 So, the last talk for today's session will be about mainstream monetary and fiscal policies and their theoretical foundations. And in that sense, so we're going to talk about what were the dominant policy prescriptions and how these have been rationalized theoretically at the time and during the global financial crisis and as such, let me make a few comments to start with. So from that point onwards, after putting down the mainstream policies and their theoretical foundations, Joe Michelle will pick up tomorrow and talk about their problems in terms of policy prescription, I mean, in practice and also alternative policies that can be engineered in order to take us out of these prolonged recessions, essentially. And another point that perhaps is good to make from the beginning is that there will be pretty much no connection with the previous discussions of today. And there will be no connection, particularly because in mainstream macroeconomic theorizing, there's always been this divide among not only the real and the monetary sphere but also this divide between money as understood at the macro level and finance as understood at the micro level. And this is a divide that essentially excludes these discussion and analysis of whatever was being undertaken until now. But so yes, I'm making that clear from the beginning that we're not going to see that. But we will see what are the implications of actually not taking into consideration how the financial sector is operating. Now to talk about the rationalization of the mainstream macro policies, we need first to situate them within the overarching macroeconomic theory that essentially offers the conceptualization of the economic system and its functioning. Because it is only through that that we can then understand if there is a role for state intervention and if so then what it is and how it can actually affect the macroeconomic system. So I'm going to start off with a very brief journey in the evolution of macroeconomic theory that will help us, I hope, understand what was the predominant conceptualization of the economic system at the time of the crisis, what we're going to be calling here the new consensus macroeconomics which goes by with many different names such as New Keynesian, DSG modeling or the new neoclassical synthesis and so on. So we're going to follow a little bit the journey on how we reach there and then we're going to put down what is the main, how the macroeconomic system is understood within this framework and hence what policy, what is the role, the scope and the capacity of macroeconomic policy intervention to play a role within that system. So but I'll do this very briefly so that then we focus on the contemporary aspects. So in the pre Keynesian neoclassical paradigm the macroeconomic, well the economic system was actually understood with the separation between the real and the money or the finance sphere, what is known as the classical dichotomy, whereby money operates as a veil in the sense that the equilibrium of the economic system is given by the real side, the supply side, full employment position of the economy and money is only there to play the role of determining absolute values after relative values and real variables have been essentially found to be at their equilibrium levels and within this setting therefore all markets clear, we are at full employment and whatever discrepancy might ever arise between demand and supplies or savings and investment is viewed as either temporary or as caused by institutional impediments to that, not least let's say minimum wage is being there and not allowing the real wage to move down and within such a conceptualization of the economic system clearly there is no scope for policy intervention so we cannot talk about monitoring fiscal policies because the perfectly working free market is self equilibrating and this was exactly the conceptualization of the functioning of the economic system that Keynes sought to attack in the 1930s bringing essentially to the fourth theoretical innovations that particularly relate to the non-automatic translation of savings into investment, they're all essentially of effective demand and money and this within a macro rather than a micro-economic analysis based on fallacies of composition and fundamental uncertainty and from that the main theoretical framework that actually survived in mainstream was actually what we call the orthodox Keynes and is that it's being popularized through the ISLM, this hydraulic ISLM popularization of Keynes which essentially allows for the possibility of the economic system standing at a point of rest at equilibrium points in which labor markets will not clear so there might exist involuntary unemployment due to deficient demand and this is particularly explained again within the ISLM and I'm assuming we're all familiar with the ISLM framework. So within orthodox Keynes and its involuntary unemployment is essentially understood as breakdowns of the evaluation adjustment mechanism so it's either because of wage rigidities or because of interest in elastic investment for which we call the investment trap or because of the liquidity trap, the absolute liquidity preference. It's because of these rigidities essentially in either the real or the money markets that we might end up in a position of insufficient levels of demand and therefore involuntary unemployment and it is within this conceptualization of the economic system and how it operates that we can talk about monetary and fiscal policies in the old Keynesian way is demand management policies that refer to the short run and are essentially attempts to boost the demand side of the economy and if we are in a position of unemployment or an underutilization of resources in general then within this framework fiscal policies understood to affect effective demand directly as being a component of aggregate demand in itself or then through movements in the IS curve and the monetary policies perceived as affecting effective demand indirectly through what is usually called the Keynes effect essentially through its impact in the money market on the rate of interest which in turn would affect investment and hence aggregate demand. So this is the