What’s the natural rate of interest?

Peter Olson and David Wessel write:

The natural rate of interest, also called the long-run equilibrium interest rate or neutral real rate, is the rate that would keep the economy operating at full employment and stable inflation.

You’ll find comparable statements from Paul Krugman, and here is the underlying Laubach and Williams paper, and more recently and ungated here (pdf).  Here are a variety of Brookings presentations.

Personally, I get nervous when I read about natural rates of interest, although I accept the core conclusion that currently low interest rates are not mainly the result of Fed policy.  I also find all this talk of natural rates of interest…historically strange.  A few points:

1. David Davidson and Knut Wicksell debated the natural rate of interest concept very early in the twentieth century, in Swedish I might add (see Carl Uhr’s books on Davidson and Wicksell).  Most people believe Davidson won those debates and even Wicksell seemed to concede.  Whether a given rate of interest both maintains full employment and stable inflation depends on the rate of productivity growth, for one thing.  It can be that no single rate of interest can perform both functions.

2. Keynes devoted a great deal of effort to knocking down the natural rate of interest concept (pdf), which he viewed as unforgivably Austrian.  He made the simple point — endorsed by modern Keynesians in other contexts — that the intersection with liquidity preferences at the margin shapes rates of interest, and thus there could be multiple natural rates of interest.  He also argued that in many settings there was no rate of interest whatsoever that would maintain capitalist stability.

3. In postwar economics, the Keynesians worked to keep natural rates of interest concepts out of mainstream macroeconomics.  I read Tobin as very much along the lines of Keynes.  Here is material on Hicks, Hansen, and Modigliani (pdf).

4. As Scott Sumner has pointed out, the older natural rate of interest used to truly be about price stability.  Nowadays that has morphed into “two percent inflation a year.”  Yes a definition can be changed, but still I find that intellectual maneuver strange and it implicitly suggests there may be multiple natural rates of interest; neither “zero” nor “two” is a special number.  There is also a blurring between the rate of inflation, the increase in the rate of inflation, the expected rate of price inflation, and so on.

5. Milton Friedman warned (pdf) not to assign too much importance to interest rates when thinking about monetary transmission.  On pp.10-11 he expresses his reservations about the natural rate of interest concept, which he calls the “natural” rate of interest with quotation marks:

What if the monetary authority chose the “natural” rate — either of interest or unemployment — as its target?  One problem is that it cannot know what the “natural” rate is.  Unfortunately, we have as yet devised no methods to estimate accurately and readily the natural rate of either interest or unemployment.  And the “natural” rate will itself change from time to time.  But the basic problem is that even if the monetary authority knew the “natural” rate, and attempted to peg the market rate at that level, it would not be led to a determinate policy. The “market” rate will vary from the natural rate for all sorts of reasons other than monetary policy.  If the monetary authority responds to these variations, it will set in train longer term effects that will make any monetary growth path it follows ultimately consistent with the rule of policy. The actual course of monetary growth will be analogous to a random walk, buffeted this way and that by the forces that produce temporary departures of the market rate from the natural rate.

There is still wisdom in those words.  You will note that in contrast Michael Woodford has worked to make interest rates more central to the discussion (pdf), and he is one reason why the natural rate of interest concept has made a comeback.

6. When Sraffa debated Hayek and argued the natural rate of interest was not such a meaningful concept, it seems Sraffa won.  Empirically, this Hamilton, Hatzius, Harrison, and West paper shows the natural rate can indeed be all over the place.  Here’s Carola Binder: “The more commonly reported 90% or 95% confidence interval would of course be even wider, and would certainly include both 0% and 6% in 2000.”

7. I sometimes read these days that the “natural [real] rate of interest” consistent with full employment is negative.  To me that makes no sense in a world with positive economic growth and a positive marginal productivity of capital.  It might make sense in 1942 Stalingrad, where the rate of growth was mostly negative.

Of course economic theory can change, and if the idea of a natural rate of interest makes a deserved comeback we should not oppose that development per se.  But I don’t see that these earlier conceptual objections have been rebutted, rather there is simply now a Kalman filter procedure for coming up with a number, combined with the triumph of empiricism, and in some quarters the desire to rebut the more extreme critics of the Fed.

