistance in the 1990s. The model failed when company after company (particularly water utilities) couldn’t extract enough from ratepayers to meet debt obligations and maintain service.
Well, they’re baaack. But this time instead of bribing or BS-ing public officials to hand over public assets, they’re holding the Default Pin and threatening to pull it.
Damn right! Classic banking elite strategy: crash the system and buy assets at pennies on the dollar (or euro). Rinse and repeat.
Cash Piñiata … the bankers are up for a little of ye olde smash & grab.
More propaganda from the money printers.
Let’s assume the ECB will start their shock and awe therapy as Mr. Aurerbacks wishes.
I can predict what happens: the Italian and Greek government will say: thank you very much and that’s it. No reforms, no debt lowering, no nothing. And when the ECB stops buying, the debt problem still exists.
There is a precedent for this: Greece and Italy entered the eurozone 10 years ago with debt at over 100% of GDP levels. No big issue everyone thought, because of the euro they get lower interest rates, so every opportunity to use that advantage to bring down debt to sustainable levels.
Didn’t happen ofcourse. So let Mr. Auerback please explain why this time it would be different.
So you are saying that you think it illegitimate to alleviate the worst problems, and to create room for, orderly reforms to take place, simply because you feel that there “must be reforms” now?
Nobody (except a bunch of deluded and self-deceiving idiots) back then believed that debt levels would be brought down by lowering effective interest rates; they simply did not care about the fact that they would be creating this problem. So why on earth is it suddenly important to “solve” it, and specifically to do so by imposing heavy austerity measures for purely ideological reasons, as they are known not to fix anything? This strikes me as extremely arbitrary.
Sorry I don’t know Eric’s history, stopped reading NC comments for awhile when I got frustrated with the bailout advocates.
Don’t know about austerity measures you mention, but why wouldn’t the PIIGS be better off breaking off from the Euro and allowing their own currencies to depreciate to the point where they can become competitive?
Won’t your solution only allow trade imbalances to perpetuate?
Just recommended NC to some people the other day, after reading recent Bill Black articles. After what I read today, have to say I’m a little embarrassed.
Oh, an exit (or a north/south split; though I’m uncertain whether that would allow for enough maneuvering room for the various ‘southern’ countries to function) would be to their advantage.
What I took issue with was Eric’s suggestion that the ECB should engineer a crisis (by denying them access to money to fund the transition with) in order to “reform” them.
(That is, I have no desire to perpetuate the current imbalances; I just think the ECB should do its part to ensure that the transition is as smooth as possible, and that the ECB has no right whatsoever to take a moral stance and deny access to credit to those countries.)
The ECB is stepping in to keep the system running but as said repeatedly by Trichet and Draghi, this can only be a temporary measure. It’s not within the mandate of the ECB to bailout countries infinitely. It’s the job of those countries to bring their house in order. There is a political vacuum in the eurozone because the other countries can’t force Greece and Italy to reform. You can claim that the lack of a federal goverment is a flaw in the design of the eurozone, but considering this fact and that the ECB is already overstepping it’s mandate, you can’t blame the ECB they put pressure on Greece and Italy.
On a lighter note, if anybody has a feasible plan for dismantling the euro, you could win the $400,000 Wolfson Economics Prize.
“Applicants will be asked to explore in detail the issues that exit from EMU wouldraise. These include:-
-Whether and how to redenominate sovereign debt, private savings, and domestic mortgages in the departing nations
-Whether and how international contracts denominated in euros might be altered,if one party to the contract is based in a member state which leaves EMU.
-The effects on the stability of the banking system.
-The link between exit from EMU and sovereign debt restructuring.
-How to manage the macroeconomic effects of exit, including devaluation,inflation, confidence, and effects on debts.
-Different timetables and approaches to transition (e.g. “surprise” redenomination versus signalled transitions).
-How best to manage the legal and institutional implications.
