CHAPTER 3

Debt Is Not an Asset. The Relative Success of the U.S. QE

“I will choose a path that’s clear, I will choose free will”

—Neil Peart

One thing we must understand by now is that, if governments benefit from financial repression, it will both continue and have commentators that defend it.

As such, we must understand how cycles function and behave, rigorously understanding what parts of the economy are going well and what is behaving poorly. This is especially important because we can be right at analyzing the risks and forget there are elements that have worked.

There are parts of the economy that have benefitted from low rates and high liquidity, but when the result is $9 trillion of added debt for a disappointing $3.6 trillion of GDP growth in eight years, it shows the fragility of the benefits and the risk of the accumulated imbalances.

But there are commentators that see differently; some even think that the national debt is not a risk, but an asset.

Is Debt Really an Asset?

At the end of the day, some economists will say that the government deficit is just money created that goes to the economy and creates more growth and wealth for citizens, and the government never has to repay such debt. It just issues promissory notes that are never repaid, just refinanced, with an interest. Therefore, the government debt is in fact an asset.

That’s essentially the situation with the U.S. national “debt.” The United States issues money by deficit spending. It puts more money into private accounts than it takes out via taxes. The private sector has more balance-sheet assets (but no more liabilities, so it has more “net worth,” the balancing item on the right-hand side of its balance sheet). The treasury has made no promises to redeem that new money for ... anything (except maybe ... different government-issued assets). It’s just out there.¹

Is it not great? More like magic.

Except, it is not true.

The deficit spending and debt created exceed the total goods and services of the economy—in the case of the United States, by more than 100 percent.

Total debt in the economy is also higher than the sum of savings, goods, and services, in the United States, by 300 percent.²

Even if none of the public debt is repaid, it still costs an outstanding amount of money in interests every year.³

Furthermore, by continuing to issue more money, the purchasing power of the currency erodes, and real wealth is not created, but destroyed.

And as the government enters the spiral of solving the imbalances with more currency issuances and further deficits, the economy enters as well into the vicious circle of unproductive debt and secular stagnation.

If creating money out of thin air generated wealth, Venezuela, Zimbabwe, and Argentina would be the richest countries in the world.

The reason why the United States can conduct its expansive monetary policy is precisely because the U.S. dollar continues to be a reserve of value and the entire world trusts that the government will actually repay those debts with more than just inflation. Furthermore, it is the promise and commitment to control the rise in deficits and to end that policy which keeps the U.S. dollar as a reserve of value. Breaking the trust that the entire world concedes to the U.S. economy by breaking the promise of payment and forgetting the importance of a secondary market, where sterilization of part of that debt issued is an integral part of such confidence, would destroy the perceived value of the currency for the rest of the world.

A currency is only worth something because most of the population accepts that perceived value.

Therefore, no, debt is not an asset. Even Marx considered it fictitious capital.⁴ If it were an asset, a government would be able to deficit-spend as much as it liked and whenever it wanted, and there would be no consequences. And there are. To disregard the numerous financial crises generated by the accumulation of debt as anomalies and promote perpetual imbalances is not only reckless, but suicidal.

Making Financial Repression a Market Trade

So far, we have talked about impacts on the real economy and put forward the risks created in a ballooning financial bubble.

The first QE program in the United States showcased just that. The theory supporting financial repression is that if bonds and financial assets are made increasingly unattractive with lower yield, and cash becomes unappealing due to the ongoing process of devaluation and lower rates, investors will channel the excess liquidity and savings to the real economy, consuming more and boosting capital expenditure.

However, capital expenditure in nonfinancial sectors collapsed to the lowest levels in real terms after an all-too-brief period of exuberance. Quantitative easing was launched in 2009, and, by 2012, capital expenditure growth was stalling, then falling, every year until 2016.⁵

Instead of funneling funds and incentivizing the real economy, the expansionary policy has been inflating financial markets’ expectations and generating excess in equity and bond markets. See Figure 3.1.

There was a certain merit to the idea. Trying to stimulate demand in a moment of absolute panic when markets and liquidity had simply dried up was reasonable, but failing to understand that the same policy—massively lowering rates—was behind the bubble that led to the crisis and ultimately to said panic meant that all other considerations were forgotten.

Figure 3.1 Federal reserve balance sheet vs. S&P 500 index

Source: Bloomberg, Jeroen Blokland.

The fact that the Federal Reserve took the economic data at face value and accepted a level of unemployment that was falling as millions left the workforce showed how easily the shift went from stopping panic to focusing too much on the behavior of markets.

