Okay folks, today is my birthday so I’m going to be a bit self-indulgent here. Below is list of a number of important policy areas where I have been right at a time when the bulk of the economics profession was wrong. Yes, this is old-fashioned “I told you so” stuff. It can be seen as a bit arrogant and a bit obnoxious, but you have been warned.
I also understand that being right against the economics profession is not a terribly high bar. But hey, that is the competition.
1) The NAIRU Ain’t 6.0 Percent or Anything Like It
The conventional wisdom in the economics profession in the early and mid-90s was that if the unemployment rate fell much below 6.0 percent then inflation would accelerate out of control. This view was held not only by conservatives but also by more liberal voices within the mainstream like former Federal Reserve Board governors Alan Blinder and Janet Yellen.
Even Paul Krugman got this one wrong, comparing the economists who questioned the NAIRU theory to the scientists who questioned the existence of a hole in the ozone layer ("Voodoo Revisited." The International Economy. November-December, 1995, pp 14-19). I argued the case against the NAIRU in Chapter 16 of Globalization and Progressive Economic Policy. The book was published in 1998, but the first draft was in early 1996 when those of us who questioned the 6.0 percent NAIRU could still bank on a heavy dose of ridicule. For those who need reminding, the unemployment rate fell below 5.0 percent in 1997 and eventually hit 4.0 percent as a year-round average in 2000. There was virtually no uptick in inflation through this period, until a rise in commodity prices in 2000 finally began sending the rate of inflation somewhat higher
2) The Consumer Price Index Does not Substantially Overstate Inflation
Another big craze of the mid-90s was the claim that the consumer price index (CPI) substantially overstates the true rate of inflation. This sentiment peaked with the verdict of the Boskin Commission, consisting of five eminent economists who were appointed by the Senate Finance Committee to evaluate the accuracy of the CPI. In December of 1996 they came out with their report claiming that the CPI overstated the true rate of inflation by 1.1 percentage points. This was intended to be used as a rationale to reduce the size of the annual cost of living adjustment to Social Security. (Note that the cut is cumulative: after ten years it is roughly 11 percent, after 20 years it is roughly 22 percent.) It also would have changed the indexation of tax brackets in a way that would have led to higher tax rates for most people. Almost no economists were prepared to publicly challenge the Boskin Commission while many were happy to jump on the bandwagon.
Fortunately some important members of Congress, notably then minority leader Richard Gephardt, refused to go along. I argued the case on the other side in my book Getting Prices Right, claiming that the evidence for the commission’s claims was limited.
These days we don’t hear economists yelling much about the overstated CPI. There were some changes made to the index, but by the commission’s own estimate these changes did not reduce the CPI by more than 0.2-0.3 percentage points, meaning most of their alleged overstatement should still be there. While there are still complaints about upper level substitution bias, which is estimated at 0.2-0.3 percentage points, even if this is corrected, the Boskin Commission will have gotten at most 0.6 percentage points of their 1.1 percentage points.
3) The Economy in the late 1990s Was Driven by a Stock Bubble and Its Collapse Would be Bad News
Back in the mid-90s it should have been clear to economists that the economy was being driven by a stock bubble. Savings rates fell to what were at the time post-war lows. This was easily explained by the sharp increase in price-to-earnings ratios above long-term trends. Stockholders were spending based on the additional wealth created by this extraordinary run-up in stock prices. Toward the end of the decade, there was also somewhat of an investment boom as well as start-ups of even hare-brained tech companies were able to raise hundreds of millions or billions of dollars on the market.
I first wrote about the impact of the stock market on the economy in a piece for The American Prospect in 1998, Bull Market Keynesianism. Contrary to the view held by Alan Greenspan and others, I did not think that picking up the pieces from the crash would be a simple matter. Ben Bernanke seemed to confirm that assessment in a talk at the American Economic Association convention in January of 2004 in which he explained why it was necessary for the Fed to continue to keep the federal funds rate at 1.0 percent more than two years after the recession had officially ended.
4) Social Security Is Not in Crisis
Back in the late 1990s, everyone who was anyone knew that Social Security was in crisis. This wasn’t just Republicans who wanted to privatize the program, this also applied to Democrats. Some folks may recall President Clinton’s 1998 State of the Union Address in which he called on Congress to “save Social Security first.”
