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Lagarde: A Rookie Mistake?

March 12, 2020 Leave a comment

So the ECB has spoken in response to the Coronavirus crisis, and it was a problematic response to say the least. I watched Christine Lagarde’s Q&A with journalists, which as usual was the most interesting part of the press conference. But boy, I wish today it had not taken place…

The bottom line is that Lagarde made a huge misstep in stating that the ECB is not going to close the spreads. I hope it is just a communication misstep, otherwise Italy (and probably other countries) will pay a heavy price.

But let’s see what happened today.

First, there is an attempt to put on the Eurozone governments’ shoulders most of the burden of reacting to a shock that will be “significant even if temporary”. Lagarde said clearly, towards the end of the press conference, that what she fears most is insufficient fiscal response coming out from the Eurogroup meeting next Monday:

It is hard to disagree with this approach. To target firms’ liquidity problems one cannot count on banks alone, (especially in countries where they have still not completely recovered from the sovereign debt crisis). As a side note, I welcome the provisions contained in the Italian €25bn package, such as the temporary lifting of short-term businesses obligations towards the government (VAT, social contributions, taxes). These seem to be the right measures to ease short term liquidity constraints.

But let’s look into what the ECB itself commits to do. Besides technicalities that I did not study yet, there will be two sets of measures:

  1. The first set concerns (continued) provision of cheap liquidity to banks, in order to ensure continuing supply of credit to the real economy. This will be ensured through a new and temporary long-term refinancing scheme (LTRO), together with significantly better terms for the existing targeted loan programs. This amount to a large subsidy to banks. Loans conditions will be more favorable for banks lending to Small and Medium Enterprises, which are the ones more likely to become strapped for liquidity in the current situation. Furthermore, as a supervisor, the ECB engages in operational flexibility when implementing bank specific regulatory requirements, and to allow full utilization of the capital and liquidity buffers that financial institutions have built. I am unclear on how much this will work in order to keep the flow of credit flowing, but overall, my sentiment is that on cheap and easy financing to banks and (hopefully) to firms, there is little more ECB could do.
  2. The second set of measure is a ramping up of QE, with additional €120bn (until the end of the year). Lagarde seemed to suggest that the ECB could use flexibility to deviating from capital keys, the quota of bonds the ECB can buy from each country. This means that maybe more help will be given to countries like Italy, and the ambiguity was probably on purpose.

But then came the Q&A, and with it, disaster. At a question by a journalist on Italian debt and yields, Lagarde replied the following:

This also made it on the ECB twitter feed:

This simple sentence was a reversal of Mario Draghi 2012 “whatever it takes“. Mario Draghi, in 2012, had basically announced that the ECB would act as a crypto-lender of last resort (conditional, way too conditional, but still), and since then the scope for speculation has been greatly reduced. Spreads have been much less variable since then (I wrote a paper with Roberto Tamborini, on that, that just came out).

Protection from the ECB against market speculation is what countries like Italy would need most. Fiscal policy is the tool that can be better targeted towards supporting the supply side of the economy and preventing liquidity problems from evolving into bankruptcies. Lagarde herself stated it many times in the past few days, and again today.

So, governments should be put in the conditions not to worry, at least for a while, of market pressure. Lagarde should have said the exact opposite: “we commit to freezing the spreads for n months so that governments can focus on supporting their productive sector, and restoring more or less normal aggregate demand conditons”. Lagarde said the opposite. And here is the effect of that on Italian ten year rates. Look what happened at around 3pm, when she answered the question:

The yields Other Eurozone peripheral countries had similar behaviours. Why did Lagarde say that? Maybe Because she wanted to appease fiscal hawks ahead of the Eurogroup meeting of next week, so that they are more willing to agree on a fiscal stimulus? Or because she was afraid to be accused to be too soft on Italy? Or to actually care about one single country, which is what the ECB is not supposed to do? Or was it simply a communication misstep? A rookie mistake? Whatever the reason, it is clear that Lagarde made a huge mistake, and even apparently she partially backpedaled in a NBC interview shortly thereafter, this is what remain of today’s press conference.

So, my assessment of today’s ECB move is mixed. It was as good as it gets on financing the banking sector, and we just have to cross finger that this is enough to keep credit flowing.

But it is disappointing on the support of expansionary fiscal policies. All the more disappointing that the ECB and Lagarde have insisted on the need for a fiscal response “first and foremost”.

