Tuesday, November 5, 2013

Romano Prodi Goes Overboard; ok. But Ambrose Evans-Pritchard?

Ambrose Evans-Pritchard posted a fiery article "Italy's Mr. Euro urges Latin Front" in his blog. Consider the following excerpt:

"As readers know, I have been arguing for a long time that the Greco-Latin Bloc and those with shared interests such as Ireland should seize control of the European institutions and dictate the policy with a very sharp knife held to the throat of Berlin's über-bully Wolfgang Schauble (sic). They have the majority votes in the EU Council of Ministers. They have a majority on the ECB's Governing Council, and indeed on other bodies such as the European Investment Bank, which could be mobilised for a Marshall Plan".

If I have ever read an excellent argument supporting the position of the new German party Alternative für Deutschland (AfD), this has got to be the one! Nothwithstanding possible merits of AEPs arguments, just consider the lack of sensitivity! Here is the population of a country (Germany) which had been very fearful about joining the Eurozone, fearing that 'the others' might take over their own preferred way of doing business. And now 'the others' might be suggesting: "Take a very sharp knife and tell the Germans that they have to change their preferred way of doing business! Take control and dictate!" This is simply poor form on the part of AEP!

Just suppose that a German politician would say something like: "We will dictate our policies with a very sharp knife held to the throats of all those who believe in free lunches!" Critics might argue that, while the Germans are not saying this explicity, they are doing it in practice. What is it that the Germans are doing in practice? They are taking advantage of a currency which, many Germans feel, was rather imposed on them against their will and which they accepted only after making very specific conditions (most of which have since been breached). That may not be good form but is it good form of the US to take advantage of a currency which they more or less imposed on the rest of the world? The late John Connally, as US Secretary of the Treasury, once told Europeans who were complaining about dollar manipulations by the US: "It's our currency but it's your problem!" That was straightforward, indeed. Has any German leader ever told the South "It's our currency but it's your problem!"?

Readers of this blog know that I consider current account balances (and the resulting capital flows) as the crucial factor in regional and global economies. From that standpoint, I have absolutely no disagreement with the notion that Germany's excessive current account surpluses are harmful to the global economy. Germany is to blame for not admitting this basis fact of Economics 101; for denying its validity. The untested question is what Germany would do once it admitted this basic fact of Economics 101. AEP - like Prof. Krugman - suggests that there is only one way to correct this situation; i. e. fiscal stimulus in Germany. Well, I apologize for saying it but this goes to prove that not only financial commentators but even Nobel Prize winners can have limited horizons...

Germany's enormous current account surpluses are not only a problem for the global economy. They are an equally important problem for the Germans themselves because they force Germany to hold a very high net foreign investment position. Germany's net foreign investment position is approaching 50% of GDP, and continues to grow. Perhaps one ought to explain to the German people that much of their wealth is not in Germany. Instead, it is lent/invested abroad. Since Lehman, a fair portion of that net foreign investment has evaporated (sub-prime; Iceland; Greece; Ireland). What if Germany were to need that wealth in the future in order to, say, pay pensions and if it couldn't get it back? As soon as someone suggests to Germans that their pensions might not be 100% safe, they will quickly listen.

When AEP gets to the point of suggesting that 'the leadership must come from France, still the great and generous heart of Europe', he is beginning to make a joke of himself. What kind of leadership can one expect from France or Italy! Perhaps courses like 'How to deprive economies of their competitiveness'? France, Germany and Italy make cars as well as the tires that go with them. They operate in the same currency. Until not too long ago, France and Italy were definitely on par with Germany; sometimes even ahead of Germany. And today? Why in the world are German automakers booming and French/Italian ones struggling?

