No more hands to wring on the Federal Reserve

Sometimes, writers used to say that someone cried their heart out that their eyes had gone dry. No more tears left. Similarly, I have no more words to expend on the disproportionate responses of the US Federal Reserve. They are now locked into the ever-increasing downward spiral of monetary support to all areas of financial markets that are also increasingly fiscal in nature. The denouement is that the global monetary regime ruptures and that a new regime is needed.

The Federal Reserve press release did not explicitly state the funding of sub-investment grade bonds but they were tucked away in the PDF attachments below the press release. Clever.

For all the actions taken by the Federal Reserve since March, pl. see this blog post by Lance Roberts. It is a ‘must-read’ otherwise too.

Note that it does not mean that RMB takes the place of the US dollar. But, there would be disruptions and instability.

From a FT commentary on the Federal Reserve actions of 9th April 2020:

… the expansion of the Fed’s crisis-fighting toolkit to encompass riskier debt — including debt issued by companies owned by private equity firms — will be controversial. One investment industry insider argued it was tantamount to an indirect bailout of the private equity industry. 

“If you think people were upset about bailing out banks where the CEOs were making $50m a year, how are they going to feel about bailing out private equity firms where the CEOs make $500m a year?” said another investor. 

Some investors in the municipal bond market also chafed at the Fed’s initiative, saying the central bank had not yet gone far enough to support states and cities.  [Link]

Clearly, interventions that were meant to support the real economy had extended into interventions to support ‘fallen angels’ and even Exchange Traded Funds. What is the economic payoff to this? What is the threat to systemic stability if the junk bond ETFs failed?

Ed Harrison of ‘Credit Writedowns’ wrote the following:

I don’t like any of this. But this is the situation we find ourselves in. There are no good choices here.

Nevertheless, while I can understand the Fed’s decision to protect fallen angels, I see with the Fed’s decision to buy high yield ETFs as a step too far. These are risk assets. And the Fed is taking the risk away. Long after the exigencies of the day have passed, these decisions will have lasting consequences. 

Moreover, where do you draw the line? Why has the Fed left the leveraged loan market untouched? Aren’t those companies just as innocent as the ones in the high yield ETFs? Don’t tell me it’s the fact that its an ETF that matters here. That’s a fig leaf and you know it. [Link]

Writing a day after the Fed announcement (a cincidence?), this short blog post at the Federal Reserve Bank of St. Louis concedes why and always the Fed acts?

The stock market’s wild ride was doubtless one consideration that prompted the government and the Federal Reserve to take actions in March to shore up the economy and facilitate the functioning of financial markets. Congress and President Trump responded with two modest emergency spending packages on March 6 and March 18, suspension of payments on student debt, and finally a $2 trillion stimulus bill, which was passed on March 25 and signed on March 27, 2020. [Link]

James Grant of the eponymous ‘Grant’s Interest Rate Observer’ was his usual pungent best when he wrote for WSJ:

If not for the buildup of the financial excesses of the past 10 years, fewer such monetary kitchen sinks would likely have had to be deployed. No pandemic explains the central bank’s massive infusions into the so-called repo market that followed this past September’s unscripted spike in borrowing costs. For still obscure reasons, a banking system that apparently is more than adequately capitalized was unable to meet a sudden demand for funds on behalf of the dealers who warehouse immense portfolios of government debt. [Link]

Too much leverage caused the 2008 global financial crisis. Central banks responded with policy measures that incentivised accumulation of further debt and increased moral hazard. The result is the leverage crisis of 2020. Covid-19 was only the last straw.

To be sure, the Federal Reserve is not done yet. They can buy stock ETFs and then stocks themselves. Then, there is direct funding of US Treasury borrowing. There is nominal GDP targeting and negative rates.

Wow! The Federal Reserve is far from having run out of ammunition. They have enough instruments to respond to the next pandemic! They are far from done! Bring ’em on!

Critics will have thrown in the towel far earlier and far more easily than the Federal Reserve would.

The clue to why the public is alienated from elites

Ms. Tett of Financial Times is a perceptive commentator on financial markets and matters. Her personal experience story also reveals a person who understands how human mind works. That is why it it is disappointing and sad that such a writer fails to address the fundamental problem with the state of financial markets, asset prices and the behaviour of market participants, etc.