I view the Laubach and Williams work as a highly useful “check” on the estimates of future rates of interest as contained in market prices.  (The market in fact does not seem to be crazy, relative to the model.)  But what macro properties will that likely future low interest rate world have, natural or otherwise?  There we do not know, and you will note that forecasts of inflation dynamics have not exactly been stellar, nor were most 2006 forecasts of future employment prescient.

I doubt these procedures are coming up with a “the natural rate of interest” in a meaningful form.  Or alternatively, look to Woodfordesque definitions, something like “what the rate of interest would be if prices were flexible.”  That too is a kind of (modal) forecast of interest rates, let’s not use the historical connotations of the natural rate of interest concept to smuggle in forecasts of prices and employment as well.

In any case, this is an interesting case study of how weak or previously rebutted ideas can work their way back into economics.  I don’t object to what most of the people working on this right now actually are trying to say.  Yet I see the use of the term acquiring a life of its own, and as it is morphing into common usage some appropriately modest claims are taking on an awful lot of baggage from the historical connotations of the term.  We’ve had the term “interest rate forecasting” for a while now, so let’s bring that one back into prominence.  It’s much clearer about what we are actually justified in trying to do.


It's almost like asking "what is the natural rate of inflation?" Especially since expected inflation is itself a component of interest rates.

And it's really, really hard to boil down 300M people's subjective experiences with purchasing power into one number that applies to the economy as a whole -- to within a tenth of a percent, no less!

Suppose we try to compare purchasing power in 2015 to 1965. The margin of error must be enormous.

What if living standards rise for reasons not captured in GDP? Is getting more utility for the same amount of dollars deflationary?

TD, In short, it´s like "looking for Wally when there are several clones":

This brings up an interesting question: what is Tyler's recipe for stabilizing a given economy that is clearly suffering from demand-side problems.

The Eurozone, for instance, suffers from lack of aggregate demand – in addition to trade imbalances between strong and weak economies – which is pretty clear from aggregate GDP growth and unemployment statistics:

This could allegedly be remedied by negative real interest rates – essentially a higher inflation target. Basically the only available alternative is to run larger public deficits, potentially directly monetized by the ECB on a country-by-country basis.

Whether or not there can be a single natural real rate of interest, a lower real interest rate would surely improve the aggregate GDP and unemployment numbers, given the excess willingness to save and/or limited willingness to consume and invest in most Eurozone countries.

Economics is not a science.

And it doesn`t pretend to be. It beats astrology a millionfold.

It does beat astrology: its practitioners are much better paid and regarded, these days.

All prices are ratio of exchange. The price of corn is the ratio at which the marginal buyer is willing to exchange dollars for corn.

Interest rates are prices, are the ratio of exchange at which the marginal person will trade a dollar now for a X dollars in twenty years.

The natural rate of interest, is the price of future money, the ratio of exchange, in the absence of government intervention. This is the same as the natural price of corn being the price ratio set by private agents freely bargaining, in the absence of government intervention.

What is this natural rate? Who knows. In the modern economy, government interventions affect the interest rate in dozens of different ways. Given the willingness to spend a lot of money, or to print and spend a lot of money, the interest rate could be set at various levels. The government has enough purchasing power to change the price of many things, if it just acts as a buyer or seller of last and infinite resort.

This quote -- "The natural rate of interest, also called the long-run equilibrium interest rate or neutral real rate, is the rate that would keep the economy operating at full employment and stable inflation." -- is ridiculous. The government could set the rate at any number of levels and still have full employment and stable inflation.

Great comment. I think that "keep the economy operating at full employment and stable inflation (price levels)" are pretty much two of the purposes of the post-modern Federal Reserve.

In any case, none of this is "natural." It is central planning and administered markets with other worldly elites pulling levers behind that green curtain.

Their theories only work in theory.

The natural rate of interest is the rate that avoids booms and busts.

With given resources and technology, it is the rate that keeps the economy on a sustainable growth path.

It is the rate that tells the truth about the availability of resources to meet current and future consumer demands, It allowing production plans to efficiently align with consumer (market) preferences.

An unnatural interest rate is an artificial, non-market rate that disconnects consumer goods/services & time preferences from production planning.

Central banking deprives the market of its ability to find the natural rate-- usually significantly damaging economic growth and the population's standard of living.

Help me understand this in terms of the 160 year, 9 country, chart below.

Does each country seriously think they are making independent decisions? Or do they understand that any rate they choose is part of a global feedback system?