Perhaps AEP should re-read what an American CEO had recently written to the French Minister of Industrial Renewal after discarding the idea of buying the French subsidiary of Goodyear: "I have visited the factory a couple of times. The French workforce gets paid high wages but works only three hours. They get one hour for breaks and lunch, talk for three, and work for three. I told this to the French union workers to their faces. They told me that's the French way!"
I have visited the factory a couple of times. The French workforce gets paid high wages but works only three hours. They get one hour for breaks and lunch, talk for three, and work for three. I told this to the French union workers to their faces. They told me that's the French way!
Read more at http://globaleconomicanalysis.blogspot.com/2013/02/incredible-letter-from-ceo-of-titan-to.html#K7PjmlADJpsJmP5q.99

AEP seems to accept Romano Prodi's argument that 'Germany's exchange rate will double and they will not sell a single Mercedes in Europe' if Germany were to leave the Eurozone. Mr. Prodi has probably never analyzed the level of imports contained in Germany's industrial exports. Those imports will get a lot cheaper if Mr. Prodi turns out right. And corporate and real estate assets in the South will get a lot cheaper, too...

The lamentable M. Hollande also gets AEPs attention. Hollande, AEP expects, will ultimately stiffen his spine but 'if he cannot rise to the challenge, his governing authority in France will collapse, and perhaps the Fifth Republic will collapse with it. We must not let this happen to France'. What has the Grande Nation come to! It has become powerless and helpless. The Fifth Republic might even fail if 'we' did not prevent this from happening. I am reminded of the American saying "Who is 'we', paleface?"

Hans-Olaf Henkel will be very happy to hear of AEPs recommendation that Germany should leave the Eurozone. He has been making this point for a long time. Not only for Germany but also for other Northern countries who have similar economic structures and policies. Henkel says that this would be good for the South because they get a weaker currency without being 'kicked out' and it will be better for the North as well because, as Henkel has often said, "the Euro is to cheap for the German economy". His suggestion is that, presently, the Euro makes it too easy for Germany to export which, in turn, means that Germany is not increasing its productivity and innovation as much as it should and could.

As a final warning, AEP predicts that Germany's departure from the Eurozone would destroy part of its banking system. Well, I would consider this as one of the most positive collateral effects. The German banking system is greatly oversized and overextended. A radical clean-out, even though quite costly, would have tremendous longer-term benefits for the German economy.
I have visited the factory a couple of times. The French workforce gets paid high wages but works only three hours. They get one hour for breaks and lunch, talk for three, and work for three. I told this to the French union workers to their faces. They told me that's the French way!
Read more at http://globaleconomicanalysis.blogspot.com/2013/02/incredible-letter-from-ceo-of-titan-to.html#K7PjmlADJpsJmP


  1. I fail to understand what your issue with AEP is. Surely the goal of a common currency is to implement commonly beneficial policy.

    Now it has come to a situation when policy isn't commonly beneficial. What do you suggest should be done?

    If Germany gets it's way, everybody loses since eventually the South will default and exit. If the South gets it's way (and the ECB supports government debt), Germany doesn't lose. I mean, where's the harm? A cheaper euro? Higher inflation? Reliance on the domestic market rather than the external one? Like, wow, what is Germany's problem?

    I happen to be disappointed with the periphery's cowardice and unwillingness to leave. I expected as much from Greece, but not from Spain or Italy. That said, it's worth taking a shot against Germany and it's satellites. For the record, I don't think it will happen, but it'd be nice if it did. Instead, I think that the really slow process of Eurozone's deconstruction will continue. Things will only speed up when the electorate elects nationalist politicians like Le Pen, the Freedom Party of Austria etc. We're wasting time though, and this delay is very costly for the crisis stricken countries.

    1. 1 of 2
      My issue with AEP is not so much content (and I thought that was clear from my post). Almost forever have I argued that the principal issue within the Eurozone are current account balances. I have always argued that Germany can’t pursue a policy of having the cake and eating it at the same time. I once even suggested that more important than a 3% deficit limit might be a 3% current account limit (BOTH for positive and negative balances). Regrettably, I have not yet been able to come up with a specific mechanism how that could be implemented, but that is what brains should be focusing on.

      My issue with AEP regards style and particularly his recommended course of action. His style is simply not acceptable and I think his recommended course of action is far too simple (and dangerous!).