orthodox Keynesian understanding of monetary and fiscal policies where usually one is attached to the IS curve and the other one to the LM curve and shifts in those two would essentially manage to boost the demand side and bring output at its full employment level and there are of course two special cases that have taken loads of attention within this framework the one of the investment in the liquidity traps particularly the latter one that makes monetary policy ineffective because essentially despite money being thrown into the system there is this absolute preference for liquidity whereby cash is held rather than invested in either bonds or in real estate. Now from that point onwards with the demise essentially of orthodox Keynesian in the stagnation period. Evolution of macroeconomic theory from that point onwards kind of takes us back to this pre Keynesian neoclassical approach even if it is in steps. So the first counter evolution comes from monetarism and particularly Friedman's monetarism that is bringing back the notion of the self-equilibrating system even if that is now only in the long run whereby the economy will be at its natural position its natural rate of unemployment story that is determined from the real supply side of the economy and clearly monetary policy cannot affect that natural position unless and only in the short run and only at the expense of ever accelerating inflation. So this is the monetarist idea that money supply is at the end a inflation is at the end a monetary phenomenon and we have like the first transformation on what should the policy intervention be in which case monetary policy is viewed not as an authority based demand management policy but rather should be understood in terms of following a rule, following a rule based policy let's say keeping the money growth at a specific percent at all time and monetary is essentially bringing forth the first step into the neglect of fiscal policy by either through arguments of crowding out even more so 100% crowding out stories or because of this long internal lack and so on. So fiscal policy is essentially slowly being neglected through this crowding out arguments that essentially say that even if we increase government spending because that would essentially increase real interest rates that would then be crowding out investment. So what we would be having is a recomposition in our aggregate demand rather than a boost in aggregate demand and that's how fiscal policy is slowly becoming considered to be ineffective or neutral or not having an effect. Now the next attack comes from new classical economics and its extreme real business cycle alter ego that is essentially bringing in particularly the notion of rational expectations and instantaneous clearing markets. So now we've got markets that are perfectly working instantaneously and we've got agents that have rational forward looking expectations and the main argument when it comes to policy intervention is the well-known policy and efficacy proposition that is essentially saying that systematic policy intervention state intervention will have no effect as it will be always counterveiled by the actions of rational agents. Now we're going back to this structural mondial. This is Lucas Critique essentially and it can only be through shocks, surprise policies that we might have an impact, temporary impact on the real side of the economy. And real business cycle theories is actually taking this conceptualization of the economic system one step even further by essentially talking about policy irrelevant. So it's not only that it is inefficient, it is irrelevant, it's undesirable and it is actually unnecessary because, well, because this is a theoretical framework that understands business cycle fluctuations in the sorter and has essentially equilibrium positions at all times and this is achieved with three consolidations or three resolutions that have been at the core of all sorts of debates throughout the theory of macroeconomics which is essentially the short run, long run division, the macro micro and the monetary real spheres. And the resolution that the real business cycle is bringing in is essentially a consolidation of short run to long run. So at any point in time we are in an equilibrium long run position, macroeconomics converges completely on micro through general equilibrium theories and also there is a pure exclusion of the monetary side so there is no money, that's why they are called real business cycle models, because money is purely a nominal variable that will have no impact neither in the long run but nor in the short run. So money is super neutral, there is no money, there is no demand side problems and there is no macro as something separate from microeconomics which then implies that we should perceive the economic system in a dynamic setting and that would give us an economic system as a moving vibration real side general equilibrium that is derived purely from microeconomic principles and fundamentals which means in simple words that the system as a whole is nothing else but the summation of the representative individuals that are optimizing at any point in time intra and particularly intertemporary and then business cycle fluctuations cannot longer be understood as deviations from any sort of a long run position or a potential output or things like that but rather what we actually observe as fluctuations in our GDP is the potential output moving around itself because of exogenous shocks. So recessions essentially are not because actually they are, they are optimal responses to an exogenous shock but lack, let's say, recessions are not situation of involuntary unemployment, people are optimizing intertemporary and therefore they are optimally withdrawing hours of work or withdraw themselves from the labor force and we can then think of recessions as great or great recessions as great vacations. So that is the fundamental understanding of the economic system and the real business cycle theory. That is quite extreme because of course it is quite extreme because first even without, even if unintentionally it is essentially a conceptualization of the economic system that makes the economics profession redundant because