My only hope is that that was a misstep, or just lip service to fiscal responsibility. If market pressure prevents governments from supporting their firms, and if liquidity problems evolve into solvency problems, a “significant but temporary” shock will become a permanent hit to long-term growth capacity. And let’s not forget that the Eurozone economy is today more diverse and less resilient than it was in 2008.

Brace yourself

ps. You can find my live tweeting during the Q&A (a bit confused at times. Live tweeting is not my thing!) here:

Could Central Banks do More during the Crisis?

September 7, 2018 3 comments

I rarely disagree with Martin Sandbu’s Free Lunch. But today’s piece on central banks is one of these cases.

In short, Martin argues that while the main culprit for the slow recovery is fiscal policy, almost everywhere too timid if not outright procyclical (we are all on board on that!), the mistakes of fiscal authorities do not exempt central banks from bearing part of the responsibility. In particular, he dismisses the claim that it was technically impossible to lower long-term interest rates further, and/or bring policy rates even more into negative territory.

I agree with this point. Interest rates could have been lowered further. Nevertheless, I think that this would have made very little difference, because after 2008 central banks were essentially pushing on a string.  This point of disagreement between us can be traced to a different view about what is the liquidity trap.

I recently published a book, La Scienza inutile (a general public account of a century of debates in macroeconomics. For the moment it is in Italian and in French, English translation in progress), in which I discuss the different notions of liquidity trap. Here is the quote (sorry, a bit too long):

 The first source of trouble that Keynes considers is the most extreme, the so-called liquidity trap: `There is the possibility, […] that, after the rate of interest has fallen to a certain level, liquidity-preference may become virtually absolute in the sense that almost everyone prefers cash to holding a debt which yields so low a rate of interest. In this event the monetary authority would have lost effective control over the rate of interest’ (Keynes 1936, p.207). In slightly more technical terms, the interest elasticity of money demand is near-infinite: no matter how much liquidity the central bank injects into the economy, it is entirely hoarded by agents and hence it leaks out of the system in its entirety. Monetary expansion is not effective in lowering interest rates.

There may be different reasons why the economy enters a liquidity trap. Keynes argued, by looking at the great depression, that this usually happens at very low (but not necessarily nil) levels of the interest rate, because in this case agents would expect interest rates to rise in the future and thus would be willing to hold any extra amount of money and postpone the purchase of bonds to the moment when interest rates will be up again. More recently the liquidity trap has been defined as a situation in which the interest rate that equates savings and investment is negative, and therefore cannot be attained by the central bank (the so-called Zero Lower Bound, or ZLB; see e.g. Krugman 2000). This latter definition leaves some room for monetary policy effectiveness: if the central bank manages to trigger the expectation of positive inflation, the real interest rate (the nominal interest rate minus the inflation rate) will become negative and lead to the full employment equilibrium.

So, if we think in terms of ZLB, it exists a real interest rate at which the output gap would be closed. If that interest rate is negative, then it is harder to reach, as central banks need to raise inflation expectations and try to push short term rates as much as possible in negative territory, which requires boldness and creativity (we have seen this). But, once again I agree with Martin on that, this can be done. If instead private expenditure becomes irresponsive to interest rates, the ‘Keynes definition’, then there is little central banks could do. I had noticed, back in 2016, that while it succeeded in easing credit conditions, EMU Quantitative Easing seemed to have done little to boost confidence and expected demand (the ultimate driver of firm’s credit needs). The EMU most recent Bank Lending Survey seems to confirm the prediction of the time. Both chart 4 (enterprises) and chart 12 (households) depict a flat demand for loans, that picks up only when the EMU economic outlook brightens.

This is by no means hard evidence (I am not aware of any papers thoroughly investigating the impact of QE on credit demand). But stylized facts seem to acquit central bankers.

 

 

ps

The two works cited in the quote:

Keynes, J. M. (1936). The General Theory of Employment, Interest, and Money. London: McMillan.

Krugman, P. (2000). Thinking About the Liquidity Trap. Journal of the Japanese and International Economies 14(4), 221–237.

Democratising Europe begins with ECB nominations

January 30, 2018 1 comment

I repost here a post from Thomas Piketty’s Blog, originally published as an op-ed on Le Monde, which I was happy to sign.
This collective op-ed was initially published on January 22 2018 in Le Monde (in French) and in VoxEurop (in English).