Questions started to arise all over the world when two things happened: policy shifted from stabilizing markets to supporting the rising valuations, and at the same time, the carefully designed estimates of growth for the years ahead—the infamous hockey sticks—were consistently missed.

So, in essence, two things happened.

Investors started to behave against the macro data. The consensual trade was to buy the weakening economic data in the hope that it would force the central banks to increase and intensify the expansionary policies. Markets had realized that monetary policy inflated asset prices and therefore celebrated when job claims rose, when growth estimates were revised down, and when companies published poor results. “Buy the Dip” became the norm.

Investors did not undertake a great rotation out of bonds into equities and out of equities into capital investments.

Investors simply accumulated more and more exposure to short-term liquid assets.

Capital expenditure, as mentioned before, rose only for a short period of time boosted by Oil and Gas and mining, as commodities—denominated in U.S. dollars—saw a massive increase in price as the U.S. currency devalued.

The Commodity Research Bureau (CRB) commodity index rose almost 100 percent, but neither supply and demand metrics nor global economic growth supported such a rise above 2008 peaks. This created an illusion of wealth for commodity producers that led many emerging markets to adapt to an extraordinary increase in dollar revenues that were used to finance long-term projects in local currency, which planted the seed for what became the next emerging-market crisis. We will explore in detail what the “sudden stop” means in the next chapter.

Markets expecting a “melt-up”⁶ based on poor economic data was one of the clearest perverse incentives of stimulus.

A 2015 report from the Bank of America pointed out the perverse effects of QE and monetary stimulus.⁷ After more than 600 rate cuts and excess of $12 trillion of money supply expansion in the period analyzed:

• For every job created in the United States in the years of QE, companies bought back $296,000 in shares.

• $100 invested in the stock market would be worth $205 while real wages stayed below 2008 levels.

The zero interest rate policy and asset purchase programs of central banks have proven to be more favorable to risky assets and unicorns than to workers, savers, companies, and the labor market.

Monetary stimulus was launched to improve macroeconomic data and market sentiment.

As such, asset valuations ballooned on the hope of recovery.

Once that economic situation proved to be less benign, markets acquired more short-term liquid assets in the anticipation that new easing would happen.

This created as well a level of valuation in those financial assets that was self-perpetuated by the hope of more stimulus, so the Federal Reserve and other central banks are entrapped by their own policy because they cannot retire the stimulus for fear of a market collapse from elevated valuations created by the policy itself. So, the easing policy is maintained to avoid a financial crisis caused by the unjustified valuations of financial assets created by that same policy.⁸

The Central Bank as the Pyromaniac Fireman

In the meantime, the minutes of the Federal Reserve and other central banks deny such aggressive valuations but show that the policy is prolonged due to risks in markets themselves.

The liquidity trap becomes a market trap. If markets go up excessively it cannot be stopped for fear of a financial-led recession and if markets correct it must be increased ... for fear of a financial-led recession.⁹

One of the clearest signals of this excessive risk fueled by central bank policy is margin debt, that is, the amount of debt taken by market participants and invested in stocks and bonds. It reached multiyear highs rising from 1 percent of GDP to above 2.9 percent of GDP in the United States by 2015, almost a threefold increase and double the historical median. It peaked at 2.6 percent before the financial crisis, and the average median since 1990 was 1.55 percent.

Now, this is the funny part. A massive increase of margin debt was viewed by many commentators as a risk or as a bullish signal.

The risk is evident. Too much debt is taken betting on further rise in stocks, so, if it does not happen, the ability to repay such debt collapses and there is a domino of payments that cannot be met, creating a financial crisis if the stock of unpayable debt is too large.¹⁰

However, some see it as a positive signal. Investors are more confident about the economy, corporate profits, and dividends, and therefore take more debt to invest in this trend. It sounds plausible. But it is complete garbage.

If confidence soars and profits are rising according to estimates, at least the market would become cheaper, as valuations would reflect those estimates at least one year ahead. But what happened was the opposite. The Shiller PE ratio, which measures the average price of stocks relative to their earnings, went from 15× to 27×—significantly higher than the historical average of 12× to 13×.¹¹

What was happening was completely different. Markets were betting on the loss of value of money due to devaluation policies and on the relentless quest to increase inflation, generating an all-time-high bubble.