Of course you can only save a program if it is in need of saving. No one talks about saving the Defense Department. At the time, the conventional wisdom was that you had to acknowledge that Social Security was in a crisis if you expected anyone to take you seriously. I recall being told this in almost those exact words by a well-respected Democratic consultant back in 1998.
I decided to go the other route. In 1999 I wrote Social Security: The Phony Crisis together with Mark Weisbrot. Today, most people recognize the crisis mongers as politically motivated hacks trying to advance their agenda with fear tactics. Our book alone did not bring about this sea change, but it certainly helped. And we were definitely ahead of the pack.
5) The Stock Market Will Not Save Social Security When the Price-to-Earnings Ratio (PE) is 30
Back in the late 1990s, economists across the political spectrum became obsessed with the idea that the stock market would provide endless money for Social Security. The conservatives wanted to put Social Security money in the stock market through individual accounts. More liberal economists, like those in the Clinton administration, wanted to take advantage of high returns in the stock market by investing a portion of the trust fund there. Both assumed 7.0 percent real returns.
I argued that this was not possible given the price-to-earnings ratios in the stock market at the time and the projected growth rate of profits. My first piece on this topic was a 1997 paper for the Century Foundation. Unfortunately, most economists were unfamiliar with arithmetic, so I had to keep pounding on this point for most of the next decade.
In 2005 I developed the “no economist left behind test,” which challenged economists to come up with two numbers, one for capital gains and one for dividend yields, that would add to the 7.0 percent average return they were assuming for stocks. Paul Krugman subsequently picked this up in one of his columns, making it more difficult for the privatizers to avoid the challenge. At that point, the honest conservatives acknowledged that the 7.0 percent return assumption was impossible unless the stock market first plunged so that PEs returned to their historic average of around 14. Less honest conservatives insisted that they need not be bound by the rules of arithmetic.
6) There is a Housing Bubble and When it Bursts it Will be Bad News
My first piece warning about the housing bubble was in early August of 2002. At that time nationwide inflation-adjusted house prices were more than 30 percent above the trend level that I could identify going back to the early 1950s using government data. (Robert Shiller later constructed a data set that went back to the 1890s showing that the nationwide trend of house prices tracking inflation went back a century.)
Over the next five years we did everything we could to try to call attention to the housing bubble and warn that its collapse would throw the economy into a recession and likely lead to a financial crisis. CEPR even sponsored an essay contest offering $1,000 for the best essay explaining why we did not have a housing bubble. (David Cay Johnston was good enough to give us two short articles in the NYT to help publicize the contest.) But Alan Greenspan said there was no bubble.
7) The Obama Stimulus Was Inadequate
After the bubble burst and the recession set in I did everything I could to argue for the biggest possible stimulus. Immediately after the Obama stimulus was proposed, I argued that the stimulus was too small and that we should look to either make the first one bigger or to set the groundwork for further stimulus later. Unfortunately, President Obama celebrated the “green shoots of recovery” and told the country that it was time to pivot the focus to deficit reduction.
8) The Major Cause of the Downturn Was the Collapse of the Housing Bubble, not the Financial Crisis
There was and is enormous confusion about the nature of the downturn. I argued early and often that the main problem was the loss of close to $1.4 trillion in demand due to the collapse of an $8 trillion housing bubble and a somewhat smaller bubble in non –residential real estate. The financial crisis was very much secondary and after the first months of 2009, not a major issue in the downturn.
The arithmetic on this one is straightforward. We lost around $600 billion in annual construction demand as the building boom collapsed and an enormous glut of housing pushed construction to its lowest levels since the early 60s. We lost around $500 billion in annual consumption as a result of the loss of $8 trillion in housing wealth. This is the well-known housing wealth effect going in reverse. If homeowners spend 6 cents each year for every additional dollar of housing wealth, then we would expect annual consumption to fall by $480 billion as a result of the crash.
There was a collapse of a bubble in non-residential real estate which cost close to $150 billion in construction spending in the non-residential sector. And, the loss of tax revenue due to the economic collapse led to cutbacks at the state and local level of around $100-$150 billion.
The financial crisis argument could be easily dismissed based on several simple pieces of evidence. First, in the case of homebuyers, we could look at the ratio of Mortgage Bankers Association mortgage application index to sales. There was little change. If otherwise qualified buyers could not get mortgages then we should be expecting people to make 2-3 applications just to get a single mortgage. And, some people may make multiple applications and still not get a mortgage. There was no evidence that this was happening.