I had already commented in detail on her piece dated 20th March 2020. Liquidity mismatches exacerbated by leverage (sizes of positions are too big) have required massive central bank interventions.

At one level, central bankers are being praised for putting out the fire. But, there are two problems: these interventions are encouragement to the arsonists to set even bigger fires because they benefit pillaging the house before it is burnt down and the cost of putting out the fire is borne by someone else. Second, the central banks themselves have created the condition for the fires to erupt and arsonists to go on a rampage with their actions since 1987. Each episode of central bank intervention has been bigger than the previous one, creating more leverage, bigger moral hazard and greater instability, requiring even bigger interventions.

Her article of March 20th failed to zero in on central bank monetary policy behaviour as the real cause behind liquidity mismatches and outsized leverage. The tradition continues in her piece dated April 16th. The article i full of positive sentiments about the Fed chairperson.

Sample these:

Mr Powell had forged most of his career in the camera-shy world of corporate law. Colleagues described him as “pragmatic”, “self-effacing”, “genial”, “humble” and “cautious”

Mr Powell is fast becoming the least cautious — or dull — Fed chair in history….

….What is even more startling is his apparent freedom to innovate. That is partly because Mr Powell has forged a close working relationship with Steven Mnuchin, the Treasury secretary. … [Link]

That Treasury prices are now relatively stable is a big victory. So is the easing of conditions in the municipal, corporate and mortgage markets.

The caveats do come but they are mild slaps on the wrist in comparison to these:

These wild experiments are also creating unprecedented moral hazard; or, more accurately, amplifying the hazard that has haunted the financial system since 2008.

After all, the main reason why hedge funds had amassed crazy risks before the virus hit was that money was ridiculously cheap. Similarly, the Fed has had to scramble to prevent a corporate credit freeze precisely because so many weak companies are so loaded with debt that they could barely service even before a shock. [Link]

Her praise with a caveat:

Is this brave? I think yes. It is wise? Probably, given the ghastly alternatives, but if — and only if — Messrs Powell and Mnuchin mitigate some of this moral hazard.

So, what is the track record in the US Federal Reserve mitigating the moral hazard?

2010: QE1 ends, credit conditions tighten slightly as the new economy recovery showed strains. The Fed quickly acts to inject more liquidity with QE2. Given credit spreads and conditions were close to normal levels, the excess liquidity only had one place to go – the stock market. 

2011: QE2 ends as the world is hit with a double-threat. Japan is impacted by a massive tsunami and the U.S. Government is enthralled in the midst of a “debt-ceiling debate.” Again, despite credit spreads and conditions being near normal levels, the Fed jumps in with “Operation Twist.” The economy quickly found its footing in Q3 of 2010, and with no crisis to absorb the liquidity, it flowed into the stock market.

2012: One of the byproducts of the “debt ceiling debate” was a bipartisan commission tasked with finding $1 trillion in spending cuts to reduce the deficit. This was known as the “fiscal cliff.” In late 2012, Ben Bernanke panicked and launched QE3 to preempt a “fiscal cliff” crisis. However, no crisis occurred, leaving the trillion-plus in liquidity with nowhere to go but the stock market.

2016: With the market down 20% from the peak over fears of a disorderly “Brexit,” Janet Yellen calls on the BOE and ECB to launch a Euro-QE program. Once again, the “Brexit” crisis never happened, and the only place for all of the excess liquidity to go was into the equity markets.

2019: In mid-summer, the Fed is faced with an “overnight liquidity shortage” for hedge funds. This was the first sign of trouble, but credit markets were not showing any real signs of strain. With credit markets operating normally, the liquidity flowed into asset prices, pushing markets to all-time highs. [Link]

The finale from Ms. Tett:

Fed officials fear that the looming potential economic shock could be worse than the US public and equity investors expect. That is scary. Sadly, it is also realistic. [Link]

The Federal Reserve (ECB, BoE and SNB included) is always praised for bold action because now it is inevitable. In good times, they never mitigate or remove the moral hazard. That goes unscrutinised.

Creating moral hazard of bigger and unprecedented scale each time there is a crisis would have invited severe comments, opprobrium and editorials had they been done by, say, President Trump. But, if it is by ‘one of us’, it is just about a mild slap on the wrist.