This bubble was even more evident in bonds. Central banks bought trillions of dollars of government bonds causing their yields to collapse. As the lowest risk asset yield fell to the lowest level on record, the yield of riskier assets, which is set by comparison to the lowest risk asset—the U.S. 10-year bond and the German bund—also collapsed. Suddenly, investors competed to buy bonds with much higher risk but much lower returns. Inflows into the bond market increased by almost $1 trillion between 2009 and 2014, posting an almost annual 30 percent higher inflow than historical figures showed.¹² Companies that showed almost bankruptcy-type cash flow and balance sheet were issuing bonds at rates not seen in three decades, reaching an all-time low in 2013. This race to the bottom of returns and top of risk was called “the thirst for yield.”

Pension funds and mutual funds invest predominantly in bonds, the safest and more stable financial assets. Those bonds pay an annual coupon, which makes for most of the returns expected, or promised. As central bank-led financial repression makes safe assets yield less (in some cases even negative) every year, these pension funds have to look elsewhere for a bit of return. What do they look for? Bonds with increasingly higher risk. But those yields have also fallen. So, the portfolio of the unsuspected “long-term, low-risk investor” gradually fills up with assets whose real risk is significantly superior to the one that the investor looked for.

Of course, the reader might say that financial conditions have improved and those risky borrowers are in a better position, so the lower yield is warranted. But it simply isn’t true. The ability to repay debt fell between 2009 and 2013 to levels not seen since before the financial crisis, as shown in the annual reports of the three major rating agencies.¹³

This thirst for yield meant extraordinary inflows into bonds but, at the same time, reduction in global capital expenditure and investment in the real economy. The objective of financial repression policies—trying to force investors out of cash and liquid financial assets and into productive investment—was delivering exactly the opposite effect: a reduction in annual capital expenditure growth and collapse of money velocity, with a massive increase in bond inflows.

Lower Costs Help Cut Debt, or Not?

The reader might say, and rightly so, that falling interest rates and bond yields and rising liquidity create positive effects. Debts are easier to be repaid, companies and governments finance themselves cheaper, and therefore growth is boosted.

Yes, debt is easier to be repaid, but global debt has risen to all-time peacetime highs, in absolute real terms and relative to GDP. The incentive to borrow more and use it for unproductive spending is evident in the fall of productivity, the reduction in return on capital employed, and the lower levels of growth.

The United States, for example, saw a massive debt increase of $9 trillion between 2009 and 2016 to generate $3.5 trillion of GDP. Elsewhere, the ratio of debt to additional GDP rose to 18 to one.¹⁴

Borrowers adapt quickly to low yields, and even with collapsing rates, the cost of a shock rises as debt balloons. A very revealing case can be seen in the eurozone where countries such as Spain, Italy, or Portugal, despite issuing at the lowest rates in the historical series, would suffer an enormous debt shock only from a rise of 1 percent in the cost of debt.¹⁵

Reading the banks’ strategists’ reports of the QE period was also proof of this mentality. A constant message in recommendations to investors was to keep buying stocks expending “accommodative policies.”

By 2016, an entire generation of traders and market participants had not seen anything except expansionary policies. This led to the consensus’s inability to discern proper valuation opportunities and understand risk and earning cycles.

Mainstream Consensus and the Swindle of the Hockey Stick

This inability is clearest when looking at estimates of corporate profits and macroeconomic projections, which are essential to determine whether the stock market is cheap or if the economy is improving.

However, every year, especially in the past eight years, we witness an interesting pattern: massive downward revision of corporate profit expectations. These have averaged 15 percent between January and December almost every year.¹⁶

The mainstream consensus of analysts suffers from the same constant mistake of large international organizations, whose average accuracy in their short- and medium-term predictions is less than 26 percent, as mentioned earlier. The error of the “double trap”: long-term optimism and negation of short-term trends.

If we take Bloomberg’s earnings-per-share (EPS) estimates for the Euro Stoxx 50, for example, in January 2016 for that same year, these were +1.5 percent and for 2017, +12.4 percent.

If we then look at the same estimates for the same index on December 16, 2016, what do we find? Profits for 2016 are +2.3 percent and for 2017, +11.1 percent.

This trend is very similar to that of S&P: full-year profits (EPS) for 2016 fell from +2.7 percent in January to +0.1 percent in December and for FY17, from +14 percent in January to +12.3 percent in December.¹⁷

Note the impact on estimates in 11 months: from healthy profit to loss or no growth. But note, in turn, the gradual but inexorable erosion of expectations for the following year.

Why is this happening? The hockey stick in future estimates is the best excuse to justify blunders.