While our eyes are glued to the interminable vicissitudes of the German Groko, a no less important story is playing out in Brussels, but has so far met with indifference. On January 22nd and February 19th, Eurogroup finance ministers will hold private meetings that will mark the beginning of a profound renewal of the European Central Bank executive board. The first big change will be the planned replacement of current Vice-President, Vitor Constancio. In the next two years, no less than 4 of the 6 members of the executive body of the ECB, Mario Draghi included, will be replaced.

All signs indicate that the future of economic, fiscal and monetary policy in eurozone countries is at stake in this series of nominations. The ECB of 2018, after all, barely resembles that earlier organisation which spent its relatively quieter days at the periphery of European policy, protected by its independent status. Built by governments and financial markets as an institutional recourse, the ECB started wielding more power thanks to the 2008 economic and financial crisis. Whether it’s telling member states how to finance their market debts, suggesting the adoption of a budgetary treaty (Fiscal Compact), notifying Irish or Italian heads of state that they should undertake without delay a raft of onerous reforms, or directly intervening in negotiations on the Greek crisis by controlling access to liquidities, it is always as a veritable co-ruler of the eurozone that the ECB operates.

After a decade of crisis, the ECB is no longer the same institution that was drawn up by the Treaties and consecrated to the sacro-saint goal of price stability: it has established itself, estimates at the ready, as Chief Economist of the eurozone; it has acquired executive power via the troika (with the European Commission and the IMF), which defines and ensures the execution of memoranda in countries being “helped”; it plays a central role in eurozone and Eurogroup summits which coordinate national economies; it has become a regulator of the banking world, deciding on the life and death of the largest banks in the eurozone; it has established itself as a reformer, working with coalitions built on prioritising “structural reforms” (labour markets), “competitiveness” (restrictive salary policies), etc.; it speaks on equal terms with the four other “presidents” of the Union (of the Commission, the Council, Eurogroup, and, finally, the European Parliament) when it comes to designing the political and institutional future of eurozone government, etc.

And yet, it as if the coming nominations are just another technicality. While there is in fact a rare occasion for leading parties and actors of representative politics to make their weight felt on the crucial issue of eurozone governance, everything seems set to keep nominations behind closed doors. Finance ministers are wary of having their decisions in Brussels held to account by their national parliaments; Eurogroup, an institution barely recognised by European treaties but which in fact plays a decisive role in the matter, has no form of political control. As is often the case, the European Parliament, which will hold a hearing for the chosen candidate, will arrive after the dust has settled, after negotiations have been concluded and compromises have been accepted, to give its… consultative opinion.

Meanwhile, there’s no lack of questions concerning the future of ECB policies and the role it should play: what position should it take in the reform of eurozone governance? What will its commitments be with regard to the European Parliament? What will become of its monetary policy when inflation has disappeared? What support can to bring to the Union’s policies? What are its priorities for the next eight years in terms of banking regulations? What place will be given to social partners? What form of policy will there be against conflicts of interest for the banking regulator? What redistributive effects can we expect from ECB policies? No doubt, the responses to these questions will determine the future course of the government of the eurozone. Candidates need to be questioned, and their responses should be known and debated.

Financial markets and governments seem satisfied with the current situation, happy to throw a veil of ignorance over the nomination process. And the signals coming from Brussels are hardly reassuring, leading us to suspect that Spain, imagining that its time has come, will propose it’s current minister for the economy, Luis de Guindos, for the vice-presidency on January 22nd. One of de Guindos’s main claims to fame is having been the executive president for Spain and Portugal’s branch of the Lehman Brothers during the peak of the financial crisis…

In the absence of the eurozone parliamentary assembly called for in the treaty for the democratisation of the eurozone (T-dem), of which one function would be precisely the political supervision of ECB nominations, there is still nothing preventing finance ministers from making public the criteria which justify their preferences for this or that candidate, and the conditions they want to impose on them.

The nomination process does not have to be conducted in private. It doesn’t have to be yet another game of European musical chairs. Nothing, in effect, is stopping finance ministers from making their decisions, and the reasons behind those decisions, public. Nothing is stopping candidates, those for the presidency most of all, from stepping forward in the coming months, being heard by national representatives, and stating their commitments.