-A consideration of evidence from relevant historical examples (e.g. the end ofvarious currency pegs and previous monetary unions).”
http://www.dailymail.co.uk/news/article-2050930/250-000-Wolfson-Economics-Prize-offered-solution-safely-breaking-euro.html
I do not really believe in currency depreciation as a way to become competitive. And it comes with a price too: inflation. You only need to look at the USA and UK, they try this, but they are not closing their trade deficit.
Southern Europe is not suffering from lack of competitiveness, they all have seen exports growth, they are suffering from over borrowing and housing bubbles because of too cheap money.
And Southern Europe does not have the advantage of reserve currency status the US has. Having said all this, it might be the only way forward for Greece because the country is dysfunctional.
There is another reason why I think it is a bad idea: the EU including the eurozone is a single market which goes much further than a free trade area. Claiming that the EU should have different currencies is like claiming that the USA should have different currencies. If the eurozone would fail, the most likely outcome would be to go back to the situation before 2000: a single market with the ERM with fixed exchange rates. If you would want to see competitive devaluation introduced, this would mean the end of the EU as we know it.
The US differs from the EU in that they have no central government, only a central currency and economy, which is the problem. I agree with something posted in New Economic Perspectives: “Professor Martin Feldstein pointed out in a major article in the Economist (13 June)[that] if a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalisation, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation.”
http://neweconomicperspectives.blogspot.com/2011/11/to-those-who-got-it-right-we-salute-you.html
http://neweconomicperspectives.blogspot.com/2011/11/to-those-who-got-it-right-we-salute-you.html
the EU already has a system of subsidies (regional, agriculture, etc). But I agree, there would need to be more fiscal transfers if the eurozone is moving to a federal structure. But fiscal structures only bring you sofar, I think there are still large regional differences in income and wealth in the USA.
If you would take the ideas of economists about perfect currency areas to the extreme, you should split up the world in completely new different countries, regions or city areas. But we don’t live in a perfect world.
Greece exiting the euro zone now = run on the banks a certainty, evaporating of what’s left of people’s savings, disastrous (to greeks) speculation on drachma, sinking its value to a point where every sellable greek asset (property, company, whatever) can be bought for pennies on dollar, and the foreign debt becomes exponentially more unpayable. So, yes, why not return to drachma, what’s not to like? And, besides tourism, what do the greeks manufacture? Olives? So bye bye new cars, fridges, computers, etc. And goodbye whatever little taxes they paid now.
The only long term solution is to return to tax rates that enable debt principal payments (after the banks have taken their haircuts). I.e. what we had in the past. I.e. having the financial elite to contribute to the common welfare. Good luck with that. Nobody mentioned that in this conversation, either. I guess feudalism is the future.
“Repent, sinners, repent!”
There, I summarized the entire argument that you have been making on NC regarding this issue. Never mind that the “righteous” are pretending that they had nothing to do with the “sinners” way, one side of the coin called the EMU.
If you insist that economics be a morality play, so conveniently now after all these years, you should take up religion over these silly economic matters, which are either beneath you, or possibly so far above you.
morality is the death of good economics. It is too tied to the narrative and will ALWAYS lead you astray! The germans certainly think they are being virtuous. Imposing depression on southern europe is what they morally deserver for being PIIGS. Simple as that.
What debt problem?
There is no government debt problem. There is only a ECB monetary mismanagement problem.
Jefferson County – exception or the new normal?
Unfortunately, the new normal.
There are a lot more public infrastructure bond defaults coming down the pipeline. Too many municipal finance fiduciaries who got the banksters’ fairy dust thrown in their eyes(or were bribed by them) tried to hedge their credit risk by entering deals they didn’t understand.
This call for the ECB to print Euros and buy sovereign debt sounds very dangerous. Maybe, before doing that all of PIIGS write down their debts (everybody takes a haircut) and then have the ECB put a floor on primary offerings.
