"These efforts, akin to avoiding bank runs in prior periods"

Robert Barro in the WSJ:

"Back in the 1980s, many commentators ridiculed as voodoo economics the extreme supply-side view that across-the-board cuts in income-tax rates might raise overall tax revenues. Now we have the extreme demand-side view that the so-called "multiplier" effect of government spending on economic output is greater than one -- Team Obama is reportedly using a number around 1.5.

To think about what this means, first assume that the multiplier was 1.0. In this case, an increase by one unit in government purchases and, thereby, in the aggregate demand for goods would lead to an increase by one unit in real gross domestic product (GDP). Thus, the added public goods are essentially free to society. If the government buys another airplane or bridge, the economy's total output expands by enough to create the airplane or bridge without requiring a cut in anyone's consumption or investment.

The explanation for this magic is that idle resources -- unemployed labor and capital -- are put to work to produce the added goods and services.

If the multiplier is greater than 1.0, as is apparently assumed by Team Obama, the process is even more wonderful. In this case, real GDP rises by more than the increase in government purchases. Thus, in addition to the free airplane or bridge, we also have more goods and services left over to raise private consumption or investment. In this scenario, the added government spending is a good idea even if the bridge goes to nowhere, or if public employees are just filling useless holes. Of course, if this mechanism is genuine, one might ask why the government should stop with only $1 trillion of added purchases.( THIS IS TRUE )

What's the flaw? The theory (a simple Keynesian macroeconomic model) implicitly assumes that the government is better than the private market at marshaling idle resources to produce useful stuff( ONLY IN AN ECONOMIC CRISIS ). Unemployed labor and capital can be utilized at essentially zero social cost, but the private market is somehow unable to figure any of this out( THE FEAR AND AVERSION TO RISK IS NOT RATIONAL ). In other words, there is something wrong with the price system.( THERE IS. FEAR AND AVERSION TO RISK. )

John Maynard Keynes thought that the problem lay with wages and prices that were stuck at excessive levels. But this problem could be readily fixed by expansionary monetary policy, enough of which will mean that wages and prices do not have to fall( WE SHOULD DO THIS ). So, something deeper must be involved -- but economists have not come up with explanations, such as incomplete information, for multipliers above one.

A much more plausible starting point is a multiplier of zero. In this case, the GDP is given, and a rise in government purchases requires an equal fall in the total of other parts of GDP -- consumption, investment and net exports( NOT IN A CALLING AND PROACTIVITY RUN ). In other words, the social cost of one unit of additional government purchases is one.

This approach is the one usually applied to cost-benefit analyses of public projects. In particular, the value of the project (counting, say, the whole flow of future benefits from a bridge or a road) has to justify the social cost. I think this perspective, not the supposed macroeconomic benefits from fiscal stimulus, is the right one to apply to the many new and expanded government programs that we are likely to see this year and next.( HERE I COMPLETELY AGREE )

What do the data show about multipliers? Because it is not easy to separate movements in government purchases from overall business fluctuations, the best evidence comes from large changes in military purchases that are driven by shifts in war and peace. A particularly good experiment is the massive expansion of U.S. defense expenditures during World War II. The usual Keynesian view is that the World War II fiscal expansion provided the stimulus that finally got us out of the Great Depression. Thus, I think that most macroeconomists would regard this case as a fair one for seeing whether a large multiplier ever exists.

I have estimated that World War II raised U.S. defense expenditures by $540 billion (1996 dollars) per year at the peak in 1943-44, amounting to 44% of real GDP. I also estimated that the war raised real GDP by $430 billion per year in 1943-44. Thus, the multiplier was 0.8 (430/540). The other way to put this is that the war lowered components of GDP aside from military purchases. The main declines were in private investment, nonmilitary parts of government purchases, and net exports -- personal consumer expenditure changed little. Wartime production siphoned off resources from other economic uses -- there was a dampener, rather than a multiplier.( ONE COULD ARGUE THAT THE WAR, BEING A WAR, EFFECTED PEOPLE'S ATTITUDES IN ANY NUMBER OF WAYS. )

We can consider similarly three other U.S. wartime experiences -- World War I, the Korean War, and the Vietnam War -- although the magnitudes of the added defense expenditures were much smaller in comparison to GDP. Combining the evidence with that of World War II (which gets a lot of the weight because the added government spending is so large in that case) yields an overall estimate of the multiplier of 0.8 -- the same value as before. (These estimates were published last year in my book, "Macroeconomics, a Modern Approach.")

There are reasons to believe that the war-based multiplier of 0.8 substantially overstates the multiplier that applies to peacetime government purchases. For one thing, people would expect the added wartime outlays to be partly temporary (so that consumer demand would not fall a lot( THAT DOESN'T FOLLOW. A WAR COULD IN FACT DAMPEN DEMAND BY EFFECTING HUMAN BEHAVIOR. ). Second, the use of the military draft in wartime has a direct, coercive effect on total employment. Finally, the U.S. economy was already growing rapidly after 1933 (aside from the 1938 recession), and it is probably unfair to ascribe all of the rapid GDP growth from 1941 to 1945 to the added military outlays. In any event, when I attempted to estimate( THAT'S ALL YOU DID ) directly the multiplier associated with peacetime government purchases, I got a number insignificantly different from zero.

As we all know, we are in the middle of what will likely be the worst U.S. economic contraction since the 1930s. In this context and from the history of the Great Depression, I can understand various attempts( YES ) to prop up the financial system. These efforts, akin to avoiding bank runs in prior periods( YES. THAT'S WHY I CALL THEM A CALLING RUN AND A PROACTIVITY RUN. ), recognize that the social consequences of credit-market decisions extend well beyond the individuals and businesses making the decisions.

But, in terms of fiscal-stimulus proposals, it would be unfortunate if the best Team Obama can offer is an unvarnished version of Keynes's 1936 "General Theory of Employment, Interest and Money." The financial crisis and possible depression do not invalidate everything we have learned about macroeconomics since 1936.

Much more focus should be on incentives for people and businesses to invest, produce and work. On the tax side, we should avoid programs that throw money at people and emphasize instead reductions in marginal income-tax rates -- especially where these rates are already high and fall on capital income. Eliminating the federal corporate income tax would be brilliant( TARGETED TOWARDS INVESTMENT. ). On the spending side, the main point is that we should not be considering massive public-works programs that do not pass muster from the perspective of cost-benefit analysis( I AGREE ). Just as in the 1980s, when extreme supply-side views on tax cuts were unjustified, it is wrong now to think that added government spending is free."