If we look at the examples in macroeconomic estimates, from the Federal Reserve¹⁸ to the ECB¹⁹ and the IMF, the Federal Reserve has been cutting one-year-forward estimates by up to half since 2009. What about inflation estimates? The same. In the case of the large international organizations, we are talking of mistakes of more than 50 to 70 percent in one-year estimates and over optimism in cases of recession.²⁰

Ignore for a second the disaster in prediction track record, and let us focus on the shape of estimates—almost always a hockey stick. See Figure 3.2.

Suppose, as with the future estimates, that economists have failed in the current-year estimates. What is the answer? “But look, next year everything improves.” And, in turn, the next hockey stick is moved to the new, lower, base. But that figure, the hockey stick of fantasy future projections, remains. Don’t worry, “next year” will always be there.

There are various reasons:

Mainstream consensus tends to overestimate the positive impact of monetary policy over other risk factors. It is very evident in corporate profits and even more so, in capex estimates. As noted before, capex predictions have been particularly erroneous.

Figure 3.2 IMF world real GDP growth over time

Source: IMF, Washington Post.

Since 2012, while consensus predicted increases in real net investment, it fell, very severely in the years 2013 to 2016.

Analysis houses often introduce large impacts on GDP, consumption, unemployment, and investment or inflation expectations due to changes in monetary policy, without addressing much more relevant trends such as overcapacity, aging, technology, or the real cost of capital. The results lead invariably to downward revisions, albeit gradually—little by little, month by month—in order not to look so bad.

Denying business cycles is another mistake. Cycles become shorter and more abrupt as debt rises and money velocity falls. Using estimates where the starting point is simply moved lower and then increased annually, as if there were no cyclical factors that cancel those correlations, is a frequent mistake.

Additionally, confirmation bias is very evident in these errors in expectations. Mainstream consensus considers short-term mistakes as just anomalies—white noise that does not change the medium-term prediction—just because most peers support the starting premise and it needs to be reaffirmed.

Of course, to justify these deviations in short-term estimates, mainstream consensus will use sentences such as “there were unexpected challenges,” “fundamentals have not changed,” and “in the longterm it will improve.”

To defend the “eternal hockey stick,” there will be seemingly robust studies of regressions, endless spreadsheets, and complicated algorithms in which everything appears very scientific until we understand that most of the key “inputs” are subjective.

The general mistake in medium-term estimates comes mainly from altering the result to justify the conclusion, albeit involuntarily, due to individual prejudices, peer pressure, and ideological preferences. There are many studies that warn of the “pollution” in optimistic estimates,²¹ where many of these predictions simply seek to justify an existing policy or strategy,²² or, in the case of corporate profits, valuations that are hardly supported by fundamentals. Any analyst in the world knows that, on average, 80 percent of the valuation of a stock is explained by the years that exceed the “forecast period” (normally four, maximum five, years).

Paul Romer, chief economist of the World Bank, also criticized the perverse incentives in macroeconomics. “For more than three decades, macroeconomics has gone backwards,” he states. Romer comments that most economists drift away from science, being more interested in preserving reputations than testing their theories against reality, “more committed to friends than facts,” offering a wicked parody of a modern macro argument: “Assume A, assume B, ... blah blah blah ... and so we have proven that P is true.”²³

Does this mean that analysis is useless? Not at all.

Analysis has an enormous value in what we must do with the detailed study of factors that affect companies, governments, and families. But predictions, especially for more than three years, should be taken not with caution, but with the certainty that they are contaminated by optimism.²⁴

To be guided by long-term predictions of economists that deny cycles and are clearly unable to predict the most immediate future is, at the very least, dangerous.

Making estimates is essential for economic analysis. It helps us realize where we are wrong, and act accordingly by recognizing those impacts—positive or negative—that we missed, for further analysis. Making mistakes is essential to improve. The problem is to confuse estimates with infallible magic predictions and, even worse, to cover these hockey stick estimates with a fake “scientific” layer, when they only serve as an excuse to perpetuate erroneous policies and recommendations.