Was the great burst of noise in world interest rates after 1970 really about oil? How does that shape the idea that natural rates are about money?

You do not seem to have a link to a chart.

With the oil crisis large amounts of money started flowing from the developed world to OPEC to pay for oil - there would have been a period of uncertainty over the terms on which it would flow back as loans.

I messed it up a bit, but clicking on the first paragraph works, or here

What I am really asking is for someone to explain how a natural rate can be dependent on a national economy, or as is often claimed national policy, but then move is such a pack, flock, school

I could certainly see if each central bank was responding to global conditions, with smaller regional variation, it would look this way.

Which means you we must abandon pretense of national control.

The chart is nominal rates. There can be significant dispersion if local inflation is different.

During the period from about 1965 to 1995 Western governments tended to adopt a mad form of Keynesianism and run significant deficits. Some countries ran more significant deficits than others. Those deficits and the oil price increases of the early seventies touched off inflation that took a long time to get under control. In 1981 the Fed increased short term interest rates and other countries followed along so all of the rates spiked at the time.

By 1995 countries were tackling their deficits, inflation was falling and international capital flows had become more efficient so you saw a fall in nominal interest rates and the decreased dispersion. Japan remained an outlier because of its relatively high savings rate and the reluctance of Japanese investors to invest outside of Japan.

Thank you Jorgensen, I think that tallies with my view, pretty much. I am inclined to think that one gets an outlying nominal interest rate by doing something wrong, and that by being closer to right one gets closer to the mean.

I am not sure policy was really that united though, and that it is really just Keynesian Mountain.

"I am not sure policy was really that united though,"

I think that all you need is inflation expectations being roughly the same in the different countries. Given that investors will do the rest by trying to arbitrage differences in interest rates.

What happened in 1995 to make global rates sharply coalesce?

The gaseous geniuses running the Fed and the State pull the levers. They subvert supply and demand which set interest rates natural or neutral or neutered.

I think they might be the Wizard of Oz, doing the best they can but with less power than people know

That would seem to depower the notion of inflation as a choice, and as tied to a currency, if it is consistent across policy regimes.

His perspective must be important if he gets nervous when thinking about it.

An utterly worthless discussion. Like central planners in the USSR debating the "natural" price of shoes.

A little like the national board of shoe economists discussing the natural price of shoes.

I agree with Friedman that "natural" should be quoted because it is a lousy word for the concept.

A truly natural rate would emerge from a system rather than be defined as a controlling variable.

Then you also don't believe in "natural rights"? If the Singapore government imposes a death penalty for chewing gum, and said government is democratically elected, then death to the gum chewers? Is that it?

I have some shocking news for you: there is no such thing as the rule of law, only the law of those who rule.

If there is no natural rate of interest, it would seem the statement "the Fed is keeping interest rates artificially low" is not a meaningful statement.

Any set rate is artificial, by the meaning of the words. "High or low' depends on forward expectations, is a prediction.

The confusion emerges when the "natural" rate is distinguished from the *market* rate, as if there is some "other" rate that develops outside both market forces and fiat decree.

Isn't Investment the determinant (of inflation/deflation, the "natural" rate of interest, productivity and wages, unemployment, etc.)? And hasn't the U.S. experienced (relative) disInvestment (in productive capital) over the past 30 years? Which would explain flat or falling wages, low or no inflation, a falling "natural" rate of interest, etc. Sure, we have also experienced periods of irrational exuberance and bubbles, but that's not "inflation". My view is historical not theoretical. It's not a coincidence that the long period of disInvestment began with the Volcker reset (i.e., very high rates of interest), exacerbated by a shift in Investment and production to foreign markets. Of course, what goes down will eventually go up, a truism that makes every economist a sage. In the long run, anyway. Critics of the Fed and zero rates of interest claim that the Fed shouldn't interfere with "markets", yet the same critics favor deep tax cuts for the wealthy to increase Savings and, hence, Investment in order to increase productivity, wages, economic growth, etc. If investors can borrow at a near zero rate of interest for Investment in productive capital but choose not to, why would those same investors choose Investment of additional savings from tax cuts in productive capital? The big money isn't in Investment (upper case I) in productive capital, the big money is in investment (lower case i) in speculative assets. More so when tax policy favors speculation.