This problem is so big I cannot comprehend the big picture, but now and then I get glimpses of its parts. I keep coming back to a basic dilemma: How do you solve a debt problem by borrowing more money?
“How do you solve a debt problem by borrowing more money”
—-
That’s what they’re doing right now, and you are correct to note that this does not work. The reason why they have gotten away with this in the past, however, was that they could just ignore the enormous social cost inflicting such a choice on the borrower did. (Nobody cared that living standards in Mexico dropped like a stone; this was considered ‘normal’ given that it was a ‘developing country’.) The reason that this did not work, though, was primarily because of the fact that they charged interest rates that were far too high for the loan to be repayable, thereby dooming the borrower to debt slavery.
The ECB monetization is not “creating more debt”. The possible bad outcome of monetization is inflation, not a debt burden. But the eurozone is at risk of deflation, and other precedents (Japan after its bubble) suggest that even with aggressive “printing” you don’t get inflation in the aftermath of a big financial crisis. The deflationary pressures are so powerful it is hard to overcome them.
Now there is moral hazard, but the Troika program is intended to be a bailout. And what you do with the banks after you have kept them from imploding is a different question than what emergency measures you take.
Be careful what you wish for. The ECB failure to act has very high odds of kicking off a financial crisis that will do much more damage than the 2008 one incurred.
If the lesson of Japan is that monetization does not prevent eventual deflation, why not just get the event over with and be able to move on. Dragging out the pain over years and years, never allowing a reset, kicking the can down the road like we have done since the financial crisis, has not allowed our economy to reset. The insolvent banks with their SIVs and growing pipeline of foreclosures are allowed to flounder along as the central bank punishes savers with low interest rates and homebuyers with stubbornly high real estate prices. Meanwhile, inflation shows up everywhere except in wages and inequality grows at a faster rate.
Although there are obvious differences, I think Iceland proved that taking the pain now is preferable to dragging out the crisis. Bondholders take the hits, reorganize new banking system, rebuild without the burden of the zombie banking system of too bigs.
It seems to me that avoiding the debt deflation merely postpones the economic cycle and, with monetization, could end up making the downturn exponentially larger in the end. If your theories tell you cycles can be avoided forever, I have to question them.
I don’t know about the crisis being bigger than 2008. Then: subprime, number is 250B range, x7 by CDS which were paid (august 2007 was this liquidity crisis). This time around there are plenty liquidity lines and short of outright QE (which will come) the ECB answer on liquidity has been timely.
Furthermore, I see a lot of commentary insist that it is a solvency crisis not a liquidity one, I think not. Italy is not insolvent. Not by a long shot. However an acute liquidity crisis will induce a solvency one (by depreciating assets) and we are clearly in the midst of this, as the central banks are letting little miss market throw yet another one of her tantrums.
So yeah we do have a solvency/liquidity issue in some markets because the ECB doesn’t want to be forced into QE, but the little miss tantrum will get her free money.
Also the main danger is the CDS rig, which is not being paid this time.
As someone who lived through the Japanese deleveraging period, I can assure you that your “creative destruction” sort of a solution would have not only inflicted the (necessarily, according to you) economic damage but also all but destroyed the social fabrics in the country, an utter Pyrrhic “victory,” as the fall of Japan’s GDP would’ve been absolutely dramatic. The subsequent failure to re-structure the Japanese mega-banks certainly dragged the entire economy for some more years, until many of them simply disappeared in the form of “merger,” but that’s a separate issue.
As Yves says, you do need to be careful about what you wish for.
Does “living through” mean you were alive then? Same here, if so.
How does your “living through Japan deleveraging” prove that an Iceland-like solution would mean long term pain? Why couldn’t they have reorganized the banking structure, ring fenced assets, guaranteed deposits, etc?
Instead, Japan is still experiencing deflation, their economy continues to flounder and they have built up a massive amount of debt.
Doesn’t sound like the best solution to me.