And nothing, finally, is stopping the European Parliament from making its participation in the nomination process conditional on its own basic political requirements. This is how European parties, unions and NGOs can cut a path and begin weighing in on the decisions which will decide economic, fiscal and monetary policies within the eurozone. This would be the first real step – however modest – towards the democratisation of Europe.

Last September, in Athens, Emmanuel Macron called emphatically Europe to bring more « democracy, controversy, debate, building through critical spirit and dialogue ». It is now time that words and deeds go hand in hand.

First signatories :

Sébastien Adalid, jurist, professer at the University of Le Havre

Michel Aglietta, economist and professor emeritus at the University of Paris Nanterre

Peter Bofinger, economist, professor at Saarland University

Loïc Blondiaux, political scientist, professor at the Paris 1 University

Julia Cagé, economist, professer at Sciences Po, Paris

Amandine Crespy, political scientist, professor at the Université libre of Brussels

Anne-Laure Delatte, economist, director of research at CNRS

Bastien François, political scientist, professor at the University of Paris 1

Ulrike Guérot, political scientist, professor at the Danube University

Stéphanie Hennette, jurist, professer at Paris Nanterre University

Justine Lacroix, political scientist, professor at the Université libre of Brussels

Rémi Lefebvre, political scientist, professor at the University of Lille 2

Nicolas Leron, political scientist, think tank EuroCité

Ulrike Liebert, political scientist, professor at the Bremen Univeristy

Paul Magnette, political analyst, mayor of Charleroi

Francesco Martucci, lawyer, professor at Paris 2 University

Thomas Piketty, economist, director of studies at EHESS

Ruth Rubio Marín, lawyer, professor at Sevilla University

Guillaume Sacriste, political analyst, lecturer at Pantheon-Sorbonne University

Francesco Saraceno, economist, OFCE

Frédéric Sawicki, political scientist, professor at the University of Paris 1

Laurence Scialom, economist, professer at Paris Nanterre University

Xavier Timbeau, economist, principal director of OFCE

Antoine Vauchez, political analyst, director of research at CNRS

Translated by Ciaran Lawles

On the Political Nature of Monetary Policy

February 20, 2017 Leave a comment

I was intrigued by Munchau’s editorial on central bank independence, that appeared on today’s FT. Munchau argues that central banks’ choices are increasingly political in nature, especially if their mandate is broad, as is the case for example of the Fed. His argument is that a broad mandate implies tradeoffs, and as such it does not go well with central bank independence.

I must say I am unconvinced to say the least, on at least two levels.

First, I do not see how a strict mandate would make central bank choices less political in nature. It makes them more opaque, but by no means less political. I wrote about this in a paper on ECB action during the crisis, and more succinctly in an op-ed for Social Europe co-written with Yan Islam back in 2015.  Let me quote a few excerpts from that piece:

A dual mandate requiring the central bank to pursue two, sometimes conflicting, objectives forces the institution to make inherently political choices. Far from being a shortcoming, this allows for a more flexible and unbiased monetary policy. A central bank following a dual mandate will always be able to take an aggressive stance on inflation, if it deems this necessary. Appropriate choice of the weights given to employment and inflation would allow incorporation of any combination of the two objectives. […]

Inflation-targeting central banks, such as the ECB, de facto also target growth but timidly and without explicitly saying so. This leads to low reactivity and opaque communication, hampering in turn the capacity of central banks to manage expectations and effectively steer the economy. A good case in point is the ECB that – compared to the Fed – did “too little and too late” from 2009, amid a constant debate on whether the inflation-targeting mandate was being violated. […]

ECB opacity is intrinsically linked to the confusion between its mandate and its activities in the real world, and as such it cannot lead to any meaningful discussion but only to legalistic disputes on the definition of price stability, of how medium is the medium term and the like.

The main merit of a dual mandate is in fact that it lets the political nature of monetary policy emerge without ambiguities. It is indeed true that monetary policy with a dual mandate requires hard choices, just like those debated these days, and hence is political by its very nature. The point is, so is monetary policy with a simple inflation-targeting objective. The level of inflation targeted, and the choice of the instruments to attain it, is anything but neutral in terms of its consequences on the economy. Thus, an inflation-targeting central bank is as political in its actions as a bank following a dual mandate, the only difference being that In the former case the political nature of monetary policy is concealed behind a technocratic curtain.