I'm sorry, but your definition of Natural Rate of Interest does not correspond with the one used by Knut Wicksell (sometimes the concept was termed Normal Rate of Interest).

Wicksell defined NRI as the rate of interest which would keep prices stable in an otherwise stable economy, this corresponds to the marginal rate of return on investment in such an economy, as explained in his cumulative process.

TC says: "Whether a given rate of interest both maintains full employment and stable inflation depends on the rate of productivity growth, for one thing. It can be that no single rate of interest can perform both functions" which is perfectly consistent with your claim that "Wicksell defined NRI as the rate of interest which would keep prices stable in an otherwise stable economy" -

(1) stable inflation (TC) = prices stable (you), and
(2) rate of productivity growth (TC) = otherwise stable economy (you). The second point being that a stable economy would have a high rate of productivity growth.

So nothing you quote Wicksell for is necessarily inconsistent with what Tyler Cowen said. BTW reading something in the original language doesn't mean you understood it any better than somebody reading a cheap translation.

It also seems that, in addition to employment, prices, and productivity growth, one needs to consider overlapping generations of savers and the distribution of wealth. A very young population is likely to have a different interest rate than a very old one, and I would guess that a very equitable wealth distribution would produce a different interest rate than a very inequitable one. As I remember these were serious considerations a decade or so ago but they seem to less so these days, true?

Mindful of Cowen's third law, I plunge in nevertheless.

1. Expected CPI increases are trivially reflected in nominal interest rates. To the extent the natural rate of interest makes sense as a concept, I think we should be talking about real rates of interest.

2. I read a lot these days about the Fed manipulating interest rates. Well, here are TIPs (roughly, "real") yields at various maturities:

Date 5-Year 7-Year 10-Year 20-Year 30-Year
12/6/2012 -1.46% -1.22% -0.87% -0.12% 0.24%
10/30/2015 0.32% 0.47% 0.63% 0.98% 1.19%

Any argument about interest rates being manipulated seems like it had a lot more force three years ago.

Take a bundle of safe-counrty bonds, average the real interest rate, and call it natural? In the meaning of the word, sure. But then you need something else to think about global savings and global money supply, because you have recognized that those are detached from any single state's interest rate policy?

No. The natural rate of interest is unknown. What I have described are actually available "real" yields.

It is left to the reader to compare these yields to their view of what the "natural" rate of interest is.

Now perhaps you think the whole idea of a "natural" rate of interest is silly, in which case you probably aren't interested in this conversation.

It is primarily Austrians who complain that the Fed is manipulating interest rates. I interpret this to mean that the "observed" rates of interest do not correspond to the "natural" rates.

I think the "natural" rate of interest (including the shape of the yield curve) changes over time in response to expected economic conditions, but that it should be reasonably stable.

I provided better on observed rates of interest from December 2012 (lowest since the financial crisis) versus currently. Simple intuition tells me that current observed yields are much more in line with my idea of what a "natural" rate of interest looks like than 2012 was.

In last paragraph, "I provided DATA..."

Formatting of data was poor. I hope thus is better (5, 7, 10, 20, 30 year TIPS):

12/6/2012 -1.46% -1.22% -0.87% -0.12% +0.24%

10/30/2015 +0.32% +0.47% +0.63% +0.98% +1.19%

A related point: most of the bitching abut manipulation suggests that the Fed is holding rates down.

But note above that real yields have risen 1% at the long end and 2% at the short-end since 2012.

Some will want to attribute this to recent Fed hints at tightening, but that is precisely wrong.

Real yields peaked in September of 2013, before the taper tantrum:

9/5/2013 +0.14% +0.61% +0.92% +1.40% +1.64%

QE and real yields have been positively correlated over the past five years.

Do you have the rates for the runs-up to the dot.com and recent real estate bubble bursts?

In a former line of work, I became conversant in real estate appraisal methods. Changes (decreases or increases) in observed (surveys of actual transactions in time and place) capitalization and discount rates in real estate market transactions seemed useful in detecting emerging price shocks.

I suspect that the natural rate is silly, and am interested in this conversation for that reason.

Why do 9 countries coalesce on interest rates after 1995? Was that natural?

Yeah, I know you're a lefty and probably have no truck with the natural rate concept. It's all good.

As you continue to misunderstand my comments, I'm disinclined to pursue your uninteresting tangent.