The Mirage Starts to Fade

In 2009 and 2010, emerging market asset prices began to strongly inflate due to the effect of the “global carry trade” in which investors borrowed capital from deflation-prone or low-inflation countries where interest rates were too low—like the United States and Japan—and liquidity was soaring, and deployed the excess liquidity into higher-yielding investments in nondisinflation-prone economies. By late 2010, capital flows to emerging markets had risen to $825 billion—a level that exceeded the last peak during 2006 to 2007, while inflows to Asian economies rose 60 percent above their prior peak.²⁵

Even Dilma Rousseff, ex-president of Brazil, decried the large pool of speculative capital that sought returns in emerging markets, calling it a “monetary tsunami”²⁶ due to its impact on inflation, overheating of the economy, and asset bubbles in emerging market economies. However, even she fell under the liquidity trap leading the country to a massive overcapacity²⁷ and investments in large, unproductive infrastructure projects, also called white elephants.

Bubbles Happen in the Perceived Safest Assets

The problem with bubbles is exactly this. They happen in the assets and in areas that the consensus believes are less risky and the safest—housing, energy, infrastructure, government bonds—and even some of the governments and leaders who rightly identify the risk of massive unjustified inflow into an overheating market fall under its spell when time passes and their prediction of a prickling of the bubble fails to happen. They start to believe the reports of economists that speak of new paradigms, that repeat “this time it’s different” ... and then it happens. The bubble bursts when there is no one else left to convince that it didn’t exist in the first place. See the example in oil prices versus supply in Figure 3.3.

Other examples of excess of liquidity turning into mirages and bubbles happened in Canada and Australia. Mining and oil companies always invested with a commodity deck that reflected significantly lower prices than the forward curve. Miners rarely took any debt because of the risks entailed from carrying financial burdens in a highly cyclical sector. Massive rises in commodity prices due to devaluation of the U.S. dollar and the illusion of perennial growth in China and the emerging markets added to the perception that massive liquidity and low rates would stay forever, and generated a complete change in the mind of an otherwise historically financially prudent sector.

Leveraged investments in mining and energy soared. The annual capital expenditure in Oil and Gas alone multiplied by tenfold in a little over a decade, and massive overcapacity was created from completely overoptimistic expectations of demand, prices of commodities, and cost of debt. By 2013 delinquencies in the most inefficient companies and dramatic investment program and dividend cuts had to be undertaken.

The U.S. Federal Reserve’s $600 billion QE2 program, which began in the fall of 2010, caused commodities prices to surge further and resulted in a new wave of fears of economic overheating. In early 2011, Andrew Haldane, chief economist at the Bank of England, warned of emerging market asset bubbles due to capital inflows from advanced economies (see Figure 3.4), and the IMF alerted governments of overheating. Joachim Fels, chief economist at Morgan Stanley, warned that the BRIC²⁸ nations faced an “elevated risk of credit bubbles and rising defaults,” and banks began to show the signs of a credit crisis.

Figure 3.3 World oil supply and price vs. QE

Source: Gail Tverberg.

Economies started to show the signs and credit downgrades ensued. Despite the slowdown in emerging market economies, their fixed income assets were still attracting massive capital inflows, but volatility started to really show an uglier face, placing many of the issuers under economic duress despite rising liquidity.

The Federal Reserve’s purchase programs suppressed bond yields below their natural market-clearing level at the same time as expansive cycles proved to be shorter and more abrupt. The high growth of two to three years became, due to overcapacity and high debt into unproductive investments, the recession of the following period. Traditional and conservative buy-and-hold bond strategies become riskier. In fact, both opportunity cost risks and actual default risks escalate when bond prices are artificially high (and yields artificially lower).

Figure 3.4 U.S. Dollar Index vs. Emerging Market Index

Source: NYSEArca.

Bondholders receive a lower return for their investments and become exposed to inflation, losing yield when they might have been better off pursuing instruments with higher upside.

This perceived risk was so strong that, during the deliberations about QE in the European Union, economists from the World Pensions Council (WPC)²⁹ warned that artificially low government bond interest rates could compromise the underfunding condition of pension funds. They argued that diminished returns from QE could force negative real savings rates on pensioners. In 2016, it happened: more than $11 billion in negative yield bonds worldwide.

But QE also harms liquidity in markets despite being a massive injection of—liquidity.

The aim of QE might be to increase liquidity in global markets, but it ends up having the opposite effect. Investors become more prudent, and place more of their assets in low-risk bonds and cash.

Capital increases merger and acquisition transactions; companies’ floating and capital expenditure falls.³⁰

Figure 3.5 Buybacks and dividends relative to earnings

Source: Marketwatch.

Companies devoted more funds to dividends and buybacks, not doing what mainstream economists demanded them to, which was to grow,³¹ because there was no real confidence in the economy. See Figure 3.5.