I'm beginning to realize that economists are using preposterous views of Human Agency as a matter of course. Wars can have a myriad of effects, and simply assuming that, if they don't last long, consumption will remain the same, seems totally unjustified to me. Much depends on the nature and context of the war. Barro sees people as robots. I don't. One reason economics is so useless to us is its use of and reliance on Mechanistic Explanations.

Still, his recommendations are like mine. One reason is that I believe that the focus on the amount of the stimulus is also a mechanistic explanation. Tax incentives are a Human Agency approach. Spending money on a cost-benefit basis is more like common sense and fiscal prudence. There is some sense in government spending when investors are frozen by the fear and aversion to risk. However, the spending should still be prudent and wise. It should not mechanistically be spent in order to hit an artificial target.

"The real threat to capitalism and democracy, however, is depression and unemployment"

From the FT comes some Burkean sense:

"Is your recession really necessary?

Published: January 2 2009 18:53 | Last updated: January 2 2009 18:53

What a bleak midwinter. It is still hard to see where any green shoots of recovery will break through the permafrosted ground. The recession seems especially unnerving given the length and scale of the good times which preceded it – years in which the current malaise was brewed. It is, therefore, tempting to believe that the world deserves and needs recession to pay for those excesses and to rid ourselves of our unnecessary indulgences. This view, however, is wrong( I AGREE ).

In the past few years, the world economy stumbled out of kilter. House prices were unsustainably bloated by cheap money( NO. POOR LENDING PRACTICES. ). Deficit countries, such as the UK and the US, borrowed frantically to sustain their consumption. Surplus countries, such as China and Germany, grew rich by sating their bingeing. ( THIS WAS THE SYSTEM. REPLACING IT WILL BE HARD WITHOUT SOME SOCIAL DISLOCATIONS. )

These imbalances had been allowed to grow to enormous sizes, nourished by dangerous financial magic. Mortgage straw was not respun, but rather packed into bails and relabelled as triple-A gold( NONSENSE. IT WAS FRAUD, NEGLIGENCE, FIDUCIARY MISMANAGEMENT, AND COLLUSION. ). The financial services industry engorged itself, ran up large profits and paid its staff huge bonuses( AND COMMITTED... ). But the pro-cess also contributed handsomely to government budgets( A HYBRID ) and created enormous demand.

Having lived beyond our means( THIS IS SILLY. ), some economists, notably disciples of the Austrian School, would say that we need recession( WE NEED SOCIAL DISLOCATION AS WELL I SUPPOSE. ). The “malinvestment” of the past few years must be liquidated away. The inefficient, along with charlatans and fraudsters, must be exposed. In 1934, during the Great Depression, Ludwig von Mises wrote that policymakers should have been “raising the rate of interest and restricting credit and so giving free play to the purging process( IT'S LIKE A COLONIC. ) of the crisis”.

To von Mises, policy that aimed to “bolster up undertakings that would otherwise have succumbed to the crisis, and on the other hand to give an artificial stimulus to economic life by public works schemes ... eliminated just those forces which in previous times of depression have ... paved the way for recovery( AND REVOLUTION )”.

Such liquidationism makes a fine morality tale: you reap what you sow. It should be little surprise that many prominent members of the Austrian School – and most of its key adherents – are and were socially conservative. But it took the genius of a man whose inhibitions were informed by life in the Bloomsbury Set to fully explain why this is so very wrong.

One of John Maynard Keynes’ great insights was to understand how, in a crisis, demand would not necessarily fall back to the desired sustainable level. If all market actors pull in their horns( A PANIC ), the result is the paradox of thrift: demand will dry up, and economic activity will crack and crumble with it. Crisis will certainly arrive, and it may not leave. Once demand has evaporated, economies can slide into a low-employment, low-growth equilibrium. Governments must respond by supporting demand with loosened monetary and fiscal policy( TRUE ).

These weapons are slow-acting blunderbusses; they do not allow for rapid responses or fine-tuning. But they are preferable to von Mises’ harsh prescription, which could deepen the recession. It is not possible to liquidate the malinvestment without risking allowing unemployment to spiral out of control and demand to fall with it. Such a plan would be less a healthy purgative, and more an acid bath( VERY TRUE ).

Businesses can, and should, still fail( TRUE ). Politicians must not subsidise existing companies( THEY WILL ). Nor should they seek to prevent necessary( ? ) adjustments which must take place. If this is what John Maples, the UK conservative MP meant when he said the “recession has to take its course”, then he is right. But governments must work together, internationally, to sustain demand. They must not sit idly by.

The allure of the Austrian story lies in its devotion to the free market. The real threat to capitalism and democracy, however, is depression and unemployment( AND REVOLUTION AND TOTALITARIANISM ). It is not countercyclical fiscal policy."

"But many of the critics of mass fiscal stimulus have an alternative frame in mind, namely, that "employment increases spending."

Alex Tabarrok on Marginal Revolution makes a good point:

"Macroeconomics without Supply

Alex Tabarrok

Paul Krugman writes:

...if you believe that a surge in private spending would raise employment — and even the critics agree on that — it’s very hard to explain why a surge of public spending wouldn’t have the same effect.

Brad DeLong writes:

But surely we believe that if the U.S. government were to follow the Countrywide plan--to send its representatives out onto the streets to have them walk up to people and say: "Here's $500,000. You can have it if you go buy a house"--then that would drive a recovery, right?

What's interesting about these statements is not so much whether they are right or wrong (let's just say that it depends) but that Krugman and DeLong are so immersed in the Keynesian viewpoint that they cannot even see any other way of looking at the issue. Thus "even the critics" and "but surely we believe," as if no other view were conceivable.

Well if the only frame you can see is the "spending increases employment" frame then whether the spending is private or public may seem like a niggle. But many of the critics of mass fiscal stimulus have an alternative frame in mind, namely, that "employment increases spending."

Frame the issue this way and it becomes clear that the choice between private employment and public employment as a driver of spending is crucial. Moreover, when we remember that employment drives spending we focus attention on the real allocation of labor and capital across sectors of the economy, on internal and external fiscal balance, on investment as well as on consumption and on time paths of development. The "spending drives employment" frame misses all this."