The FT did the same thing for Neil Ferguson of the Imperial College. His model had massively overpredicted the fatalities from H1N1 in 2009. He sits in an oversight body and in the overseen bodies too. There is massive conflict of interest and yet, no criticism.

The Wall Street Journal did far better:

The Fed isn’t scrimping on the firepower, but the details released Thursday are disappointing, and perhaps even dangerous to a robust recovery. The Fed is rescuing weaker credits as well as the strong, is diving ever-deeper into risky assets, and is putting Wall Street ahead of companies across Middle America. [Link]

The systematic bias of the elites had lost them credibility with the masses and their failure to detect and understand the alienation of the masses from their views and their incestuous patronage and protection of ‘people like us’ has made them poor analysts and forecasters too. Yet, they march on unflinchingly.

The Return of the Seventies

About two hours ago, the Federal Reserve Board (FRB) committed to buying unlimited amounts of US Treasury Securities and Mortgage Backed Securities.

More than that, the Federal Reserve is lending directly (almost) to businesses:

Establishment of two facilities to support credit to large employers – the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance and the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.”

The PMCCF will allow companies access to credit so that they are better able to maintain business operations and capacity during the period of dislocations related to the pandemic. This facility is open to investment grade companies and will provide bridge financing of four years. Borrowers may elect to defer interest and principal payments during the first six months of the loan, extendable at the Federal Reserve’s discretion, in order to have additional cash on hand that can be used to pay employees and suppliers. The Federal Reserve will finance a special purpose vehicle (SPV) to make loans from the PMCCF to companies. The Treasury, using the ESF, will make an equity investment in the SPV.

The SMCCF will purchase in the secondary market corporate bonds issued by investment grade U.S. companies and U.S.-listed exchange-traded funds whose investment objective is to provide broad exposure to the market for U.S. investment grade corporate bonds. Treasury, using the ESF, will make an equity investment in the SPV established by the Federal Reserve for this facility.

Establishment of a third facility, the Term Asset-Backed Securities Loan Facility (TALF), to support the flow of credit to consumers and businesses. The TALF will enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.

In addition to the steps above, the Federal Reserve expects to announce soon the establishment of a Main Street Business Lending Program to support lending to eligible small-and-medium sized businesses, complementing efforts by the SBA.

This is unprecedented. The Central Bank is directly lending to the Main Street.

This took me to the piece that John Authers had written few days ago on the melting of the ‘Ice Age’, a concept proposed by Albert Edwards of SocGen.

There are two ways to interpret the calling of the ‘End of the Ice Age’ where Ice Age refers to low growth, deflation or very low inflation and low nominal bond yields.

End of Ice age and the arrival of helicopter money (see the Federal Reserve announcement above; it is almost there) which has been hastened by Covid-19 does not necessarily have to be an equity bull market. It could simply mean the end of the bull market in bonds.

In that case, we could have a return of the Seventies. Those were the years of stagflation. Bad bond returns and worse equity returns, in real (i.e., inflation adjusted) terms.

(1) Pl. see table below (Only USA):

Real Returns on US dollar instruments

Source: This is from the text book, ‘Macroeconomics’ by Dornbusch, Fischer and Startz.

(2) On Real S&P 500 Equity Returns:

(3) Nominal returns for S&P 500 are as follows and interesting:

Source: https://seekingalpha.com/article/2789035-s-and-p-500-index-returns-by-decade-since-1940 (accessed 23rd March 2020)

In the Seventies, nominal returns were positive mainly due to dividends and real returns were negative since the inflation rate averaged 7.2% per annum.

Now, American companies are not in the habit of paying dividends as the table above clearly shows. Therefore, nominal equity returns in the decade of 2020-2029/2030 could be low or negative and real returns even lower (more negative).

So, the end of Albert Edwards’ ‘Ice Age’ could hearld the end of the bond bull market rather than presage the continuation of the QE inspired bull market in stocks which had no fundametnal underpinning as David Rosenberg had pointed out.

So, quite why John Authers is ‘anxious’ (my impression, of course) to point to Albert Edwards as turning bullish towards equities or quite why Albert Edwards should be willing to let that impression prevail is not clear to me. Perhaps, it points to anxious personal hedging. It can be too lonely to be a bear in QE inspired world in which very few are willing to call the emperor out for his nudity.