Certainly many people who got mortgages in the bubble years were not getting mortgages in 2009-2012, but this is what we would expect. While undoubtedly there were some people who could have gotten mortgages in the pre-bubble years who did not get them in the post-bubble period, this was not a major factor in the housing market.
A second piece of evidence on this issue is the very low interest rates for corporate debt. Unlike Japan, large and even mid-sized companies can raise money directly in financial markets and therefore are not dependent on banks for financing. The low interest rates on corporate debt mean that these companies are not impeded in their expansion plans by the problems in the financial system. Furthermore, if their smaller bank-dependent competitors are facing credit squeezes, then the larger companies should be moving aggressively to claim market share. There is no evidence that they are engaging in this sort of behavior as firms of all sizes have cut back expansion plans.
Finally, small businesses themselves do not claim that access to credit is a problem. The National Federation of Independent Businesses has been surveying its members on the major problems they face for more than a quarter century. Only 3-4 percent of its members list the availability or cost of finance as a serious problem.
9) We Don’t Have to Worry about Deflation Because Wages Are Sticky
At the start of the downturn there were numerous accounts that raised the prospect of spiraling deflation. I was dismissive of these concerns for several reasons. First most of the evidence was simply falling commodity prices. The drop in commodity prices was not going to continue and would likely be reversed. Furthermore this deflation would not likely spread to core prices in any case, since wages tend to be sticky.
10) Low Inflation Is as Bad as Deflation
The fact that we didn’t see deflation should have provided little solace. The problem is that inflation was lower than we want for the simple reason that the nominal interest rate cannot go negative. We wanted a large negative real interest, but that is not possible when inflation is very low.
There is nothing magical about zero as an inflation rate. The drop in the inflation rate from 1.5 percent to 0.5 percent is every bit as bad as the drop from positive 0.5 percent to negative 0.5 percent. I made this point repeatedly (here, here, and here). Krugman made this same point in a blogpost last year.
The reason that this mattered is that many policy types were celebrating because we didn’t have deflation. They considered this a great victory and were willing to hand a crown to Ben Bernanke for his heroic work.
By my argument this is a rather hollow victory. It is certainly good that prices did not actually fall, but the real problem is that the real interest rate is still higher than we would want it to be given the severity of the downturn. The obsession with deflation led us to focus on the wrong issue.
11) A Double-Dip Recession Was Not a Serious Concern in the Summer of 2011
In the summer of 2011 many doomsayers began raising concerns about a double dip. In fact, the economy was still growing at a modest 2.0 -3.0 percent rate. The reason for the slowdown was the winding down of the stimulus at the end of 2010 and the beginning of 2011. I wrote several pieces deriding the double-dipsters (e.g. here and here).
The reason why it was important to beat back the double-dipsters is that the talk of a double-dip recession created an absurd lowering of expectations. When people think that a recession is a reasonable possibility then even 2.0-3.0 percent growth looks good. This is exactly what happened in the fall of 2011. We saw modest growth in the second half of the year which analysts touted as though it was some sort of boom.
We are coming off a severe downturn that has left the economy with about 10 million fewer jobs than our trend level. GDP is about 6 percent lower than trend. It will take us a decade or more to make up this shortfall with growth between 2.0-3.0 percent. After prior step recessions we had years of 6.0-8.0 percent growth. That is what we should be looking for. The modest growth in the fall of 2011 was a disappointment; however thanks to the nonsense spewed by the double-dipsters, it was treated as good news.
12) The Weather is Fickle, the Economy Isn’t
Economists can’t seem to avoid getting misled by the weather. Generally our data are seasonally adjusted, but these adjustments are designed to take account of normal seasonal patterns. They do not pick up the effects of unusually good or unusually bad weather.
While anyone who does economic analysis for a living should know this, we routinely get accounts brimming with optimism when good weather leads to better than normal economic numbers and then overflowing with pessimism when more normal conditions bring the economy back down to earth.
This is important for the same reason it was important to shoot at the double-dipsters. People lose sight of the real state of the economy and get caught up in short-term fluctuations that have little bearing on the direction of the economy or appropriate policy.