if everything is optimal and if we are all sitting at equilibrium points, I mean there is no point for us to sit here and discuss about these things. And one would then expect that it would not have much of an impact when it comes to policy prescriptions and actually that could be a theory that would not have much of an impact on macroeconomic theorizing in general. But that is not true, perhaps not so much when it comes to its policy prescription which is we should do nothing because we always at our best but it has had one of the major impact when it comes to what should the research program of macroeconomic theory be in terms of the aim, what is the aim of macroeconomics and in terms of the methodology. And I am going to talk about these things within the new consensus macroeconomics. Now of course this super extreme position of real business cycles has created all sorts of responses from all sorts of different mainstream macroeconomists that we can nowadays call them New Keynesians and that essentially embraced the methodology and the aim of the new classical and the RBCs. So they still analyzed the economic system from the point of view of methodological individualism and axiomatic mathematical formalization. But their initial attempt was at least to essentially try to explain periods let's say of unemployment even within a setting of rational expectations and so on. And this is predominantly being brought into with theoretical innovations at the micro level when it comes to marketing perfection. So they are bringing in marketing perfection within the same analytical framework. From this superboard New Keynesian palette some particular aspects are being brought together with pretty much whatever was going on before, meaning together with monetarizing with the new classical and with the RBCs to then form what we call the new consensus macroeconomics or the new synthesis. Now these new synthesis, these new consensus again is accepting much more from what came before rather than reset. So it continues to think of the system as a dynamic general equilibrium system derived from micro foundations that is buffeted by exogenous shocks but it brings in two main differences. It brings in a separation between the short run and the long run pretty much in the same vein as it was with the old ISLM story whereby in the long run everything is working perfectly and the equilibrium potential position, the natural position of the economy is given by the real side equilibrium. But in the short run it could well be that some prices are sticky so there could be a deviation of the short run from the long run. Now price stickiness is therefore one of the main differences from the RBC models that can only be and it's being brought as an assumption of course and it can only be rationalized if we make one other assumption that plays another role but that which is the assumption of monopolistic competition in goods market. So essentially we need to have firms not being price takers, we need to move away from perfect competition in order to be able to give a micro foundation for prices being sticky, for some firms essentially not deciding not to change their prices in the short run. So these are the two main deviations essentially from the new classical and the real business cycle theory and the fundamental assumption here is price stickiness. Now this assumption within another ways, similar macroeconomic setting, has two implications. It essentially reintroduces a scope and a role for monetary policy only for monetary policy intervention and it also, this assumption also brings the means, the capacity for monetary policy to do so. So in a natural way we can also, okay the long run position is always at its best, so we're at potential output with employment but in the short run because of some price stickiness the responses to exogenous shocks will not be optimal so there will be a deviation between the long run and the short run in response to exogenous shocks and it is because of that that policy intervention can step in to stabilize the system and that can only happen through monetary policy and that can only happen because prices are sticky. Right, is that all clear or not clear? Okay, so and fiscal policy is pretty much non-existent in this story as is the financial sector by the way. So monetary policy within this mainstream new consensus macroe is understood to operate within the form of a tailor rule. This is a feedback rule that essentially prescribes how the central bank should adjust its policy instrument which is an nominal rate of interest, the policy rate. So how should that policy rate be adjusted in order to meet its policy targets and its policy targets are essentially established by the primacy of price stability but also stabilizing the economy around its long run position and within this setting money is also supposedly endogenized money supply so we can move away from the old SLM story that we are controlling money supply but this is more in token rather than in essence because real, because new consensus macro models are pretty much non-monetary models and I'm not going to talk more about this point because I think Joe will bring that up to more the endogenous story. So very very simple. Okay, very very simply we can see how monetary policy is viewed to operate in this model by looking at the three key reduced form equations of an otherwise huge DSG model behind those three equations that we're not going to go through for obvious reasons but essentially what we've got is kind of a New Keynesian IS kind of curve and New Keynesian kind of Phillips curve and essentially the monetary policy rule and the monetary policy mechanism actually represents and will show to us how this economic structure is supposed to operate. So first of all we have a Taylor rule that is saying that the central bank should be moving its nominal rate of interest whenever inflation is deviating from its target or whenever output is deviating from potential output, from full employment, long run, fully flexible prices output that we would get. And whenever there are deviations between those two gaps, let's say, because of exogenous shocks, these are models that explain fluctuations because of