As Borio explains:

Attaining monetary and financial stability simultaneously has proved elusive across regimes. Edging closer toward that goal calls for incorporating systematically long-duration and disruptive financial booms and busts—financial cycles—in policy frameworks. For monetary policy, this means leaning more deliberately against booms and easing less aggressively and persistently during busts. What is ultimately at stake is the credibility of central banking—its ability to retain trust and legitimacy.³²

And central banks are losing credibility faster than the speed of light. Despite what the central planners of monetary laughing gas want us to see—a mirage of growth and opportunities to take risk and invest more—CEOs and management teams witnessed every day the weakness in demand and the level of overcapacity in their respective markets. Companies saw a reality different than what central banks and governments wanted them to see. Families did not see lower rates and financial repression as a driver to spend more and take credit. Because the reality in front of them was stubbornly different from the science-fiction-like improvement that mainstream media and consensus analysts desperately tried to paint.

How could anyone expect anything different, when the experience of Japan showed that the economy stalls and participants become more conservative, after 21 years of zero interest rate policies (ZIRP) and six consecutive stimulus programs? Because, as it always happens, many repeated the three favorite sentences of mainstream economics:

It could have been worse.

It was not enough.

This time it’s different.

¹ http://evonomics.com/isnt-time-stop-calling-national-debt/

² Private and Public Debt.

³ www.treasurydirect.gov/govt/reports/ir/ir_expense.htm

⁴ Capital III (Moscow: Foreign Languages Publishing House, 1958).

⁵ Standard & Poor’s Global Corporate Capital Expenditure Survey 2016.

⁶ http://articles.orlandosentinel.com/2012-09-08/news/ct-biz-0909-gail-20120908_1_twitter-gailmarksjarvis-stimulus-expectations-stock-market

⁷ Bank of America Merrill Lynch, 2015. Michael Hartnett. November, 2015.

⁸ The Ultra-Easy Money Experiment, William White. Bruno Leoni Institute, Rome. October 2015.

⁹ http://inflation.us/nyse-margin-debtgdp-explodes-past-dot-com-bubble-peak/

¹⁰ Exactly what happened with housing and margin calls; could happen to stock markets.

¹¹ www.multpl.com/table

¹² Thomson Reuters 2009 to 2014.

¹³ End of 2013 and 2014, Moody’s, Standard and Poor’s, Fitch.

¹⁴ According to Deutsche Bank, 2016.

¹⁵ A widespread increase of 1 percent in interest rates for the eurozone would cost €10 billion in higher costs using one-year average maturities of 2016 to 2020.

¹⁶ Bloomberg median.

¹⁷ Bloomberg consensus estimate of EPS.

¹⁸ This graph shows how bad the Fed is at predicting the future, Dylan Matthews, Washington Post, June 19, 2013.

¹⁹ Economic forecasting: some lessons from recent research. ECB Working Papers.

²⁰ On the Accuracy and Efficiency of IMF Forecasts: A Survey and Some Extensions, Hans Genberg and Andrew Martinez, 2014.

²¹ www.smh.com.au/federal-politics/political-opinion/when-a-guess-is-as-good-as-a-forecast-20130108-2cep8.html

²² Growth Forecast Errors and Fiscal Multipliers, Olivier Blanchard and Daniel Leigh, IMF 2013.

²³ “The Trouble With Macroeconomics,” Paul Romer. Stern School of Business New York University. September, 2016.

²⁴ Growth Forecast Errors and Fiscal Multipliers, Olivier Blanchard and Daniel Leigh, IMF 2013.

²⁵ According to Bloomberg, Citigroup.

²⁶ https://brazilportal.wordpress.com/tag/dilma-monetary-tsunami/

²⁷ Almost 30 percent by the time she left power.

²⁸ Brazil, Russia, India, China.

²⁹ http://nebula.wsimg.com/e68d7776b95ea984eb11a1bc120e38af?AccessKeyId=9BB168F4CFBA64F592DA&disposition=0&alloworigin=1

³⁰ In the 2009 to 2014 period, according to Goldman Sachs and UBS.

³¹ From 2009 to 2016, buybacks have tripled from $205 billion to $627 billion, and net buybacks have increased by more than $540 billion. Since February 2007, total gross buybacks have grown from $521 billion to $627 billion, and net buybacks have grown from $350 billion to $448 billion, according to Jeremy Schwartz, director of research at Wisdom Tree Investments, Inc.

³² Claudio Borio. Monetary policy and financial stability: what role in prevention and recovery? BIS Working Papers No 440, January 2014.