13) Labor Market Protections Don’t Cause High Unemployment
This refers to work that I did with three friends, David Howell at the New School, Andrew Glyn at Oxford (who died far too young in 2007), and John Schmitt at CEPR. Back in the late 90s and early part of the last decade it was the absolute gospel in the economics profession that the relatively high unemployment in Europe at the time was attributable to its generous welfare state. This view held that high unionization rates, generous unemployment benefits, and employment protection legislation slowed growth and hiring, leading to the higher unemployment rates that Europe had at the time, compared with the United States. The recommendation of economists, as expressed explicitly in the OECD’s 1994 Jobs Study was to adopt U.S. style labor market regulation with minimal protection for workers.
We carefully analyzed the studies that supposedly supported this view. It turned out that their results were all over the place. Clearly the goal was to get a significant coefficient with the right sign and then declare victory.
This is not a serious basis for designing policy. It is important to know not only the effects of policy, but also the size of the effects. Suppose that a 20 percent increase in unemployment benefits will raise unemployment by 0.2 percentage points. That is a price that might be worth paying in order to ensure that unemployed workers had a decent standard of living. However, a 20 percent increase in benefits might not look like such a good idea if the resulting increase in unemployment was 2 percentage points. The research at the time provided no basis for determining the size of such trade-offs, insofar as they existed.
We wrote a series of papers demonstrating that the results of prior work were not robust and that it was easy to design plausible specifications in which most labor market protections did not lead to higher unemployment. (Here’s the best.)
To its great credit, the OECD took our criticisms seriously. They followed up on our work and reached a similar conclusion. There was no relationship between unionization rates and unemployment or employment protection and unemployment. They published an update to their jobs study in 2006 in which they explicitly touted the Nordic model for achieving high rates of growth and low unemployment, while at the same time provided strong protections for workers.
14) Educating the World Bank on NAFTA
If the OECD gets high marks for its integrity in seriously addressing the questions we raised about the work linking welfare state institutions to high unemployment, the World Bank gets very low marks for what can only be a propagandistic approach to NAFTA. In 2004 the World Bank put out a book on the tenth anniversary of NAFTA focusing on its impact in Mexico. One of the items in the book was a chapter that touted the convergence of per capita GDP in the United States and Mexico in the years since the agreement took effect.
We knew this was wrong since Mexico had experienced very weak growth in the decade following NAFTA. There was no way that it had closed the income gap with the United States in this period. We analyzed their model (David Rosnick did most of the work) and found they had committed a simple mistake. They had used an exchange rate measure of GDP. As a result their measure of the ratios of per capita income tracked the ratios of real exchange rates almost exactly.
Unfortunately the World Bank refused to acknowledge our criticisms even though we had a direct exchange with them on the topic at a conference arranged by the International Trade Union Confederation. It seems that a lot of people in positions of power have staked their egos, and perhaps more, on NAFTA being a successful growth policy for Mexico. No matter how much the evidence indicates otherwise, they are determined to hold that position. And we are determined to keep showing that they are not being honest.
15) Work Sharing Is An Effective Way to Bring Down Unemployment
There are two basic ways to reduce unemployment in the face of a sharp falloff in demand like the one we saw in 2008. One is to boost demand, with the most obvious route being government stimulus. The other route is to redistribute work so that more people are employed, with each working fewer hours. Stimulus is great if it is politically feasible and there are useful venues for spending. However, redistributing work can provide a useful alternative route. I argued early on for the benefits of going this
There are several positive features about the work sharing route. First the cost is limited since for the most part it simply involves taking payments that would have gone to unemployed workers and turning them into subsidies for workers who are putting in fewer than their normal hours. If the politics are such that large-scale stimulus is not feasible, then many more jobs per dollar can be created through work-sharing. I argued early on for the benefits of going the work sharing route.
Work sharing also has the benefit that it can give workers more time to spend with their families. This can alleviate the time pressures that many families experience, especially those with young children. The U.S. stands out from other countries in not guaranteeing workers any paid time off for vacations, parental leave, or sick days. (John Schmitt and Rebecca Ray have written several papers on this topic (here and here). Also, it is likely that if workers take some of the benefits of productivity growth (insofar as they get them) in leisure rather than higher income, there is good reason to believe that it will result in lower greenhouse gas emissions.
The great economic success story in this downturn is Germany. While its GDP growth has not been very much better than growth in the United States, its unemployment rate has fallen by 2.0 percentage points, while the unemployment rate in the U.S. has risen by 3.7 percentage points. Germany has gotten its unemployment rate down by encouraging employers to reduce hours rather than lay off workers.