If you can't slot me as a moderate independent, like Ben, you might not have the analytical skills necessary.

That 160 year chart has a huge honking mountain, from 1950 to 2010, just begging to be explained.

Just asserting that the natural rate remains the same, and getting angry at "tangents?"

Obviously protective.

Look, I make a comment about observed rates, which you interpret as natural rates and just plow ahead.

But I'll do you a favor and explain it to you.

Even in a world without money, there would be interest rates. They would fluctuate over time in response to intertemporal supply and demand.

The mountain you refer to is largely due to inflation, although there is a (much less pronounced) trend in real rates too, up in the 1970s and 1980s, down since.

Multiple factors explain this phenomenon, but I suspect demographics are a good part of the explanation. Young people are a lot poorer than old people. When the baby boomers were young, real interest rates were high. Now, they're old, and rates are lower. Supply and demand.

That sounds like more agreement, but I was responding to:

I think the “natural” rate of interest (including the shape of the yield curve) changes over time in response to expected economic conditions, but that it should be reasonably stable.

That mountain, which I agree is something big in the global economy, looks anything but stable, and should give pause to anyone who yearns for a return to "normal" or "natural."

But maybe if we insult anyone who cannot see a stable natural rate in the mountain, we can feel better.

How do you reconcile the fact that the "marginal productivity of [risk free] capital" is positive with the fact that people, businesses and banks choose to store so much wealth as idle excess reserves?

If it was positive, wouldn't we see investment instead of cash hoarding at zero interests?

Historically, negative real returns have been the norm for safe stores of value. Before financial systems existed, almost all investments had negative returns or high risks if you didn’t put work into them. The main ways you had to store value was to accumulate stuff, buildings or land. All options either had high maintenance costs, were subject to risk of damage from natural causes and theft, were very volatile or required hard labor to get production out of.

Even in societies with financial systems, getting risk free, hassle free, positive real returns has been difficult for a large part of history. Negative returns simply reflect the _natural_ laws of thermodynamics that tell us that everything tends to decay without a constant supply of work and energy. In general, most things require maintenance to keep their worth.

The 20th century was probably the most notable exception. Because of unprecedented demographic and technological growth, positive risk free real returns were easy to find. The recency effect probably explains some of the confusion people have about this. It is possible that under favorable conditions, wealth can have positive returns and even compound into very good long run returns but it is not a guarantee and there is nothing natural about it. It may not continue forever, particularly amidst an aging and retiring population.

With higher than equilibrium central bank rates, money acts as an artificial backstop for savings, displacing marginal investment and capital creation. This destroys the total amount of real wealth the economy creates and replaces it with pieces of paper.

I would say an obvious sign that central bank interest rates are above the natural rate is when we see excess reserves accumulating instead of capital forming.

The aggregate saving vehicle of last resort should be something like people stockpiling the stuff they will need in the future (which incidentally creates job because this stuff needs to be produced) not accumulating intrinsically valueless cash.

This seems like a misuse of the word "natural" to me. It implies that an economy with full employment and stable inflation would exist "naturally" if not for some unfortunate intervention. Does anyone really believe that? A better word for what is being described is the "ideal" interest rate.

If I could define the natural interest rate I'd say it was the rate at which the maximum dollar amount of debt contracts are signed. If the rate goes too low lending will decrease; too high and borrowing will decrease. As long as people are interested in lending and borrowing the rate will "naturally" trend towards a value that lets deals go through. I wouldn't expect this natural rate to be stable or predictable, and if it was close to the ideal rate that would only be by coincidence or government intervention.

The natural rate of interest is the one that permits the Fed and Treasury to not worry too much about the cost of financing the debt. If the rates went up to what has historically been expected, financing costs would be one of the largest if not largest line items on the budget, and suddenly this wouldn't be academic anymore.

Perhaps if it was the US Fed in isolation, and US savings in isolation, bond vigilantes could ride.

The fact that is global rates and global savings seems important.

The US situation is common in almost all advanced economies. Are there any European countries that don't borrow to fund government operations?

Without looking, I think most developed countries are at "high" debt to GDP ratios, sovereign wealth funds are rare. But as that 160 year chart below shows, "flocking" transcends debt cycles.

@ derek: "Are there any European countries that don’t borrow to fund government operations?"

yes, Russia. only half-european though.