As someone who lived through the Japanese deleveraging period, I can assure you that your “creative destruction” sort of a solution would have not only inflicted the
(necessarily, according to you) economic damage but also all but destroyed the social fabrics in the country, an utter Pyrrhic “victory,” as the fall of Japan’s GDP would’ve been absolutely dramatic. The subsequent failure to re-structure the Japanese mega-banks certainly dragged the entire economy for some more years, until many of them simply disappeared in the form of “merger,” but that’s a separate issue.
As Yves says, you do need to be careful about what you wish for.
Sorry I didn’t put your response in quotes in my reply. I like to see what I’m responding to and do a cut an paste so I can see it where I’m typing. Usually I delete it afterwards, but forgot to here.
On a sidenote, it would be easier if the message I was responding to was right above the box I’m replying in. Then I wouldn’t have to do the cut & paste routine.
Japan never really monetized the debts.
Anyway, the second key lesson from Japan (apart from “print money and hand it to people, not to banks”) is *don’t keep the management of zombie banks*. Zombie bank management will guarantee that the bank continues to act like a zombie.
Because bank managements appear to own most of the governments of the US and Europe, this key lesson has not been learned….
Japan is certainly not adverse to intervention, as recently shown. So if everybody decides intervention is the answer, what will the net effect be? A currency war?
Are you sure Timmy Turbo and Helicop Ben are the real authors of this article?
Just Print, buy the CRA* and kepp the Ponzi game going! Wow!
as disgusting as it feels, little miss market will get her free money
This is especially rich: ” Sarkozy hailed the “courageous and responsible” stance of the main Greek opposition party”
Of course, it was that very same “main Greek opposition party” that was in power from the early 2000s through the bubble, when Greek public debt balooned. It was that same “main Greek opposition party” that lied shamelessly about the public fisc to keep the lucrative (to them) debt deals flowing, relying on the wise advice of the vampire squid itself, Goldman-Sachs, on how to lie better.
And it is that same “main Greek opposition party,” finally driven out by elections, that turned around and opposed all of the measures that the EU was pushing – austerity, public service cutbacks, tighter enforcement of tax laws — yes, opposed the very laws that their allegedly ‘center-right’ position ought to have made them support, if it meant anything. But no! They wanted Papandreou and the Socialists (whose hands are doubtless also dirty at the top, to be sure) to take all of the blame for the austerity, for the firings and pension cutbacks, for ‘knuckling under’ to the EU, even though it was the so-called opposition whose actions had made this path necessary.
Good old Sarkozy: he sure knows how to pick ’em.
The whole lot of so-called ‘conservative’ and ‘center-right’ politicians deserve to be locked on a desert island together with not enough food…let them rediscover the laws of economics with some consequences, for a change!
“The eurocrats seem incapable of understanding that even if the budget deficit rises in the short-run, it will always come down again as GDP grows because more people pay taxes and less people warrant government welfare support.”
The americrats seem incapable of understanding this, either, as our select, undemocratic super committee toils in the dark on austerity measures.
I agree with Fiver. Events in Europe are looking more and more like a kleptocratic coup. From the kleptocratic perspective, disasters are actually plusses since they afford even greater opportunities to loot and concentrate wealth.
This also highlights the weakness of the MMT approach which some commenters have already noted although they got their target wrong. It isn’t profligate peoples or governments that would benefit from printing up lots of money but the looters. They’ll run things into the ground and then buy up everything in sight for pennies on the dollar, as Fiver noted, but print a lot money, and hey, they’re OK with looting that too.
What Europe needs is a redistribution of wealth away from the kleptocratic elites, new non-elite governments committed to the welfare of their 99%s, and an empowered ECB that can ease the transition. Without burning the rich and throwing out the corrupt pols, any money creation is just throwing good money after bad.
If I have a fear it is exactly as you describe, collapse, followed by largely unfettered buying.
Skippy…the printer has the power over all.