We have helped to get work sharing on the map here in part in collaboration with Kevin Hassett of the American Enterprise Institute. Due to the fact that Republicans were willing to go along, there was a provision attached to the bill that extended the payroll tax cut that calls for the federal government to pick up the cost of state work sharing programs over the next two years. (Twenty three states have these programs as part of their unemployment insurance system, including large states like California and New York.)
16) Greece Should Consider Leaving the Euro
This one is more my colleague Mark Weisbrot’s doing than mine, but I will take a bit of credit since we did collaborate some in developing the argument. Mark first raised the possibility that Greece and other debt-burdened countries should consider leaving the euro back in March of 2010. That suggestion received a healthy dose of ridicule and contempt from knowledgeable economists and policy people everywhere back then. The situation is a bit different now.
17) Argentina Is Not a Spendthrift Nation
According to informed sources, Argentine was at one time known as “the ‘A’ Word” in the halls of the I.M.F. After all, it had the gall to stand up to the I.M.F. and refuse to accept continued austerity. Instead it defaulted on its debt and broke the link between its currency and the dollar. Even worse, it managed to bounce back from the resulting economic turmoil and maintain solid growth for six full years until the world economic crisis led to a recession in 2009.
We showed that the I.M.F.’s morality tales about Argentina were not true. Argentina went from being an I.M.F. poster boy in the mid-90s to a reckless spendthrift country by the end of the decade. However its primary budget deficit had not changed, the cause of the increase in the budget deficit was higher interest rates in the United States.
The I.M.F. also seemed to have a problem with growth forecasts for Argentina. Until the default at the end of 2001, its growth projections for Argentina were consistently higher than actual growth. After the default, the I.M.F.’s growth projections for Argentina were consistently lower than actual growth.
18) We Were Never at Risk of a Second Great Depression
It is common for knowledgeable policy types to tell us that we narrowly averted a second Great Depression following the collapse of Lehman in the fall of 2008. The heroes in this story are usually Ben Bernanke, Tim Geithner, and Henry Paulson. They pushed through the TARP and other measures to shore up the financial system as it was teetering on the brink of collapse. The story goes that without these measures the whole financial system would have collapsed and that would have condemned us to a decade of double-digit unemployment; just like Great Depression I.
The problem with this story is that we now know how to recover from a financial collapse. The evidence here is provided to us by Argentina. Argentina did suffer a full-fledged financial collapse in December 2001. People could not get money out of their banks. It was not a pretty story. However the economy did stabilize over the next quarter and by the summer it was growing rapidly. It had made up all the lost ground from the collapse by the middle of the next year.
While our economic policymakers may not be as competent as Argentina’s crew, even if it took them twice as long to get things in order, we would still only be looking at a downturn lasting 3 years. That probably would not qualify as a second Great Depression in most people’s views.
This matters because if the actions of the Bush-Obama administrations were necessary to save us from a second Great Depression, then we really should be grateful. After all, this would be a pretty awful story for tens of millions of people, scarring current generations of workers with prolonged periods of joblessness as well as hurting their children through the resulting family instability.
However if a second Great Depression was never in the cards then we have less cause for gratitude. We have seen policies that have left the financial sector largely intact. The too big to fail banks are even bigger. The bonuses are every bit as large and none of the honchos have been convicted or even tried for illegal actions associated with marketed, packaging and reselling of fraudulent mortgages. Count me among the ingrates.
Things I Will Be Right About
Perhaps in 5 or 10 years these items will appear on an updated list of birthday boast.
1) Patents Are An Incredibly Inefficient Way to Finance the Development of Prescription Drugs
Read the NYT for the next month. There will be a scandal about payments for drugs, mis-marketing drugs, or concealing evidence that reflects negatively on a pharmaceutical company’s drug. (Here’s this week’s mini scandal.)
2) We Will Need Alternative Mechanisms to Copyrights to Finance Creative Work
Nominal spending on recorded music has fallen by more than 50 percent between 1999 and 2011. This trend is going to continue with recorded music and spread to books and movies in the years ahead as the speed of the Internet and spread of cheap portable devices make it ever easier to transfer material whether or not it is protected by copyright. The industry groups want to respond with tighter regulation and harsher punishments for copyright infringers or abettors, like the Stop On-Line Piracy Act.
This route is doomed to failure. The more realistic path is developing alternatives to copyright support for producing creative work. One day creative workers may be sufficiently creative to realize this fact.