In a sentence, we argued that monetary policy choices are always political, and as such they should be incorporated in the policy mix, without hiding behind what Yan and I called a technocratic illusion.

Munchau’s link between the broadness of the mandate and its political nature, is simplistic and in my opinion strongly misleading. In fact, we concluded back in 2015 that it is linked to a specific intellectual framework

The profound justification of an exclusive focus on price stability can only lie in the acceptance of a neoclassical view in which virtually powerless governments need to make little or no choices. Once we dismiss that platonic view, monetary policy acquires a political role, regardless of the mandate it is given.

The second reason why Munchau’s argument is unconvincing is the conclusion, somewhat implicit in his piece, that a central bank making political choices needs to be a “government agency”. Why is it so, exactly? I fail to see it. What matters is not that the central bank is controlled by the finance ministry, but that it is accountable, like any other actor doing policy, in a system of well functioning checks and balances.

Once we recognize that a central bank has a political role, we need to make sure first, that its mandate is not falsely perceived as technocratic; and second, that its actions are properly embedded in a balanced policy mix, in which there is coordination with, not subordination to, the other branches of government. It seems to me that the US institutional system comes pretty close to this. The same cannot be said for the eurozone.

Pushing on a String

June 3, 2016 1 comment

Readers of this blog know that I have been skeptical on the ECB quantitative easing program.
I said many times that the eurozone economy is in a liquidity trap, and that making credit cheaper and more abundant would not be a game changer. Better than nothing, (especially for its impact on the exchange rate, the untold objective of the ECB), but certainly not a game changer.
The reason, is quite obvious. No matter how cheap credit is, if there is no demand for it from consumers and firms, the huge liquidity injections of the ECB will end up inflating some asset bubble. Trying to boost economic activity (and inflation) with QE is tantamount to pushing  on a string.

I also said many times that without robust expansionary fiscal policy, recovery will at best be modest.

Two very recent ECB surveys provide strong evidence in favour of the liquidity trap narrative. The first is the latest (April 2016) Eurozone Bank Lending Survey. Here is a quote from the press release:

The net easing of banks’ overall terms and conditions on new loans continued for loans to enterprises and intensified for housing loans and consumer credit, mainly driven by a further narrowing of loan margins.

So, nothing surprising here. QE and negative rates are making so expensive for financial institutions to hold liquidity, that credit conditions keep easing.
So why do we not see economic activity and inflation pick up? The answer is on the other side of the market, credit demand. And the Survey on the Access to Finance of Enterprises in the euro area, published this week  also by the ECB, provides a clear and loud answer (from p. 10):

“Finding customers” was the dominant concern for euro area SMEs in this survey period, with 27% of euro area SMEs mentioning this as their main problem, up from 25% in the previous survey round. “Access to finance” was considered the least important concern (10%, down from 11%), after “Regulation”, “Competition” and “Cost of production” (all 14%) and “Availability of skilled labour” (17%). Among SMEs, access to finance was a more important problem for micro enterprises (12%). For large enterprises, “Finding customers” (28%) was reported as the dominant concern, followed by “Availability of skilled labour” (18%) and “Competition” (17%). “Access to finance” was mentioned less frequently as an important problem for large firms (7%, unchanged from the previous round)

No need to comment, right?

Just a final and quick remark, that in my opinion deserves to be developed further: finding skilled labour seems to become harder in European countries. What if these were the first signs of a deterioration of our stock of “human capital” (horrible expression), after eight years of crisis that have reduced training, skill building, etc.?
When sooner or later the crisis will really be over, it will be worth keeping an eye on  “Availability of skilled labour” for quite some time.

Tell me again that story about structural reforms enhancing potential growth?

The Sin of Central Bankers

April 19, 2016 Leave a comment

I read, a bit late, a very interesting piece by Simon Wren-Lewis, who blames central bankers for three major mistakes: (1) They did not see the crisis coming, while they were the only one in the position to see the build-up of leverage; (2) They did not warn governments that at the Zero Lower Bound central banks would lose traction and could not protect the economy from the disasters of austerity. (3) They may be rushing in declaring that we are back to normal, thus attributing all the current slack to a deterioration of the supply side of the economy.