The key is, as you note, who gets the money.
The advantage of printing money is that you don’t have to go to the trouble of confiscating it from the kleptocrats — you simply dilute them. (This is called “inflation”.)
This only works if you print the money and *hand it directly to ordinary people*, perhaps as payment for working for the government, perhaps just as an “Alaskan Permanent Fund Dividend” sort of affair.
The Treasury should print US Notes and distribute them to every man, woman, and child in the US. But Congress is owned by banksters, so it won’t.
One other point. Auerback gets it exactly right about French and German hypocrisy. All we hear from them with regard to the PIIGS is the sanctity of treaties and with regard to Europe the sanctity of democracy. But all this high sounding rhetoric goes out the door when it contravenes French and German interests. They have been dictating to the PIIGS for months. Screw the people. And when that isn’t sufficient, they start deciding who will stay and who will leave the EZ or even I suppose the EU. But who elected them god and enshrined their power in the treaties they so much like to beat others over the head with? No one. You see law is not law, and treaties are not treaties, if one side requires strict adherence for others but not themselves. At the level of Europe, there is apparently one law for France and Germany and another for everyone else. We know this two tiered system of justice rather well in this country and it is a hallmark of class war.
Non-austerity clearly didn’t work. When times were good, “Italy actively exploited ambiguity in accounting rules for swap transactions in order to mislead EU institutions, other EU national governments, and its own public as to the true size of its budget deficit.” So, more non-austerity will not work now because the system is inefficient and social re-engineering is needed. Austerity provides, but is no guarantee for, an opportunity for re-engineering. But this opportunity is continuously being vilified: “… yet the ECB, the Germans, the French and virtually every single policy maker in the core continue to advocate the economic equivalent of mediaeval blood-letting via ongoing fiscal austerity.” Given that the engine is leaking oil, how will adding more oil fix the leak? How will ECB bailouts fix the underlying problems? Does Italy import too much from Germany like Greece? Or is she in the same boat as Greece for different reasons? In the latter case, I would question the vendor financing/trade imbalance theses. Can anyone put numbers to the probable causes of trouble in Greece and Italy: X% due to fraud, Y% due to trade imbalances, Z% due to budget shortfalls?
It seems to me that the fear is that austerity induces a debt spiral. Granted. But no-one seems to describe the dynamics of such a spiral beyond initialization. In economies with competent societies, such spirals must be transitory? That is, accelerate at first, then slow down, then reverse? In economies with less competent societies, a decline to the level of competence of the society must ensue? Are all debt spirals in all societies the same given the same external contexts? Is Argentina’s default comparable to the potential default of Greece?
I find economic discourse riddled with overt and many more covert contradictions (no doubt some of those contradictions are apparent, rather than real, and due to my ignorance) and they make me livid with frustration!
Debt deflationary spirals ARE reinforcing. They do continue to spiral downward.
See this classic paper that explains why:
http://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf
Thank you, will examine.
If debt deflation is self reinforcing, how about default? Bondholders take the hit and the debt is reduced.
that should have been the preferred road, but all economists, bankers and politicians scream ”Lehman” and that the end of the world would be near.
It’s difficult to see what part is selfinterest and what part is true. For example, in the case of France I think it is selfinterest, as French banks would take a huge hit with Italy going down.
Profligacy in the boom is not the opposite of of austerity in the bust, it’s the same thing. And it’s dishonest to call profligacy-in-the-boom evidence that the critics of austerity are wrong. The critics of austerity now are for austerity in the boom, they’re just not for austerity in the bust, right now.
Pro-cyclical is pro-cyclical, anti-cyclical is anti-cyclical.
Jim, thank you for the reply. It made me realize that what I wanted to point out was that austerity in the boom was not possible because there was no sense of urgency. ECB bailouts will not foster this required sense of urgency and the subsequent austerity (we have the experience with TBTF banks in the US failing to clear up their acts). It would be helpful if critics of austerity could address this point credibly. Austerity in the bust certainly will focus the mind. I did not mean to be unfair, apologies.