3) Medical Trade Will Help to Keep Down Health Care Costs in the U.S. If We Don’t Fix the Health Care System
The gap between health care costs in the United States and other countries with comparable levels of care is huge, with the U.S. paying more than twice as much per person than people in other wealthy countries. This gap is projected to grow rapidly in the decades ahead.
If it turns out that the political structure in the U.S. is so corrupt that we cannot take steps to contain this growth then people will simply go elsewhere for care. According to the NYT, 150,000 patients went to just one city in Mexico (Mexicali) last year. Procedures that cost $200,000 in the United States can be performed in high quality facilities with well-trained doctors for one-tenth this price in India and Thailand. If this gap grows further, it will be impossible for the protectionists in Congress and the White House to keep patients from going elsewhere for their medical care. This is good.
4) Countries Can Finance Much of the Debt Issued in the Downturn by Central Bank's Holding of Assets
The Federal Reserve Board has refunded roughly $80 billion in each of the last two years to the Treasury. This is interest that it earns on the Treasury bonds and mortgage backed securities that it holds. While the Congressional Budget Office’s budget projections show the Fed dumping these assets in the next few years, there is no reason that the Fed cannot continue to hold large amounts of assets and refund the interest to the Treasury. This would substantially reduce any interest burden associated with the borrowing during the downturn.
The excess reserves in the system would undoubtedly be inflationary at some future point, assuming the economy gets back to full employment, or something like it. However, this can be addressed by raising reserve requirements across the array of accounts over which the fed has direct or indirect control. This would have the same effect as pulling reserves out of the system by selling off the assets held by the Fed.
The impact of going this route could be substantial. If the Fed continued to refund the Treasury $80 billion each year in interest over the next decade, this would come to $800 billion in deficit reduction, without even counting the compounded interest from having lower deficits each year. There aren’t many better proposals for lowering the deficit over the decade by this amount.
5) Financial Speculation Taxes Will Make the Financial System More Efficient
The United States and many other wealthy countries suffer from a bloated financial sector. The narrow investment banking and security and commodities trading sector has quintupled as a share of the economy since the 1970s.
Finance is an intermediate good, like trucking. Just as we need trucking to move goods from point A to point B, we need the financial sector to steer money from lenders to borrowers. Just as an efficient trucking sector is a small trucking sector, an efficient financial sector is a small financial sector. We don't have a small financial sector.
A modest tax on financial transactions like buying and selling stock, option, credit default swaps and other derivative instruments can raise more than $1.5 trillion over the next decade. (The small 0.03 percent tax proposed by Senator Tom Harkin and Representative Peter DeFazio was scored by the Joint Tax Committee as raising more than $350 billion over its first nine years of existence.)
Perhaps more importantly, by reducing the waste in the financial sector (think of a completely worthless government bureaucracy), a speculation tax can provide a boost to growth. Recent research from the Bank of International Settlements found that a large financial sector impedes growth. The mechanism appears to be that it pulls away capital from rapidly growing sectors that are dependent on external financing (as opposed to retained earnings) to support their growth. It also pulls away highly skilled people who would otherwise be employed in sectors that have large amounts of research and development spending.
It also appears that downsizing the financial sector might be an important mechanism for reducing inequality. David Rosnick's recent analysis of the OECD's report on inequality found that the financial sector share of compensation in GDP could explain much of the rise in the OECD's measure of inequality over the period they examined.
In short, financial speculation taxes sound like a way to collect government revenue, increase growth, and reduce inequality. In other words, a total political non-starter in Washington.
Thanks for the nice comments and birthday wishes. In brief response to a couple comments that reasonably asked when I have been wrong, I will mention two cases. First, I never expected that the dollar would be able to stay high enough to support a large trade deficit for as long as it has. This stems from the desire of developing countries to continue to acquire massive amounts of dollar reserves. I assumed that they would have had their fill long ago, which would lead the dollar to fall to a point where trade would be closer to balance.
The other item is that in 2009 I expectd that interest rates would drift upward rather than downward. This was not the deficit hawks story of the markets losing confidence, it's more that I assumed that the conditions that have led to such low rates would have been ameliorated more by now. I expected that the euro zone folks would have gotten their act together so that we would no longer be looking at a euro collapse as a reasonable possibility. I also thought that there would have been more stimulus in the U.S. so that the economy was recovering more robustly. I was wrong in these expectations.