These are good points. The government needs to spend money on:
1) The social safety net
2) Infrastructure
I have no good numbers on these, because, even if I were an expert, I still wouldn't know how much 1 will turn out to cost us, and 2 depends upon how many truly useful and cost efficient infrastructure projects we will be able to develop.

Otherwise, we should focus on the Fear and Aversion To Risk, which is the main problem that we are facing. The way to do that is to try and offer incentives for risk, such as tax reductions. Oddly, greater risk will lead to more jobs as lending and investment unfreeze.

One could also target consumption with a sales tax decrease or payroll tax decrease, which will be for a limited time only. This would offer some disincentive to saving, but not enough to stop all saving, since we need some increase in saving as well. Going forward, we should look into incentives for saving as well. But not right now.

"In a sense, what we have is a a "just so" story, and not a theory"

Arnold Kling has a point about theories:

"Josh Hendrickson writes,

there are many so-called Keynesians who have been out there promoting policies that are quite the opposite. They have been promoting the re-capitalization of banks, forcing banks to lend, automotive bailouts, and a push toward developing "green" jobs. These attempts to micromanage the supply side of the economy are not consistent with Keynesian stimulus or that of modern macroeconomic theory( THAT DOESN'T MATTER. THEORIES ARE SIMPLY MORE OR LESS USEFUL ).

In my mind, there are three dots that need to be connected:

1. theory( KANTIAN: ECONOMICS: MORE OR LESS USEFUL )
2. the explanation for the recent crisis ( HUMAN AGENCY AND NARRATIVE THINKING )
3. policy to get us out of the crisis.( POLITICAL ECONOMY: PRAGMATIC:EXISTENTIAL:TRIAL AND ERROR )

Hendrickson is worried about the disconnect between (1) and (3). I agree. But I also worry that there is a disconnect between (1) and (2) and between (2) and (3).

Neither textbook macro nor modern theory is focused on sudden shifts in the risk premium( FEAR AND AVERSION TO RISK AND THE ACCOMPANYING FLIGHT TO SAFETY ), although I think it is impossible to describe the recent crisis without referring to such a shift. In a sense, what we have is a a "just so" story ( I'VE CALLED IT A NARRATIVE ), and not a theory. That in turn makes the connection between theory and policy rather tenuous( FOR ME, IT ALWAYS IS. IF THE QUANTS HAD UNDERSTOOD THIS, THEY WOULDN'T HAVE HAD SUCH FAITH IN THEIR THEORIES ).

"but the critics never mention the reason for the low rates nor their benefits."

Bob McTeer takes the blame for turning the water on in the Spigot Theory, which I don't credit:

"When recession becomes an issue, as it now is, the remedy involves increasing total spending, or aggregate demand, to match the capacity of the economy to produce goods and services at full employment( TRUE ).

One way to view aggregate demand is by its spending components such as consumption, investment, and government spending. This "Keynesian approach facilitates a focus on fiscal policy( TRUE ).

An equally valid approach that highlights monetary policy is to treat aggregate demand as the money supply (M) times its velocity (V). MV gives you the same spending totals as above( YES ).

A third approach, rarely used, is productivity (output per hour worked) times the number of hours worked. That too gives the same result. It's like describing the same thing in different languages.( OK )

Productivity growth came into prominence in the late 1990s because its acceleration had very positive results. It enabled employers to give pay increases without increasing their unit labor costs. That permitted an easier monetary policy with less worry about inflation. We had faster growth with falling inflation( YES ).

Remarkably, faster productivity growth continued as we climbed out of the recession in 2002. That was a mixed blessing since business expanded with little or no expansion in employment. Rising output coinciding with rising unemployment led to the term "jobless recovery."( YES. THAT'S SOMETIMES AN ODDITY OF AN INCREASE IN PRODUCTIVITY )

While rising productivity was increasing our standard of living, it also depressed employment growth, which is probably not a desirable tradeoff when the economy is weak( I AGREE ). Rising employment spreads the benefits of growth more widely( YES ).

As 2002 progressed, the recovery sputtered and a double dip recession threatened. Falling inflation threatened to morph into actual deflation. Fear of deflation, was the main reason the Greenspan Fed allowed the Federal funds rate to go so low, eventually reaching one percent. Alan Greenspan is routinely blamed for those low interest rates fueling the housing boom, but the critics never mention the reason for the low rates nor their benefits( TRUE. SAME PLAN AS THIS TIME ).

Whether the policy was justified or not, I left my fingerprints at the scene. At the September 2002 FOMC meeting, I dissented, along with Governor Ned Gramlich, in favor of reducing rates. We didn't prevail at that meeting, but the vote to ease was unanimous at the next meeting, on November 6.

I wrote the following rational for the minutes, which are now public:

Messrs. Gramlich and McTeer dissented because they preferred to ease monetary policy at this meeting. The economic expansion, which resumed almost a year ago, had recently lost momentum, and job growth had been minimal over the past year. With inflation already low and likely to decline further in the face of economic slack and rapid productivity growth, the potential cost of additional stimulus seemed low compared with the risk of further weakness.

So, you see, it wasn't Chairman Greenspan's fault. It was mine."

I would have voted with McTeer. But, as I say, I don't hold Low Interest Rates as the cause of our crisis. My main complaint against Greenspan is not recognizing problems and voicing concerns about them. He was too much of a cheerleader for some dubious views about current Political Economy.

"conversion, whereby, for example, all existing mortgage debts could be wholly or partly converted into long-term, low and fixed-interest loans"

Niall Ferguson on FT talks about Leviticus:

"In the Old Testament Book of Leviticus, God commands the children of Israel to observe a jubilee every 50 years. Nowadays we tend to associate the word with celebrations of royal anniversaries such as Queen Elizabeth’s golden jubilee in 2002. But the biblical conception of a jubilee was more precise: that of a general cancellation of debts.