But what is the turning point? When should a government switch policies from expansion to austerity?
When private sector growth returns after a recession?
But for a lot of unemployed this is not the end of economic hardship. And austerity might cause a double dip (as is happening now in Europe).
When the debt-to-GDP rate reaches a certain level?
This doesn’t take into account economic conditions and will eventually result in pro-cyclical policies.
When full employment has been reached?
In my opinion the last criterion (full employment) is the only valid one: it is the point where economic capacity is fully used (and therefore the most efficient) and the most humane (nobody is left unemployed because of too early austerity by the government).
But, using this criterion, European countries fiscal policy has been overly austerian for decades now, since most european countries have not known full employement for decades.
So what “bad behaviour” is there to “punish” for the ECB? Whose minds should be focussed, why, and to do what?
I think the perils of “moral hazard” go well beyond the fact that the Wall Street/Washington nexus remains every bit as corrupt beyond words as its (very) junior partner in Europe, as this piece from ZeroH by Chris Whalen makes abundantly clear:
http://www.zerohedge.com/contributed/mf-global-repo-maturity-and-large-bank-obs-exposures
But beyond that, I don’t see how destroying the concept of “saving” as one of the foundations of prudent judgment re the future and replacing it with what we keep assuming is essentially “riskless” credit creation via ultra-cheap money can possibly be the real answer – just the reverse.
What I would argue is that it completely ignores the profoundly unstable acceleration of the pace and scope of change that is generated as a result. Consider that any North American city now has only about 3 days’ worth of essentials on hand. Everything rides on the assumption that the food delivery system (let alone the climate) never breaks down over any significant area – just in time survival, if you will.
Or “launch on warning”. Or politicians and publics stampeded into terrible decisions by “markets”. Or take any number of new technologies or products that are rolled-out with virtually no testing, nor any thought whatever as to wider consequences. Thus too-big-to-fail everything, even if we KNOW it is killing us.
And every year, rather than raising up the disadvantaged, greater numbers of people are made essentially redundant as the value of their “labour” is reduced to nil. Think, for example, about the immense implications of 3D printer technology on employment.
There is simply NO WAY we can “manage” what we’ve already built, let alone where this is headed, unless we actually slow down, and we cannot slow down so long as we worship “growth” no matter what it is we are “growing”.
http://www.guardian.co.uk/environment/2011/nov/09/fossil-fuel-infrastructure-climate-change?newsfeed=true
We simply must stop letting “markets” and the faux imperative of “growth” tell us what to do. Time is very nearly up.
FINANCE ENGINEERING?
The CDS’s are just another bit of Finance Engineering Trickery that sought, abracadabra, to insure Debt Risk. Yes, they look nice on paper. Yes, if employed, as the Fall of 2008 showed glaringly well, they open the abyss of bank failure.
Much like securitization of Toxic Waste, yet another (abracadabra) bit of Finance Engineering Alchemy, sought to create Instant Value out of a worthless substance.
The Finance Industry should be ashamed of itself. As I have opined before, the first and foremost precept of Engineering (which I learned in engineering school) is that any physical design must be “fail safe” in order to prevent loss of life.
Finance failed in its moral obligations (if it ever had a moral or ethical spine). And we are left, after that failure, to pick up the pieces of the House of Cards that came tumbling down around our ears.
Why in hell the SubPrime Loan was ever conceived is beyond belief. It’s like putting micron-thick brake pads on a car with bald tires. Everything is fine until the car must come to a screeching halt. Then death occurs.
Why as a Debt Instrument it was ever packaged deftly into SIVs (along with good debt to cover its noxious smell) is another mystery. Why, with its noxious smell, it was ever given a Triple-A rating by CRA’s, then sold (fraudulently) as Realty Backed Debt to a gullible world debt-investors is also beyond comprehension.