exogenous shocks rather than endogenous instability. So let's say for whatever reason that output, current output is above potential so the economy is overheating and also that inflation is above its inflation target. What would then monetary policy, the Taylor rule should tell us to do is to increase the nominal rate of interest. Now if we increase the nominal rate of interest that would translate into an increase in the real rate of interest because there is price stickiness otherwise it wouldn't and there would be no scope from monetary policy. But because some prices are sticky the real expected rate of interest will increase. Now a real expected interest rate going up would through an IS curve essentially choke out investment or consumption and that would essentially be reducing aggregate amount or closing the gap between actual and potential output. And through this closing gap together with commitment to controlling inflation, essentially controlling inflation expectations, we're going to have current inflation going down through the Phillips curve because that could gap its closing and because inflation expectations are contained. So this is pretty much how the system works. And the opposite of course when there is a shock that moves current output below full employment or inflation below the target rate. So in that case so whenever we are in some sort of a recession let's say what the central bank should do is reduce the nominal interest rate which would bring the real interest rate down which will increase consumption and investment through the aggregate amount and that would boost output and inflation. And that's pretty much the response that let's say central banks followed in the aftermath of the current of the global financial crisis of 2007-2008. So actually what central banks did is they brought their policy rates pretty much to minimal levels. So these interest rates were brought down again. There is one transmission mechanism in this story. So very low interest rates boost aggregate demand. In reality I mean most of the new Keynesian models do not have investment behind. So consumption plays the role of investment and consumption at the same time. It's as if consumption goods and investment goods are the same thing. So a lower interest rate would essentially, because we are inter-temporal, inter-temporal maximizers, a lower interest rate would actually make us want to consume more today and will be boosting demand as such. But suppose there was an investment there as well. So a lower rate of interest would be boosting up investment and demand. So interest rates were pretty much brought to minimal levels and the recession continued. And it was at that point that more unconventional investments monetary policy was adopted by the Fed or the Bank of England and much later by the ECB as well, which comes by the name of quantitative easing. Which essentially was central bank directly buying assets from financial institutions. Now quantitative easing in practice of course preceded whatever theoretical personalization could be made out of quantitative easing. Because up until that point the main policy instrument for monetary policy was the rate of interest. And one of the realities that were exposed by this financial crisis was what we now call the zero lower bound problem. So the zero lower bound problem is essentially a problem that has not been well thought in the mathematical models of okay what happens if the nominal rate of interest is brought to zero? What do we do next? So in a sense in the model it would be what will happen if I have to end up in a corner solution rather than an interior solution? The zero lower bound problem is essentially the question of how effective is monetary policy when the interest rate is brought to zero. And despite the fact that it has been in many occasions connected with the liquidity trap, the old liquidity trap story. And QE being essentially portrayed as a solution to the liquidity trap, this is really not the case. The liquidity trap is essentially referring to that position where there is absolutely liquidity preference. So whereby whatever money is throwing in, we are actually hoarding it rather than using it. And that is very different than whether the rate, where the rate of interest is situated, whether it's zero or one or minus one. And it has nothing to do with this new unconventional policy in the measure which is understood theoretically at least as going back to all the monetaries. Let's just throw more money in. Yes. And despite all this QE, the recession persisted and the banks were essentially not willing to extend credit. So QE cannot be thought as a solution essentially to a liquidity trap. And the new consensus macro does not have space to understand a liquidity trap. Because one of the things that they did in relation to the old ISLM story is to replace the LM curve with an interest rate function with a Taylor rule which would then imply that there is no money demand, there is no liquidity preference. There is no such channel in this model. So they cannot explain liquidity traps. At least they could not explain liquidity traps up until the crisis. So that is one point about QE. And it's theoretical rationale. Now how about the financial sector? And let's see. Yeah, why haven't we talked about it at all? The main reason for this is because the financial sphere is actually non-existent in pretty much most macro models. And again this has very deep traditions and it essentially relates to this divide whereby at the macro level finance becomes money demand and money supply. And it's only at the micro that finance is supposed to be connected with the allocation of resources to most productive projects essentially. So first of all, yes, there is no meaningful financial sphere within these macro models. And this is predominantly driven by this conventional wisdom that monetary stability would have financial stability as a byproduct. Or in other words, okay, and was one of the justification for the non-incorporation of financial system within these DSG models has been that, first of all, the banking sector banks operate as neutral financial intermediators. All they do is they take savings and turn them into