This point is spelt out in Deuteronomy: “Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the Lord’s release.” ( I BELIEVE THAT THIS WAS ALSO TO ENSURE THE LAND REMAINED IN THE POSSESSION OF EACH TRIBE )

Such injunctions may strike the modern reader as utopian. How could any sophisticated society function if all debts were cancelled twice a century – much less, as Deuteronomy seems to suggest, every seven years? Yet we know that such general cancellations of debt really did happen in the ancient world. In 1788 BC, for example, about 500 years before the time of Moses, King Rim-Sin of Ur issued a royal edict declaring all loans null and void, wiping out some of history’s earliest known moneylenders. ( WHY NOT HAVE SAVER NATIONS LIKE CHINA AND GERMANY CANCEL DEBT, AND THEN THE SPENDER NATIONS CAN START SPENDING AGAIN AND EVERYONE IS HAPPY AND DOING WHAT COMES NATURALLY TO THEM? )

The idea of a generalised debt cancellation is not wholly unknown in modern times. The late Gerald Feldman, the world’s leading authority on the German hyperinflation of 1923, drew a parallel between the ancient Hebrew yovel and the wiping out of all paper mark-denominated debts as a result of the collapse of the German currency (though, as he was quick to point out, those whose savings were wiped out were far from jubilant).

In the hope of avoiding the mark’s meltdown, the economist John Maynard Keynes had repeatedly called for a general cancellation of the war debts and reparations arising from the first world war. Though no such intergovernmental jubilee was ever proclaimed, debt cancellation was effectively what happened after 1931, beginning with President Herbert Hoover’s one-year moratorium on both war debts and reparations.

As 2008 draws to a close, there are many people on both sides of the Atlantic who yearn for such a simple solution to the problem of excessive indebtedness. Parallels with the interwar period are not inappropriate. It is all but inevitable that we shall see serious political and geopolitical upheavals in 2009, as the recession takes its toll on weak governments (Thailand and Greece are already reeling) and raises the stakes in inter-state rivalries (India-Pakistan). In the words of Hank Paulson, the US Treasury secretary: “We are dealing with a historic situation that happens once or twice in 100 years.” The stakes are high indeed. Has the time arrived for a once-in-50-years biblical jubilee?

Excessive debt is the key to this crisis ( BUT WHAT CAUSED IT? ); it is the reason we are confronting no ordinary recession, curable by a simple downward adjustment of interest rates. It is the reason we still have to fear, if not a second Great Depression, then very likely the biggest recession since the 1930s. We are living through the painful end of an age of leverage which saw total private and public debt in the US rise from about 155 per cent of gross domestic product in the early 1980s to something like 342 per cent by the middle of this year.

With average household debt rising from about 75 per cent of annual disposable income in 1990 to very nearly 130 per cent on the eve of the crisis, a large proportion of American families are submerging under the weight of their accumulated borrowings. British households are in even worse shape.

Looking back, we now see just how big a proportion of US growth since 2001 was financed by mortgage equity withdrawals. Without that as a means of financing consumption, the economy would barely have grown at 1 per cent a year under President George W. Bush. Looking forward, we see just how hard it will be to stabilise property prices and the prices of the securities based on them. Already, at the end of September, one in 10 American home owners with a mortgage was either at least a month in arrears or in foreclosure. One in five mortgages exceeds the value of the home it was used to purchase.

The financial sector’s debts grew even faster as banks sought to bolster their returns on equity by “levering up” ( THIS IS TRUE ). According to one recent estimate, the total leverage ratios (on- and off-book assets and exposure divided by tangible equity) for the two biggest US banks were 88:1 for Citibank and 134:1 for Bank of America. The bursting of the property bubble caused such ratios, which were already too high on the eve of the crisis, to explode as off-balance-sheet commitments and pre-arranged credit lines came home to roost. Only by borrowing from the Federal Reserve on an unprecedented scale have the banks been able to stay in business( THE BANKS CONSIDER IT INSURANCE AND WERE COUNTING ON IT ).

With estimates of total losses on risky assets now ranging from $2,800bn (£1,850bn, €1,960bn) to $6,000bn, a chain reaction is under way that will leave no sector of the world economy untouched. The American economy is contracting at an annualised rate of 5 per cent ( WE NEED TO WAIT ON THAT ). Commercial property is following the residential market into freefall. The Standard & Poor’s 500 index is down 43 per cent since its peak in October last year. The market for credit default swaps is pointing to a surge in defaults on corporate bonds( I BELIEVE THIS IS OVERDONE ). The automotive industry is already (against the will of Congress and the original intention of the Treasury) on life support. The US is at the centre of the crisis but Europe and Japan may suffer even larger aftershocks. As for the much feted emerging market “Brics” – Brazil, Russia, India and China – their stock markets have been dropping like, well, bricks.

What makes this crisis of burning interest to financial historians is the knowledge that we are witnessing a real-time experiment with not one but two theories( THEY'RE NOT MUCH HELP ) about the Depression.

On one side, Ben Bernanke, Fed chairman, is applying the lesson of Milton Friedman’s and Anna Schwartz’s A Monetary History of the United States, which argued that the Depression was in large measure the fault of the central bank for failing to inject liquidity into an imploding financial system. Mr Bernanke has not merely slashed the federal funds rate to below 0.25 per cent. He has lent freely to the banks against undisclosed but probably toxic collateral. Now he is buying securities in the open market. ( HE'S DOING WHAT LOOKS LIKE THE LEAST AWFUL ALTERNATIVE )

The result has been an explosion of the Fed’s balance sheet and of the monetary base. With assets approaching $2,263bn and capital of less than $40bn, the Fed increasingly resembles a public hedge fund, leveraged at more than 50:1. ( THE ASSETS OF THE AMERICAN PEOPLE BACK THIS )

On the other side, Mr Paulson has emerged as an unwitting disciple of Keynes, running a huge government deficit in an effort not merely to bail out the financial sector but also to provide a public sector substitute for sharply falling private sector consumption. Even before President-elect Barack Obama launches his promised infrastructure investment programme, estimates of next year’s deficit run as high as 12.5 per cent.

Once, monetarism and Keynesianism were considered mutually exclusive economic theories. So severe is this crisis that governments all over the world are trying both simultaneously ( THAT'S BECAUSE WE'RE NOT SURE WHAT TO DO ).

Although commentators like to draw parallels with Franklin Roosevelt’s New Deal, in truth the measures taken since the crisis began in August 2007 more closely resemble those taken during the world wars ( AND? ). After 1914, and again after 1939, there was massive government intervention in the financial system. Banks and bond markets were reduced to mere channels for the financing of huge public sector deficits. That is what is happening today, but without the stimulus to manufacturing that the world wars provided. We are having war finance without the war itself.( THANK GOD )

Yet the effect of these policies is essentially to add a new layer of public debt to the existing debt mountain. Added together, the loans, investments and guarantees made by the Fed and the Treasury in the past year total about $7,800bn, compared with a pre-crisis federal debt of about $10,000bn. The Treasury may have to issue as much as $2,200bn in new debt in the coming year. ( IT'S A PROBLEM, BUT NOT INSURMOUNTABLE )

For the time being, the distress-driven demand for dollars and risk-free assets is pushing down the cost of all this borrowing. Treasury yields are at historic lows. But it is not without significance that the cost of insuring against a US government default has risen 25-fold in little over a year ( THIS MIGHT WELL BE OVERDONE ). At some point ( WHAT POINT? ), with most big economies adopting the same fiscal policy, global bond markets are going to start choking.