MY POINT
The entire process needs to be rethought. That is, shut down, analyzed and an alternative solution – based upon competent creditworthiness analysis – devised.
But please, please, please – stop calling it “Finance Engineering”. Real engineers cringe at the human calamity that has occurred by blithe disregard of cherished “fail-safe” principles.
I’m sorry, but who did you feel was in need of this “explanation,” precisely? Marshall Auerback?
It has been well established already that it is quite understandable why subprimes were invented: to create revenue streams for the banks. To suggest that this was simple stupidity, and that these things are “mysteries” is to provide cover for the banks and regulators.
Lastly, I find it extremely puzzling how it is that you first introduce a term — “finance engineering” — only to end by saying ‘do not use this term, it makes “real engineers” cringe.’
The emotional tone of the comment is superficial but understandable. Clearly the CDS saga needs to come to an end, they are weapons of mass destruction.
to the original comment: From a MICRO STANDPOINT CDS look good. If you own the bond, you are “hedged” if you don’t you are speculating like a champion and books will be written about your greatest trade and your american genius, you will be lionized.
FROM A MACRO STANDPOINT.
On covered CDS you have done nothing but move the risk around which is the same as SELLING THE BOND.
On naked CDS you have created a macro MONSTER, that requires to be fed 10x its mass in CASH when bad debt appears. What non-sense at a macro level.
SIZE MATTERS. what can be innocuous on companies, was dangerous on subprime (housing) and is suicidal on sovereigns. The numbers just get too big.
According to William K Black subprime was created to make mortgage fraud easier and more efficient. I am convinced.
http://neweconomicperspectives.blogspot.com/2011/11/virgin-crisis-systematically-ignoring.html#more
Enough of your tedious responses. There are no mysteries; my explanations have been very frank. Yes, we all know very well “why” the SubPrimes were innovated by Finance Engineering neophytes.
It is amazing, nonetheless, that oversight authorities allowed it to happen. The Fed, by charter, is responsible for overseeing finance markets. The failure is basically due to:
* It was not conducting any mortgage market audits for the creditworthiness of the debt-instrument products they were generating.
* No agency was enforcing the Truth In Lending Act. And, * There was no Consumer Agency to prevent that mortgagees should be protected adequately by predatory practices.
All were gross negligence on behalf of Federal market oversight agencies.
Keep on subject with factual, reasoned rebuttal.
Otherwise, like so much other forum chaff, you’re posts go on the SOB-list. (SOB = Scroll On By)
No, you are the opposite of “very frank”. You, just in the past few days since you’ve started posting here (in earnest), have repeatedly pushed the line that voters (“we, the sheeple”) and borrowers (“caveat emptor”) should “accept equal responsibility” for having voted in/taken on fraudulent/unsustainable politicians/debt (further suggesting “consumerism” is comparable to being willing to perpetrate massive fraud), you have pushed the idea that everything will be made right just as soon as “responsible voters vote in responsible politicians“, while implying that critique of the the banks is akin to populism, that it could lead to lynchings, and La Terreur. In addition, there’s the fact that, days after starting to post these amazingly lengthy, and curiously informed (WRT European affairs) posts of yours, you actually manage to suggest Hugh is a Republican shill because he doesn’t buy your Democratic brand, and you push the idea (as evidenced here) that the main driver behind the “invention” of CDO’s/liar’s loans/etc. was negligence or ineptitude, you suggest QE was intended to have/did have a legitimate public function (in the process pushing more uninformed drivel about how Americans ‘became irresponsible’ and started lending because they couldn’t simply save like ‘good Calvinists’), etc..
Yet pretty much none of your points make any sense if I am to assume that you are a reader of this site, as Yves and others have debunked pretty much all of the points you’ve made here a dozen times over already; so the fact that you’re pushing them anyway tells me that you either have no interest in the discourse that already exists (which you substantively ignore), or that you’re being paid to post disinformation.