investment. That's all they do. And that the financial sector per se is most efficient in its allocative role of scarce resources to the most productive projects, which is nothing else but the efficiency market hypothesis. Then we've been such an understanding of the financial sector, the dominant macro economic theory at the time of financial crisis could not shed any light to question such as why would a collapse in an asset market, let's say in a housing market could have an effect on real activity. And it cannot shed any light on questions of the sort. Why would these large losses of financial institutions have real effects? So these are macro theory at that time could not answer this kind of questions. And the fundamental reason for that is because it precluded the asking of these questions. So these are models that cannot ask these questions because they are excluded from the beginning. And this is reflected in all sorts of essentially the mathematical assumptions which underline the theoretical presumptions of the new consensus macroeconomics. And it can go on with many different weird names. But the fundamental assumption that is not allow for these sort of questions to be asked are the representative agent parody that is a much stronger assumption than efficiency market hypothesis. The representative agent parody is essentially saying that we're all a bunch of different people and we are forming the economic system. But we can be represented by as if we are one household. For us as an economic system, for us actually heterogeneous people to be thought as a one representative that would necessarily imply that first of all we have complete mass markets and we have perfect risk sharing amongst each other. Yes. This also implies that for every asset there is a corresponding liability. So if asset prices, housing prices go up, for me that it is an asset, I'm better off for you that it is a liability you are worse off. But at the aggregate, at the representative agent level, there will always be net wealth effects. And that's why these are theories that cannot explain why asset markets collapsing should have an impact at the aggregate real economy. Again, that we can have complete current and future markets and pure perfect risk sharing for us to be represented as one. This necessarily implies that there exists all sorts of different promissory notes, okay, that in these models are called our double securities. There exist all sorts of these promissory notes that we can trade freely with each other of the form that shall something bad happen to me, you will bail me out and I'll do the same for you. Shall I lose my job? You can provide me with an employment benefit and I will do the same for you. So we are essentially perfect, we are sharing risk privately, perfectly among each other because we can essentially enumerate all the possible states of the world, individual states of the world, okay, not aggregate shocks, not systemic shocks. And we can essentially share the risk among each other which then by definition, okay, these plus transversality conditions that we're always imposing in these dynamic models essentially imply that by assumption we are not allowing for default, bankruptcy, insolvency, and liquidity problems to ever show up, yes. So the representative agent paradigm is something that goes beyond on whether we can think or whether it is a good or a bad first approximation or abstraction of reality to think of the economic system in terms of one aggregate average person, yes. It goes beyond that because as soon as we make that assumption we are pretty much shutting down all those effects that can be brought in by all sorts of different crises. And of course, this has been also one of the main weaknesses, yes, of the new consensus macro of the dominant macro economic theory at the time of the crisis. And by many, New Keynesians, it was a well-accepted criticism and self-refraction that indeed we do not have a meaningful banking sector in our models and we have no meaningful financial sector in our models. And there has been attempts to essentially reconcile this divide between money at the macro level and finance at the macro at the micro and whatever malfunctions can be taking place at the finance financial sector level. But in most cases, and I'm not going to discuss these models, but in most cases the incorporation, this bringing back in a financial sector into these models that was never there is done pretty much within the same framework and within the same conceptualization of the workings of the economic system, which essentially necessarily implies that the nature and the form of the financial sector included into these models would be problematic per se, because you have to move away from a representative agent paradigm to be able to, and you have to move away from all sorts of other issues essentially, the shorter and longer end divide and this consolidation to micro principles, if one is to be able to understand in a macro theoretical framework what we were discussing in the morning and in the afternoon. Okay, so this is on the financial sector or lack of the financial sector in the new consensus model. How about fiscal policy? Okay, fiscal policy has also been excluded from the new consensus macro economic framework. Again, I mean this was done in, it took some time to actually take place, starting off from monetarism, but by the time that we reached to the New Keynesian DSG modeling, fiscal policy is completely out of the picture. It is only therefore monetary policy that can play the role that we describe through a Taylor rule or a QE, if the interest rate reaches here and that's pretty much it. So with fiscal policy non-existent, again, in the dominant macro framework at the time of the crisis, how can we then, what are the theoretical foundations for the proposed austere fiscal policies? So the argument in favor of austere essentially of austere fiscal policies cannot come from the new consensus macro model because there is no fiscal policy in this model. It can, however, well it has, it has been supported by a set of more or less quite neoclassical arguments that have been showing up at different points in time in a piecemeal basis. Now