Is it really plausible that the cure for excessive leverage in the private sector is excessive leverage in the public sector ( YES IT IS. IT'S PARADOXICAL, BUT MUCH OF LIFE IS ) Might there not be a simpler way forward? When economists talk about “deleveraging” they usually have in mind a rather slow process whereby companies and households increase their savings in order to pay off debt. But the paradox of thrift means that a concerted effort along these lines will drive an economy such as that of the US deeper into recession, raising debt-to-income ratios.

The alternative must surely be a more radical reduction of debt. Historically, such reductions have been done in one of four ways:( 1 ) outright default,( 2 ) restructuring (for instance, bankruptcy), ( 3 )inflation or ( 4 ) conversion. At the moment, more and more American households are choosing the first as a way of dealing with the problem of negative equity, while more and more companies are being driven towards bankruptcy. But mass foreclosures and bankruptcies are not a pretty prospect.( BUT THEY MIGHT HELP )

Inflation, by contrast, is hard to worry about in the short term, not least because the Fed’s expansion of the monetary base is leading to no commensurate expansion of the broad money supply; the banks would rather shrink than expand their balance sheets.( SO WHY NOT USE IT? )

That leaves conversion, whereby, for example, all existing mortgage debts could be wholly or partly converted into long-term, low and fixed-interest loans, as recently suggested by Harvard’s Martin Feldstein. (In his scheme, the government would offer any homeowner with a mortgage the option to replace 20 per cent of the mortgage with a low-interest loan from the government, subject to a maximum of $80,000. The annual interest rate could be as low as 2 per cent and the loan would be amortised over 30 years ( THEY DO HAVE TO PAY THE MONEY BACK ).

At the very least, this would rescue many homeowners from the nightmare of negative equity. A similar operation might also be contemplated for the debts of those banks that have been partially or wholly recapitalised by the state. This would not add to the federal debt in net terms and would reduce the interest burden, if not the absolute debt burden, of households.

Such radical steps would naturally represent a haircut for creditors ( FINE WITH ME, SINCE THE HOUSES THEY WOULD FORECLOSE ON WOULD BE WORTH LESS ), notably the holders of mortgage-backed securities and bank bonds. Yet they would surely be preferable to the alternatives ( NOT IF THEY FEEL THAT THEY CAN GET A BETTER DEAL FROM THE GOVERNMENT. ALSO, ARE YOU GOING TO MANDATE THIS? ). And they would certainly be a less extreme solution than the general debt cancellation envisaged in the Old Testament.

Financially, 2008 has been an annus horribilis. The answer may be to make 2009 a true jubilee year.

To be honest, I don't think he made a case for any of the four alternatives. It's an interesting plan, but it is dubious that it can be made to work in practice, due to a number of factors leaving lenders and borrowers to prefer other alternatives.

How fallow years led to a golden jubilee

Every seven years, God told Moses, the children of Israel should neither sow their fields nor prune their vineyards – a kind of self-imposed recession. After seven such sabbatical years, the trumpet of jubilee should be sounded: “And ye shall hallow the fiftieth year, and proclaim liberty throughout all the land unto all the inhabitants thereof: it shall be a jubilee unto you; and ye shall return every man unto his possession.”

Land that had been sold was to be redeemed or returned to the original seller and the poor were to be relieved: “If thy brother be waxen poor, and hath sold away some of his possession, and if any of his kin come to redeem it, then shall he redeem that which his brother sold ... If thy brother be waxen poor ... then shalt thou relieve him: yea, though he be a stranger ... Take thou no usury of him ...” In addition, Jews who were slaves were to be set free.

To modern eyes, however, the most striking of these divine injunctions was that debts were to be cancelled as part of “the Lord’s release”.

"This wouldn’t require permanent deficits as long as, once economic growth returns, revenues from a progressive income tax refill the coffers."

Robert Reich joins the Keynes parade:

"Not long ago I was talking to someone who once had been a deficit hawk but the current recession had turned into a full-blooded Keynesian. He wanted a stimulus package in the range of $500 to $700 billion. "Consumers are dead in the water," he said, fervently, "so government has to step in." I agreed. But I didn’t tell him his traditional Keynesianism is based on two highly-questionable assumptions in today’s world, and the underlying logic of Keyenes leads us toward something bigger and more permanent than he has in mind."

Why didn't you tell him?

"The first assumption is that American consumers will eventually regain the purchasing power needed to keep the economy going full tilt. That seems doubtful. Median incomes dropped during the last recovery, adjusted for inflation, and even at the start weren’t much higher than they were in the 1970s. Middle-class families continued to spend at a healthy clip over the last thirty years despite this because women went into paid work, everyone started working longer hours, and then, when these tactics gave out, went deeper and deeper into debt. This indebtedness, in turn, depended on rising home values, which generated hundreds of billions of dollars in home equity loans and refinanced mortgages. But now that the housing bubble has burst, the spending has ended. Families cannot work more hours than they did before, and won’t be able to borrow as much, either."

What does "full tilt" mean? So, yes, people in general should spend less and save more.

"The second assumption is that, even if Americans had the money to keep spending as before, they could do so forever. Yet only the most myopic adherent of free-market capitalism could believe this to be true. The social and environmental costs would soon overwhelm us. Even if climate change were not an imminent threat to the planet, the rest of the world will not allow American consumers to continue to use up a quarter of the planet’s natural resources and generate an even larger share of its toxic wastes and pollutants."

Obviously it would depend upon what they spent the money on. Go Green!

"This would be a problem if most of what we consumed during our big-spending years were bare necessities. But much was just stuff. And surely there are limits to how many furnishings and appliances can be crammed into a home, how many hours can be filled manipulating digital devices, and how much happiness can be wrung out of commercial entertainment."

How many homes have you been in? There are physical limits to how much stuff can fit in a house. Give that problem to an MIT chap. He feels that people spend foolishly, but that's an opinion.