It is worth keeping in mind that two wrongs cannot make a right.

"Hitherto underappreciated mismatches"

I read Ms. Gillian Tett’s article in FT titled, ‘Toilet rolls and Treasury bonds tell the same panicked story’. What follows is a slightly expanded and modified version of the comments I had posted on the article. My comment is being moderated and has not yet appeared on the FT site.

The all-important lines in her article are these:

First, the sheer violence of the price moves suggests that asset managers have amassed leverage and maturity mismatches that are much bigger than hitherto appreciated. Current watchdogs should hang their heads in shame, given the lessons of 2008, as the Systemic Risk Council, made up of former regulators, notes.

Time and again, this is going to come up. In 2008, policymakers had no idea of the extent of sub-prime mortgages issued and of their securitisation. Now, they have contented themselves and patted themselves on their backs that banks are stronger and recapitalised (apparently!). Again, that is bolting the door after the horse had fled. It is a response to the last crisis. Banks are stronger again because, this time, they have transferred the risk to non-financial corporate borrowers who have leveraged themselves substantially since 2008. They are to be found both in advanced and in emerging economies.

Second, they have provided leverage to asset managers who have amassed mismatches as Ms. Tett notes.

It is one thing to blame the so-called regulatory (or, macroprudential) watchdogs. It is another thing to identify and call out the root cause of the problem AND that is the monetary policy of central banks of advanced nations, principally, ECB, BoJ, BoE, SNB, PBoC and FRB. Not in any particular order. All are egregiously guilty of ‘too easy for too long’ policy. That is what has almost near-totally blunted their effectiveness now and yet, they are going to double-down with MMT and with much more adventerous measures, unprecedented in nature and with un-anticipate-able consequences. See her words, ‘hitherto unappreciated’. That will repeat itself again.

Debt is not accumulated until it is made too cheap to do so. Period. Regulatory or macroprudential policies will not help in the face of policies that.

She had provided a link to the statement released by the ‘Systemic Risk Council’ (SRC). Apparently, the CFA Institute is now fully supporting this body of former global policymakers and academics. I do not see any name from emerging economies. In any case, that is not a priority now.

The Systemic Risk Council (SRC) has released a lengthy statement on 19th March 2020. You can find it here. In the current context, it is hard to fault SRC’s statement. Now that there is a deluge, it is not the time to be talking about what caused it but it is time to fix it.

The good thing is that comunication talks about what to do after the immediate crisis dissipates:

For all their interventions, governments and central banks should incorporate into their design incentives for smooth exit when conditions permit. That is as important for forbearance in banking supervision as it is for central banks’ market support measures, and government subsidies and guarantees.

That is good. But, no mention of what is principally behind all the massive dislocation that is happening in financial markets which distract the authorities from focusing on the real economy – small and medium businesses and households. 

Jeremy Stein who joined the SRC in January 2020 had said the following in a speech in Feb. 2013:

In spite of the caveats I just described, I can imagine situations where it might make sense to enlist monetary policy tools in the pursuit of financial stability. Let me offer three observations in support of this perspective.

First, despite much recent progress, supervisory and regulatory tools  remain imperfect in their ability to promptly address many sorts of financial stability concerns. If the underlying economic environment creates a strong incentive for financial institutions to, say, take on more credit risk in a reach for yield, it is unlikely that regulatory tools can completely contain this behavior. This, of course, is not to say that we should not try to do our best with these tools–we absolutely should. But we should also be realistic about their limitations. These limitations arise because of the inherent fallibility of the tools in a world of regulatory arbitrage; because the scope of our regulatory authority does not extend equally to all parts of the financial system; and because risk-taking  naturally tends to be structured in a nontransparent way that can make it  hard to recognize. In some cases, regulatory tools may also be difficult to  adjust on a timely basis–if, for example, doing so requires extended interagency negotiation.

Second, while monetary policy may not be quite the right tool for the job, it has one important advantage relative to supervision and regulation– namely that it gets in all of the cracks. The one thing that a commercial bank, a broker-dealer, an offshore hedge fund, and a special purpose ABCP vehicle have in common is that they all face the same set of market interest rates. To the extent that market rates exert an influence on risk appetite, or on the incentives to engage in maturity transformation, changes in rates may reach into corners of the market that supervision and regulation cannot. [Link]

This is the point that SRC misses in its opening paragraphs of its communication. It had expressed concern over “steps taken to reduce equity and liquidity requirements in banking” and urged “greater vigilance over leverage and liquidity mismatches in shadow banking and trading markets.