And then there are your repeated attempts to assert dominance in the discussion (evidenced primarily by your attack on Hugh, JTFaraday, and again here), and your attempts to silence people who disagree with the nonsense you push.
In sum, I see no reason to trust you.
Good answer!
“you have pushed the idea that everything will be made right just as soon as “responsible voters vote in responsible politicians“”
That contention alone, in this environment, is enough to transform any good Calvinist into a revolutionary anarchist.
Yeah, well read that which is weritten in between.
Michael,
I have rather enjoyed your commentary on CDS. I want to dig a bit further. I have written about it here http://www.thedelphicfuture.org/2011/11/greek-cds-tragedy.html
you know this song, “ain’t nothing going on but the rent?”.
I question the value of CDS entirely. If you own the bond and buy a CDS you have a risk free (from a default risk standpoint) instrument so the yield differential should be close to nothing (or US Treasury if you consider that risk free) by the no-arbitrage hypothesis. In short, the CDS just moves the risk around and at a macro level there is NO HEDGE, it is equivalent to SELLING THE BOND.
Of course what is left is NAKED CDS. There the mechanics of the derivative from a macro standpoint are VERY DIFFERENT. Just from a monetary standpoint, the monetary mass needs to increase 10x the default size (assuming a 10x ratio). In short Naked CDS is just a speculative instrument whose sole RAISON D’ETRE is to multiply bad debt to the benefit of speculators. CDS INCREASE THE MACRO EXPOSURE TO RISK WITH WHATEVER RATIO THEY HAVE. Everyone thinks they are Paulson (the HF manager) and has the next greatest trade in their books. A lot of moral hazard comes from setting up securities to blow up and buying the CDS around them.
The point that they provide ‘information’ because they are liquid is silly. The point that they provide fees is certainly true.
The US is rigged with explosives in CDS trades, itis the main justification for the Geithner trip to europe and the demands for ‘voluntary haircuts’. I am glad to see the CDS market die an ignominious death.
In short, the CDS just moves the risk around and at a macro level there is NO HEDGE,
True, but having a CDS (duff or not) on f.ex. a bond enables accounting fraud: Because the trade has zero risk, on paper at least, traders can back-discount the entire expected cash flow from a “Greek bond + CDS” to right before bonus time. The bank may blow up but, who cares? Its all other peoples money and getting as much at possible transferred to ones own account as quickly as possible is the entire motivation for a career as a trader.
I believe there are several forces at work here: the flaws of the EU construction, the immense flaws of the euro construction and the complete absence of guts by the politicians to rein in the banksters.
All this put together leads to the various arguments above. When, in the old days, the IMF went in to help a developing country in dire straights like Greece is in now, it lent some money to get the country over the worst but also imposed very strict controls and reforms (not always the right ones but that is not the point here). Why should not the ECB and EU do precisely this to Greece: lend them money at very low interest rate (by printing it so not to add any more debt) and impose radical changes such as creating a proper land registry (it has none at the present time) and creating a proper tax collecting system. Once all the reforms are in place and working, then Greece might leave the euro or keep it for international movements but use the Drachma for internal use.
In parallel, the EU should issue new regulations that will have the banksters howling that they are being murdered, like decreeing that naked CDS are unlawful (even maybe all CDSs), separating casino banking from mom and pop banking etc.
I believe that only all the above together might work but not only one the other.
The IMF allows its members to exploit the developing countries they “help”. They have been criticized for their support of military dictatorships, negative impacts on access to food, public health and environment, particularly in developing countries.
The IMF also supports currency devaluation, which Greece has no way of doing. Greece is already in economic freefall and unable to meet targets. I don’t think fixing the bookkeeping problems will solve that. The reforms need to be made, but I think its up to Greece to make them. After they default on their debt.
How does this mssg board work, are older comments automatically deleted?