"The current recession is a nightmare for people who have lost their jobs, homes, and savings; and it’s part of a continuing nightmare for the poor. That’s why we have to do all we can to get the economy back on track. But most other Americans are now discovering they can exist surprisingly well buying fewer of the things they never really needed to begin with."

Another up side. Pretty soon we're going to have enough of these "silver lining" discoveries to call this crisis a huge benefit. I doubt that "discovering" is the right term. More like being forced to acknowledge. There's a big difference, which might explain why I find these "silver linings"
to be so annoying.

"What we most lack, or are in danger of losing, are the things we use in common – clean air, clean water, public parks, good schools, and public transportation, as well as social safety nets to catch those of us who fall. Common goods like these don’t necessarily use up scarce resources; often, they conserve and protect them.

Yet they have been declining for many years. Some have been broken up and sold as more expensive private goods, especially for the well-to do – bottled water, private schools, security guards, and health clubs, for example. Others, like clean air, have fallen prey to deregulation. Others have been wacked by budget axes; the current recession is forcing states and locales to axe even more. Still others, such as universal health care and pre-schools, never fully emerged to begin with.

Where does this logic lead? Given the implausibility of consumers being able to return to the same level of personal spending as before, along with the undesirability of our doing so even if we could, and the growing scarcity of common goods, there would seem only one sensible way to restore and maintain aggregate demand. That would be through government expenditure on the commons. Rather than a temporary stimulus, government would permanently fill the gap left by consumers who cannot and should not be expected to resume their old spending ways. This wouldn’t require permanent deficits as long as, once economic growth returns, revenues from a progressive income tax refill the coffers.

My friend the born-again Keynesian might not like where the logic of Keynesianism leads in today’s world, but the rest of us might take heart."

The spending idea seems to entail higher taxes indefinitely. There is no certain relationship between higher taxes and the programs that he wants, as long as we cut expenses elsewhere. The programs that he calls for should be judged on their merits, including whether or not they are worth the cost.

The bottom line is that he wants higher taxes on the rich to pay for more common goods. Why not just say so, and leave Keynes out of it, especially since what he's really being lauded for is having an idea of what to do to increase consumption in a liquidity trap. Hopefully, that won't be our normal condition.

"*It is the Minsky effect that is the real kicker here."

Arnold Kling also lines up with the Payroll Tax Cut:

"Mark Zandi says

A payroll tax holiday and a permanent payroll tax credit would be effective tax cuts, particularly if designed to help harder-pressed lower- and middle-income households and smaller businesses.

Tyler Cowen also favors payroll tax cuts. I like the idea because there is minimal time lag, it lowers the price of labor, and it keeps the government out of picking winners and losers in terms of industries.

I have zero faith in econometric estimates of the Keynesian multiplier. I think that today's asset-deflation economy is too different from most of what we have observed over the past fifty years for econometrics to be of any help."

I tend to agree that history is not much help here at all, except as a narrative to help us get through this mess. I'm fine with the Payroll Tax Cut, but I'm still stubbornly pushing my Sales Tax Cut Idea.

"Logic suggests that the multiplier today is large. It more likely to be closer to 3 (or above) than to 1.

1. Interest rates on Treasuries are so low that printing Treasuries is tantamount to printing money. ( True )

2. Unless the fiscal stimulus is really stupidly targeted, there should be few supply bottlenecks. The demand increase will go mostly to output and hardly at all to prices. ( Agree )

3. Investment is more likely to be "crowded in" by stronger demand than crowded out by higher interest rates. ( Agree )

4. We are likely to see a strong "Minsky effect." That is, higher income should increase wealth and improve balance sheets. This will stimulate spending by both businesses and consumers.*" ( Agree )

Logic=It makes sense to me.

"Having said all that, it is still a bit strange to think of a larger government deficit as a stimulus. If I wrote myself a check for $5000, obviously that would not be a stimulus. If I wrote my daughter a check for $5000 and said that it was coming out of her inheritance, we are saying that would be a stimulus. At a national level, what we are doing is writing checks to our children and taking it out of their inheritance. And, yes, I do think that under present circumstances that will be a net stimulus."

I'm glad he agrees.

Let's look at "stimulus":

1. Something causing or regarded as causing a response.
2. An agent, action, or condition that elicits or accelerates a physiological or psychological activity or response.
3. Something that incites or rouses to action; an incentive: "Works which were in themselves poor have often proved a stimulus to the imagination" (W.H. Auden).

[Latin, goad.]

I don't know, it does seem to be a stimulus, in that it is intended to incite or rouse spending. Where the money comes from seems secondary to the purpose.

"*It is the Minsky effect that is the real kicker here.

Let E be expenditure and let Y be income or GDP. Suppose that without the Minsky effect, we have:

E = $100 + 0.5Y
E = Y

The multiplier is 2, and Y = $100/(1-0.5) = $200.

Now, introduce a Minsky effect, where wealth is denoted by W.

E = Y
W = 5Y
E = $100 + 0.5Y + 0.08W

Now, E = $100 + 0.5Y + 0.08(5Y)

= $100 + 0.9Y

and the multiplier is 10, so that Y = $1000"

Can we introduce the Minsky Effect into my bank account?

"The installation of infrastructure increases economic growth in the future"

Mark Thoma answers some of my questions about Woodward and Hall's post:

"Romer and Romer do not look at government spending multipliers, so we don't know if the government spending multiplier is smaller/larger than the tax multiplier if they are estimated in the same model (note, though, the the confidence band for Romer and Romer's tax multiplier is 1.3 to 4.7, so a multiplier smaller than Ramey's estimated value of 1.4 for government spending - though not strictly comparable since it comes from a different model - is within the confidence bounds of these estimates; confidence bounds for Ramey's estimates are not reported). I should also note that Romer and Romer isolate different types of tax cuts, the multiplier of 3.0 (plus or minus about 1.7) is for exogenous tax changes intended to promote economic growth, not tax changes intended to stabilize the economy. Their results for tax cuts used for stabilization purposes are not encouraging:

The behavior of output following countercyclical tax changes ... suggests that policymakers' efforts to adjust taxes to offset anticipated changes in private economic activity have been largely unsuccessful.