That is all fine and dandy. But, what is the root cause of these two issues that the SRC is concerned about? It is to be found in Jeremy Stein’s remarks pasted above. That is misisng from SRC’s concerns. That should be on top of their list.

Equally, that is why it is rather disappointing that Ms. Tett’s solutions are precisely those that would aggravate the issue and not end them. Paul Tucker’s suggestion that the central banks buy ‘toilet rolls’ too or lend against them will build up leverage again. These asset managers with ‘leverage and maturity mismatches’ will be emboldened to do more of the same because the central banks have their backs with even more unconventional measures.  Classic and humongous moral hazard. Paul Tucker’s solution which Ms. Tett channelises will achieve exactly that!!

Second and more importantly, Ms. Tett is guilty of not identifying and calling out this principal source of the problem – monetary policies of the post-2008 era and, more generally, the monetary policy framework in place since Mr. Greenspan became the Governor of the Federal Reserve Board in 1987.

By all indications, they are going to be at it (rinse, lather and repeat) until they truly bust the world. It is unfortunate that even some perceptive and erudite observers and commentators like Ms. Tett become willing or unwitting accomplices to this massive and reckless policy experiment. A century or even half a century from now, some historians would consider if the ‘too easy for too long’ policies were ‘crimes against humanity’.

Kitchen sinks and the epitaph

The defining legacy of Mario Draghi seems to be ‘whatever it takes’, for now. He should be grateful. Historians, a century or half later, might judge him more harshly. Every Finance Minister and Central Banker promises to do whatever it takes. But, they should be careful not to overuse their English. Well, they might have already overused their instruments. I blogged on it two days ago.

Having blunted the power of interest rates to work and having made a lot of people become dollar debtors such that they are now scrambling for dollars and having left central bankersr impotent, Ben Bernanke and Janet Yellen are now making sure that Jay Powell completes their unfinished task of reducing the Federal Reserve to eventual and inevitable irrelevance.

The Federal Reserve, in opening a Primary Dealer Credit Facility, offered to accept equity securities as collateral. Don’t know if it is a first for the Federal Reserve. They have not yet started buying investment grade corporate bonds, let alone equity. May be, a matter of time.

The Reserve Bank of Australia has slashed rate to 0.25% and has also announced a QE programme – a term lending facility with an initial size of A$90.00 billion.

The European Central Bank has announced a PEPP (Y) programme. Just kidding. It is only PEPP – Pandemic Emergency Purchase Programme (PEPP) of EUR750 bn.

This website shows that there have been 63 rate cuts this year as of March 19 (missing Australia, for sure). In March alone, the count is 41. Include Australia and it is 42.

Central banks have thrown almost the kitchen sink at the problem. There are few more throws left. But, having created so much of debt, pre and post-2008, the virus might end up writing the epitaph of the post-1973 era.

Central banks will have to re-invent themselves all over again and for that we may have to thank covid-19. Who would have thought?!

The monetary solution is the problem

Woke up Monday morning to the news that the Federal Reserve Board (FRB) had dropped the interest rate to the band of 0.0% to 0.25%. It activated dollar swaps because global dollar liquidity had dropped. There is not enough of it. It then made a vaucous announcement about helping households and businesses. It was ‘class participation’ and no content. Of course, we can put a lipstick on the pig , calling it optics and signalling.

Over the years, the FRB encouraged far too excessive dollar borrowing with its ‘too easy for too long’ monetary policy; helped created abundant dollar liabilities globally setting up the cycle for dollar shortages when crises strike (as they do invariably) and then scramble to put fingers on the holes in the dyke when the crises do strike. There is no end to this circus and madness; Time to ask the question (I know my answer) if central banks, with their current framework, have outlived their utility.

QE became QEternity. Why? Did the economy need so much support? If it was so fragile that it needed to be on monetary ventilator all the time, then did it make sense to encourage economic participants to take on more and more debt?