It is essential to have a real time measure of potential real GDP. Then you can estimate real time changes in the natural real rate.
And of course, as Friedman says, the real rate in the economy will not be equal to the natural rate throughout the business cycle. It must be lower to bring the economy to full employment, but not too low. And the health of the economy in terms of a healthy labor share is essential to a low real rate.
Here is my post that puts forth a real time estimate of the natural rate.

This post seems to confuse real and nominal interest rates.

Since we are talking about sovereign debt, maybe the 'natural interest rate' would reflect on the returns expected from the investment. Say you are the Treasury, and you need to borrow money to pay for Medicaid. What is the economic return on investing in a hip replacement for a retiree? Probably negative.

Or the net return to education, k-12. $11k per year * 12. If you were funding that, with expected tax collected minus any other costs paid by government over the life of that individual, what would be your return? On average?

Take any government program and calculate net return in tax revenues. Borrow money to fund it and the interest paid is the net return in tax revenues.

Maybe the low interest rates are a reflection on the extraordinary high cost of government vs their extraordinarily ineffectiveness in supporting let alone engendering economic growth.

EPA shuts down coal. An investment of very little with enormous negative returns.

no idea what happened with that a-tag, sorry

A nice collection of views of the natural rate. However, the ideas behind the natural rate seem to still be behind most of economics today. You can think of it as the last common ancestor of Keynesian, Austrian and monetarist economics:


DeLong replies here: http://www.bradford-delong.com/2015/11/cracking-the-hard-shell-of-the-macroeconomic-knut-keynesian-friedmanite-and-wicksellian-epistemes-in-macroeconomics.html
Krugman replies here: http://krugman.blogs.nytimes.com/2015/11/01/natural-confusion

Is DeLong saying that Greenspan drove the world economy to a change in 1995? Did he have that market or intellectual power?

Krugman seems to accept a national isolation which I do not believe.


That which recurs when certain relationships exist in particular circumstances.

Example: Flying at a sustained power level, dropping the bomb load "causes" the plane to rise. Really?

I am in general agreement with this post. I find it regrettable that this basically nonsense concept has become so entrenched in textbooks and also policy discussions. Woodford probably is more responsible than anybody else for this regrettable development.

This post mistakes the change in definition of the natural rate. It didn't change from "0% inflation" to "2% inflation." It changed from "0% inflation" to "a constant inflation rate." This change in definition was necessitated by a change in the theory of inflation, when people (first Phelps and Friedman, and then everyone else) came to think that an overheated economy would be characterized not by a constant, high inflation rate but by an ever-accelerating inflation rate (and later, with rational expectations theory, perhaps simply by a precipitous collapse in the value of money). If you believe strictly in the vertical long-run Phillips curve (which was orthodoxy until a few years ago), then the real rate of interest associated with stable 0% inflation would be the same as the real rate of interest associated with stable 2% inflation. So the old definition of the natural rate of interest wouldn't make sense.

'Interest' is the price of credit. Does anybody debate the 'natural' price of t-shirts or styrofoam cups?

Good post. There is very little evidence that the returns on capital assets converge with the money rate of interest as assumed by Fisher, Keynes et al. Hence movements in interest rates are not a significant determinant of investment - expectations of future profits are. http://www.creditcapitaladvisory.com/2014/09/04/swedish-perspective-equilibrium-level-interest/

It's good to begin an article about a concept by first defining that concept, but it would be equally good to question that very definition.

For example, if I begun an article about the Tooth Fairy by first defining it, and then by comparing different forms of it from different authors, would that mean that the Tooth Fairy indeed does exist ?

Thee same is true for the natural interest rate:

1) there is nothing "natural" about money: it's a human construct, it has no "natural" origin, like gravity or speed of light. Calling it "natural" is already a sign that those that use this concept are ignoramuses.

2) even if one would give another name - like "best interest rate" for example - it would be necessary, for scientific purposes, to prove that it exists, that a "best" rate maximizes employment, which, today, seems to not exist. Worse, it's not even clear that there is a direct relationship between employment and interest rate.

Has ever the FED used the natural rate concept to set its interest rate? They use the unemployment rate as a proxy but when inflation is falling behind the expected " natural" target, it is a good proxy? It appears that under severe desequlibrium, market forces are useless to bring about a recovery path unless an external shock changes market expectations.

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