Finally, many estimates of the Keynesian government spending multiplier can be criticized on the same grounds that the tax cut advocates like to cite. The installation of infrastructure increases economic growth in the future, but these dynamic effects are missing from the standard Keynesian analysis (and using history as a guide is not very helpful since we have had very few surges in government spending devoted to infrastructure spending, and we have little data on the effects of fiscal policy - or any policy - in severe downturns since they are so unusual). If the dynamic effects were to be included in the infrastructure spending mulitplier, the multiplier would be larger."

This would explain my belief that infrastructure spending does have positive benefits, and that tax cuts don't necessarily do a great job as a stimulus.

But he doesn't discuss targeted tax cuts in order to help move the fear and aversion to risk in investment. I still think that's an obvious move, and don't understand what's so controversial about them.

"As it has become evident that the financial crisis is comparable, in important ways, to the early stages of the Great Depression,"

I'm not much interested in these lessons from the 30s discussions, but here's John Quiggin's take:

"As it has become evident that the financial crisis is comparable, in important ways, to the early stages of the Great Depression, there has been a lot of debate about the lessons to be learned from the responses to the Depression in the US, most notably the various policies that made up the New Deal. There’s a lot to be learned there, but it’s also important to remember that the Depression, in the US and elsewhere, continued throughout the 1930s before being brought to an abrupt end by the outbreak of World War II.[1]

Not only did the slump end when the war began, it did not return when the war ended - a huge difference from previous major wars.[2] Instead the three decades beginning in 1940 were a period of unparalleled prosperity for developed countries, with economic growth higher and unemployment lower than at any time before or since.

What lessons can we learn from this experience?

In the immediate aftermath of the war, the lesson seemed obvious. Planning had succeeded where capitalism had failed, and more planning was needed to maintain that success. As the White Paper on Full Employment (Commonwealth of Australia 1945) put it

Despite the need for more houses, food, equipment and every other type of product, before the war not all those available for work were able to find employment or to feel a sense of security in their future. On the average during the twenty years between 1919 and 1939 more than one-tenth of the men and women desiring work were unemployed. In the worst period of the depression well over 25 per cent were left in unproductive idleness. By contrast, during the war no financial or other obstacles have been allowed to prevent the need for extra production being satisfied to the limit of our resources.

Over time, as the difficulties of planning became apparent, emphasis shifted to the idea that the war had provided a Keynesian stimulus to aggregate demand, and that, with careful management, unemployment (or inflation) due to inadequate (excessive) aggregate demand could be avoided. Thirty years of success seemed to confirm that view.

After the failure of Keynesian economic management in the 1970s, this explanation appeared less adequate, but no adequate alternative was proposed. Given the apparent success of monetary policy in stabilising output and inflation, and reducing unemployment, from 1990 onwards, the issue seemed largely academic, and given the focus of US economists on the New Deal, even academic attention to the question has been limited.

Perhaps stimulatory fiscal policy will produce a rapid and complete recovery from the current crisis, and a restoration of the postwar Keynesian orthodoxy. But given the damage that has already been done to the global financial system, and the prospect of much more to come, this is far from certain. The experience of Japan in the 1990s is not encouraging, and this crisis is far worse in important respects. Perhaps when the collapse of financial intermediation is as near-complete as it was in the Depression, a large element of central direction is needed to restore trade and ensure necessary flows of credit. In the absence of a rapid recovery, questions like this will assume increased urgency over the next year or two."

I don't agree with him on various points, but here was my main response:

1. Don the libertarian Democrat Says:
   December 8th, 2008 at 3:17 am

   I’m on record favoring a very grand stimulus, tax cuts, and even printing money. I also love Keynes, but more for his writing style, which means a lot to me.

   Anyway, I feel differently about the knowledge we can gain from the 30s. Abstracting out the economic data can be of some slight use, but not much. The reason I believe this is that the decisions people made in the 30s were made in the context of the 30s, and that was a very different context than ours.

   I’ll give you one example. I once read a bunch of books by Wyndham Lewis. I don’t remember much about them, except that he seemed to truly believe that the only choice available was between Communism or Fascism. In other words, some form of Totalitarianism. This shocked me, but, after reading his books, I was surprised to find that many people writing in the 30s made that same assumption.

   Fortunately, there were wiser and better people around, millions and millions of them it turned out,including Keynes and Hayek, who understood the world better, and so we weren’t left with only those choices. But I continue to believe that the existential situation of the times people live in are more important than other people do. So that, the choices and decisions made in the 30s really can’t help us much.

   Instead, what’s happening is that we’re lurching and veering in a pragmatic way towards a path that leads us out of this mess. It turns out that we’re doing so in a way more reminiscent of Keynes, so, in order to feel like we really know what we’re doing, and since Keynes helped get us out of the 30s, we’re calling upon his spirit for solace and guidance.

   That’s fine with me because, as I’ve said, I love Keynes. But we’re going to get out of this mess in our own way and in our own time, and part of the process will be reading great books that help us get through these kind's of times. But there’s one thing that makes me more hopeful about this crisis, and, maybe I’m different than everybody else, but I really wouldn’t want to have been in the existential crisis of the 30s. I’ll take this one any day.

"whether the New Deal and World War II are good examples of Keynesian stimuli."

He sounds like a Wodehouse character, but Freakonomics vouches for his credentials:

"Economic historian Price Fishback, who recently guest blogged about the original Home Owners’ Loan Corporation, is back for an encore. This time, he tackles the issue of whether the New Deal and World War II are good examples of Keynesian stimuli.

I always thought they were; but using data, Fishback makes a simple and compelling case that they are not.

I learned a lot from his piece, and I suspect many of you will as well. In my opinion, this sort of writing is exactly what academic economists should be doing to help shape the public debate."

Where's it being held?

"What Do the New Deal and World War II Tell Us About the Prospects for a Stimulus Package?
By Price Fishback
A Guest Post

Everybody is talking about the stimulus package, and many are citing the New Deal and World War II as classic examples of successful stimulus programs. In punditry history, the federal government spent large amounts of money on works projects in the 1930’s and munitions in the 1940’s, and these were important stimuli to the American economy. Readers should beware, because the history is more complicated than the two-line descriptions."

Readers should also beware of long winded descriptions. They often signal that the author doesn't know what they're talking about.

"The New Deal

Federal spending rose from 4 percent to 8 percent of G.D.P. during the New Deal in the largest peacetime expansion in federal outlays in U.S. history. Yet this was not an example of Keynesian stimulus to the economy. Economists and economic historians have known this for the past 70 years, yet the myth lives on. The accompanying chart, which measures everything in real 1958 dollars for the 1930’s, shows why. The definitive analysis is more complicated, but the figure is a good shorthand way to show this.