What surprises me is (2), for which I quote Wren-Lewis in full:

Of course the main culprit for the slow recovery from the Great Recession was austerity, by which I mean premature fiscal consolidation. But the slow recovery also reflects a failure of monetary policy. In my view the biggest failure occurred very early on in the recession. Monetary policy makers should have said very clearly, both to politicians and to the public, that with interest rates at their lower bound they could no longer do their job effectively, and that fiscal stimulus would have helped them do that job. Central banks might have had the power to prevent austerity happening, but they failed to use it.

The way Wren-Lewis writes it, central banks were not involved in the push towards fiscal consolidation, and their “only” sin was of not being vocal enough. I think he is too nice. At least in the Eurozone, the ECB was a key actor in pushing austerity. It was directly involved in the Trojka designing the rescue packages that sunk Greece (and the EMU with it). But more importantly, the ECB contributed to design and impose the Berlin View narrative that fiscal profligacy was at the roots of the crisis, so that rebalancing would have to be on the shoulders of fiscal sinners alone. We should not forget that “impeccable disaster” Jean-Claude Trichet was  one of the main supporters of the confidence fairy: credible austerity would magically lift expectations, pushing private expenditure and triggering the recovery. He was the President of the ECB when central banks made the second mistake. And I really have a hard time picturing him warning against the risks of austerity at the zero lower bound.

And things are not drastically different now. True, Mario Draghi often calls for fiscal support to the ECB quantitative easing program. But as I argued at length, calling for fiscal policy within the existing rules’ framework has no real impact.

So I disagree with Wren-Lewis on this one. Central banks, or at least the ECB, did not simply fail to contrast the problem of wrongheaded austerity. They were, and may  still be, part of the problem.

The problem is one of economic doctrine. And as long as this does not change, I am unsure that removing central bank independence would have made a difference. Would a Bank of England controlled by Chancellor  Osborne have been more vocal against austerity? Would an ECB controlled by the Ecofin? Nothing is less sure…

 

Resilience? Not Yet

April 11, 2016 1 comment

Last week the ECB published its Annual Report, that not surprisingly tells us that everything is fine. Quantitative easing is working just fine (this is why on March 10 the ECB took out the atomic bomb), confidence is resuming, and the recovery is under way. In other words, apparently, an official self congratulatory EU document with little interest but for the data it collects.

Except, that in the foreword, president Mario Draghi used a sentence that has been noticed by commentators, obscuring, in the media and in social networks, the rest of the report. I quote the entire paragraph, but the important part is highlighted

2016 will be a no less challenging year for the ECB. We face uncertainty about the outlook for the global economy. We face continued disinflationary forces. And we face questions about the direction of Europe and its resilience to new shocks. In that environment, our commitment to our mandate will continue to be an anchor of confidence for the people of Europe.

Why is that important? Because until now, a really optimistic and somewhat naive observer could have believed that, even amid terrible sufferings and widespread problems, Europe was walking the right path. True, we have had a double-dip recession, while the rest of the world was recovering. True, the Eurozone is barely at its pre-crisis GDP level, and some members are well below it. True, the crisis has disrupted trust among EU countries and governments, and transformed “solidarity” into a bad word in the mouth of a handful of extremists. But, one could have believed, all of this was a necessary painful transition to a wonderful world of healed economies and shared prosperity: No gain without pain. And the naive observer was told, for 7 years, that pain was almost over, while growth was about to resume, “next year”. Reforms were being implemented (too slowly, ça va sans dire) , and would soon bear fruits. Austerity’s recessionary impact  had maybe been underestimated, but it remained a necessary temporary adjustment. The result, the naive observer would believe,  would eventually be that the Eurozone would grow out of the crisis stronger, more homogeneous, and more competitive.

I had noticed a long time ago that the short term pain was evolving in more pain, and more importantly, that the EMU was becoming more heterogeneous precisely along the dimension, competitiveness, that reforms were supposed to improve. I also had noticed that as a result the Eurozone would eventually emerge from the crisis weaker, not stronger. More rigorous analysis ( e.g. here, and here) has recently shown that the current policies followed in Europe are hampering the long term potential of the economy.

Today, the ECB recognizes that “we face questions about the resilience [of Europe] to new shocks”. Even if the subsequent pages call for more of the same, that simple sentence is an implicit and yet powerful recognition that more of the same is what is killing us. Seven years of treatment made us less resilient. Because, I would like to point out, we are less homogeneous than we were  in 2007. A hard blow for the naive observer.