why austerity? The main focus of austerity fiscal policy, this essentially means to, well, focusing on the government budget constraint and on the funding gaps, right, of the government, particularly then the focus is on reducing deficits or bringing down debt to GDP ratios, which in terms of how it can be done in terms of policy, there can be whatever policy mix between reducing government expenditure or increasing taxes and so on and so forth. Now the main idea behind this austerity or the main rationality behind austerity policy comes from essentially the advantages of reducing budget deficits and debt. This has, of course, a very long history in the international financial institution propositions, particularly the IMF and whatever conditionality programs has been devising for countries with external debt problems and nowadays with domestic debt problems as well. But the main idea is that government should have balanced budgets and deficits because this reduces the probability of sovereign debt crisis, like in Greece, and it provides support to these debt sustainability arguments because sound public finances are essentially enhancing individual and investor's confidence and therefore sound public finances contribute to sustainable growth in private consumption and investment. So then sustainability and stability and growth essentially reinforce one another. That's the main rationality behind this austerity policy. Now when it comes to why is it a good thing? So why may austerity has positive effects or essentially these theories that have been popularized a lot with the last few years, all these expansionary fiscal constructions. So we can grow through shrinking. Now the main arguments that have, again, these are theoretical arguments that have been introduced in piecemeal, but the whole discussion has been very much empirical because there is no integrated theoretical model that can put down this argument for austere fiscal policies. But there are bits and pieces that I essentially have to do with, first of all, crowding in effects, which is the opposite of crowding out. So if we reduce government spending that would then reduce interest rates and that would then reduce private investment and the efficient allocation of resources that we are assuming that it always is taking place, as opposed of course to an inefficient allocation of resources by the state. So that's the one argument, the crowding story that takes place through the rate of interest, which is pretty much exactly the main transmission mechanism of monetary policy in the macro consensus. So it's all through rates of interest. Then is this new Ricardian equivalence idea that would tell us that if a reduction in government spending today would be credible, then us as, again, as rational individuals that are maximizing inter-temporally, we would then conceive this reduction of government spending today as a corresponding reduction in whatever future taxation we might have to pay. And if we do so through our inter-temporal optimization, we may boost our consumption today. Yes, now this is an argument that does not necessarily work through interest rates, but predominantly it works through expectations and confidence that in the future, because we're going to have the sound financial position, we will not have to pay that much taxes, so we might as well consume more today. And there's the last channel, orthoretical contribution that connects public austerity with the boom of domestic competitiveness. So it is not only through the rates of interest, but it could also be through devaluation of exchange rates. Now this can happen either directly, i.e., if we cut jobs in the public sector that would then reduce wages and will directly boost our competitiveness, because prices might go down, or indirectly, if then government expenditure is reduced, then domestic demand will be suppressed, and firms might go looking for sales abroad, and this is how we are actually reducing imports and we are increasing exports. An export kind of lead story that can be brought in by fiscal austerity. So these have always been the main arguments in favor of these expansions through contraption. And of course, within this whole story, we have to very much downplay the negative gains and multiplier, the direct effect on aggregate demand of reducing government spending, actually reducing aggregate demand directly, and that might have a big negative multiplier, particularly in recessionary situations where there is lots of unemployment or in general underutilization of resources. So we need to downplay the direct channel, so that the arguments in favor of austerity can be brought up. But in the same token, and Joe will discuss these things much more tomorrow, because I'm only going to put some of the problems that do come out from these arguments. Yes, I mean, even this crowd-in-ine effect or this competitiveness story is too to work. It might, if we are to believe that reduction in the government's spending will reduce rates of interest and that can boost investment, that might expect to operate in situations where there is a scope for the rate of interest to go down. Yes. It is very much indeed unlikely for this to happen in a situation where rates of interest are, nominal rate of interest are close to zero and loads of real interest rates are already negative. I'm not even going to discuss the requiring equivalence because the requiring equivalence, yes, the requiring equivalence is never seem to be. It has very, very weak theoretical and empirical basis. But it's the same when it comes to depressing domestic demand to be able then to grow through exports, but how can that then operate in an environment of a global financial, of a global crisis essentially. So if we all start exporting, depressing our domestic demand and exporting for instance, which is pretty much what Germany is doing. So if all countries are doing that, to whom are they then exporting? Yes. So yes, this is one of the main debate that goes around to this austerity, this story that austerity is the way out actually of this crisis. But I leave it to that because Joe will pick it up from that point tomorrow. And that's it. No questions. Oh, it's okay, sure.