Dollar liquidity is a problem because too many people and too many companies have borrowed dollars that they did not need or cannot repay. Much is made of the U.S. banking sector being safe. Let us put it this way: banks are safer post-2008 because they have made the non-financial sector unsafe by stuffing them with dollar loans the businesses did not need; the CEOs used them to buy back shares and pay themselves well; PE funds benefited; some start-up entrepreneurs and promoters benefited personally. They all gorged on dollar debt; now they don’t have the dollars to repay; it has all been digested.

Did the real economy benefit from QE and if so, what is there on the liabilities side of the ledger? Has any one bothered to ask the question and have central banks accepted their responsibility to provide the answers?

If you think I am ranting, check out the responses by David Rosenberg for the two questions he was posed (the interview was conducted in February 2020):

Do you think this threat of disinflation or deflation over the course of the next couple of years is something the stock market is missing?

Well, what has made this cycle unique is that the correlation between gross-domestic product growth and the direction of the S&P 500 index has only been 7%. Historically, it has been 30% to 70%. The stock market is telling you nothing about the economy anymore. Economic fundamentals have never mattered as little for the stock market as has been the case during this 11-year bull market. The stock market is behaving more like a commodity than anything else, in that it’s trading on simple supply and demand.

Why has that relationship broken down?
It’s perfect symmetry. We have had $4 trillion of quantitative easing matched perfectly by $4 trillion of corporate share buybacks, to the point where the share count of the S&P 500 is down to its lowest point in two decades. You would normally believe that a powerful bull market in equities would have been reliant on a strong economic backdrop. But that’s far from the case. We have never before seen such a stock-market performance in the face of what has been in the last 11 years the weakest economic expansion of all time. We haven’t even had one year of 3% or better real GDP growth in the U.S. since 2005.

Central banks can never normalise interest rates because they have gotten the world so addicted to the drug of low interest rates that they have to keep on administering it more and more, even as it loses or has lost its effectiveness. The 12% slide on Monday after FRB slashed rates back to 0.0% to 0.25% is proof enough.

Why did the Fed reverse course on normalizing interest rates?
To think that all it took was a 2.5% fed-funds rate to cause the corporate bond and stock markets to choke in December 2018 is a real testament to how acute the problem is. We are simply choking on too much debt. The economy cannot handle a nominal funds rate above 2.5%, and it can’t handle real [inflation-adjusted] rates much above zero because of the gigantic debt morass. The poster child is the corporate sector, though other measures of debt are high. It’s not just the U.S.—it’s global. Interest rates have no staying power on the upside, and they will come down. The question is the speed and the level at which we bottom out.

Barry Eichengreen is right (ht: Amol Agrawal) that neither monetary policy nor fiscal policy are the answers to the economic deceleration caused by the virus. The point is that the monetary policy instrument has been completely blunted by those who wielded it too often, too excessively and for too long.

In my Mint column today, I argue that global central bankers have followed an ‘unscientific’ approach to the problem of leverage (debt) in contrast to how scientists advise responding to the virus:

The handling of Covid-19 and the debt epidemic are studies in contrast. The attempt with the former has been to isolate, contain and slow the spread. With the latter, central banks have done the opposite. They have fanned it, enabling its spread and encouraged further infection. They are at it again this week. To expect it to end without economic and social consequences is to hope that the suspension of disbelief could be eternal.

IMF advice on capital flows

Kristalina Georgieva, Managing Director of the International Monetary Fund, has written an article for FT on providing sound policy advice to emerging economies. It is conceptual in nature. Nothing wrong with the piece. To the extent it signals intellectual openness on the part of the Fund, it is welcome. 

The elephant in the room is the monetary policy pursued by the developed world. That has become a big and sizeable fetter on the policy options available to developing countries, with their spillover effects. IMF is unable to do much about them, if at all.

For the countries pursuing such policies, their efficacy – taking into consideration the impact on asset markets, real economy and the society at large – is in doubt. At the minimum, a honest evaluation is needed. But, central banks are resistant. Further, governments in those countries are not paying due regard to the long-term effects of such policies – a well-known ‘time inconsistency’ problem.

See this article on the housing bubble in Ireland and its impact on the Irish elections. The role played by QE pursued by the European Central Bank is highlighted.

Unless this is addressed, whatever advice IMF offers emerging economies will be band-aids. Well, band-aids have their uses too.