The chart shows federal-government outlays, the budget deficit, and the difference between G.N.P. in that year and G.N.P. in 1929. The problem to be resolved was to reduce the huge gap in annual real G.N.P., which had fallen 33 percent below the 1929 level.

The graph shows that federal spending comes nowhere close to replacing that gap. Once we take into account the taxation during the 1930’s, we can see that the budget deficits of the 1930’s and one balanced budget were tiny relative to the size of the problem."

I love graphs. He's right. Nowhere close.

"John Maynard Keynes published an open letter to Franklin Roosevelt in major American newspapers saying more spending was not enough; the government needed to run larger deficits. As Keynes’s arguments were fleshed out after the 1930’s, various scholars ranging from Abba Lerner to E. Cary Brown to Claude Pepper have re-examined the New Deal budgets. They all agree that the New Deal cannot be described as a Keynesian stimulus program. We can only hope that the word will finally spread widely enough now to correct the myth."

Excuse me, there are still people who don't even know who shot Liberty Valence. So, it wasn't big enough to be called a Keynesian stimulus program. How about a John Mayn stimulus program?

"If not Keynesian policy, what was the New Deal? It was a broad-ranging mix of spending, regulation, lending, taxation, and monetary policies that can best be described as “See a problem and try to fix it.” In many situations the fix for one problem exacerbated other problems."

Brilliant. You've discovered government action in the real world. I commend you. Most people can't seem to find it.

"As people invoke the W.P.A. and F.E.R.A. work relief projects as templates for modern stimulus programs, they do not really understand how they worked.

While it’s true that the F.E.R.A. and W.P.A. built many roads, buildings, and public works, they were designed as “relief” programs with work requirements. The goal was to help families reach a minimum level of income, and the average payment per hour on these programs was roughly 40 percent of the wage being paid on the non-relief public works projects described below.

The pay was so low because the unemployment rates between 1933 and 1939 ranged between 14 percent and 25 percent, Roosevelt was trying to keep budget deficits in check, and the administration was trying to help as many people as possible reach a basic standard of living.

This focus on providing a basic standard of living contributed to an improved situation on several socio-economic dimensions. Recent studies of the relief programs in the largest cities suggest that spending an additional $2.5 million in year-2008 dollars (about $200,000 in 1935) on relief was associated with a reduction of 1 infant death, 1 suicide, 2.5 deaths from infectious and parasitic diseases, 1 death from diarrhea, and 21 property crimes.

Despite this success, my sense is that most people are not interested in recreating a system where people are paid such low wages to contribute to building public works for the rest of the society. The modern social-insurance structures of unemployment insurance and a wide variety of health, nutrition, and welfare programs are already in place to help resolve these types of problems."

I sure don't. Can I ask if you could document some of these people you're talking about? That's got to be easier than figuring out the Depression.

"The New Deal programs that better fit what the stimulus proponents have in mind are less well known and include the Public Works Administration (P.W.A.), the Public Roads Administration (P.R.A.), and the Public Buildings Administration (P.B.A.). There was also the Civil Works Administration (C.W.A.) that paid full wages but ran as a relief program employing 4 million people during four months of the winter of 1933/1934.

These programs built dams, sewers, bridges, roads, and buildings, as did the W.P.A. and F.E.R.A. The difference was that the programs contracted with private contractors, who then hired workers at the typical wages paid in the construction industry.

How successful were they at stimulating the economy? As yet, the only estimates we have are for the combined effects of the public works and relief programs. Studies that examine their success at the county level suggest that an additional grant dollar per person distributed to a county for public works and relief during the period of 1933 to 1939 contributed to a rise in in-migration and an increase in income per person in the county of about 80 cents in 1939. We should remember, however, that this was during a period when there were huge numbers of unemployed workers available for work. Even during this period, some studies find evidence of crowding out of private employment. Today, with unemployment rates below 7 percent, it is likely that such public-works spending would crowd out a significant amount of private construction."

As yet. What are we waiting for? Androids to help us?

"My own recommendation would be to evaluate the modern public-works programs more on the basis of the specific productivity of the programs rather than as stimuli to the economy. We know that we have an aging infrastructure of roads, bridges, and dams. The costs and benefits of the replacements would be my focus in evaluating whether to spend the money or not."

Sorry for being a smartass. It turns out I agree with you.

"One sign that Keynesian budget deficits were not the key to bringing the U.S. out of the Great Depression is what happened after the war. Every Keynesian predicted that the private economy would go into a recession because the large government budget deficits would be eliminated and so many men would be returning from the war jobless. Instead, as government deficits receded, private consumption and investment boomed. Resources were no longer allocated to producing munitions and instead were devoted to production of typical consumer goods and services.

Some people might misconstrue this discussion as saying that the U.S. should not have fought the war. The point here is that World War II was a period of sacrifice when many Americans experienced deprivation on par with what they experienced in the latter stages of the Great Depression. Vast budget deficits were not a stimulus in the normal sense of the word because the U.S. was a command economy devoted to an all-out war effort. William Tecumseh Sherman famously stated, “War is hell.” We should add the phrase, “even when financed by large budget deficits.”

That seems like a more complicated story, but I don't like the war brought us out of the Depression explanation anyway.

As for Keynesian budget deficits, I certainly can't see them as a positive in normal circumstances.

Roubini On A Stimulus

Via Greg Mankiw again, Roubini on a stimulus package:

"Since the private sector is not spending, and since the first fiscal stimulus plan (tax rebates for households and tax incentives to firms) failed miserably as households and firms are saving rather than spending and investing, it is necessary now to boost public consumption of goods and services via a massive spending program (a $300 billion fiscal stimulus).

The federal government should have a plan to immediately spend on infrastructure and new green technologies; also unemployment benefits should be sharply increased, together with targeted tax rebates only for lower income households at risk; and federal block grants should be given to state and local government to boost their infrastructure spending (roads, sewer systems, etc.).

If the private sector does not spend and/or cannot spend, old-fashioned traditional Keynesian spending by the government is necessary. It is true that we already have large and growing budget deficits; but $300 billion of public works is more effective and productive than spending $700 billion to buy toxic assets."

Add this to Reich, Summers, Obama, Kuttner, and Krugman.