      If Romano Prodi wants to damage his reputation even further by saying silly things, he should be free to do so. He does not have an official function. If a serious journalist wants to make a serious point, he should not jump on the bandwagon of a silly Italian and he certainly should not use even more unacceptable language than the Italian. If Prodi had any political smarts at all, he would know that to accomplish something like he has in mind, one doesn’t talk about it publicly; instead one works at it discretely. Announcements will not get a ‘Latin Union’ anywhere. What would be required is a skillful building up of alliances; of developing shared interests; etc. etc. That typically does not happen coram publico.

      To promote the sad figure of a Francois Hollande, probably a nice man but as far from leadership talents as a French leader has ever been, into the potential flag bearer of a potential ‘Latin Union’ is an embarrassing faux-pas. That would really signal the world what kind of jokers the Europeans are. France, once a fierce competitor of Germany, is now close to an economic basket case. Just look at the automotive or other sectors, where France (and Italy) should really have the same position in global markets as Germany. If they don’t, it means that France and Italy are just not up to it at this time. If third countries prefer to buy more expensive German instead of much less expensive French and Italian cars, there is more to blame than just the Euro or German austerity.

      A general notion seems to be developing in Europe, namely that mediocrity should prevail. That is not a good premise for future generations. Europe, at least Continental Western Europe, has been on decline globally for decades in terms of many, many criteria. It seems that Europeans, for 2000 years, have lived with the consciousness of cultural and economic predominance. Europe ‘ruled the world’, so to speak. An extreme feeling of one’s own supremacy; of being superior to others (particularly to Americans). Well, certainly in the last years and decades, Europeans have rather screwed up. They have nurtured entitlement societies where the state is charged with providing for welfare. Enterprising young Americans might go bananas if they had to live in France to realize their entrepreneurial dreams there.

    2. 2 of 2
      So what do I suggest? Well, I think I have been rather consistent in my suggestions in this blog as regards Greece. As regards the Eurozone as a whole, I have not made many suggestions because I lack specific information about other countries. I would say this, though: both, France and Italy, should be relatively easy to solve. Both countries have huge industrial sectors, i. e. a huge productive capacities. All they would have to do is to make this productive capacity efficient and competitive and they could become fierce competitors of Germany again. As it is, though, these two countries may eventually become the mortal blow to the Eurozone. As long as Germans work as productively as they do and the French work as unproductively as the above American CEO suggests, there is no way that this can work out long term.

      I strongly disagree with the Krugman-notion that all one has to do is increase spending. Unqualified spending could make matters even worse than they are. When I now say ‘Germany’, I mean the entire German economy; not only the state.

      Yes, ‘Germany’ needs to increase its spending but it has to be spending abroad. And – most importantly – it has to be spending in those countries which need it the most, i. e. the South. It is immaterial whether ‘German’ spending is done by the state, by private corporations, by savers, or whoever. The crux is that it is spending abroad and in the right places (I have once suggested, a bit as a rhetorical point, that if the German state subsidized every family to spend vacations in the South, a lot of positive things would happen quickly).

      Mind you, Germany’s trade has moved away from the Eurozone in recent years. Exports are now almost 2/3 outside the Eurozone. The figure for imports I don’t have. There is no point if a German stimulus serves to stimulate the economies of the East and/or Far East if the idea is to strengthen the Eurozone.

      All those who preach Keynes today might be smart if they read Keynes again. The exercise which he went through (‘Germany’s capacity to pay’) in his book about “The Economic Consequences of the Peace” is what the Eurozone should carefully study. We are no longer in times of a ‘made in Germany’. What is made in Germany today, is to an important part previously made in other countries (if memory serves correctly, the majority of Audi engines is made in Hungary and of BWM engines in Austria). Cause and effect can no longer be so clearly determined without detailed analysis.

      I am not going to go on because, as I am sure you know, I have given up hope that the EU will eventually come around to doing the things which are necessary. There is no point in talking about ‘commonly beneficial issues’ when it is as clear as ever that national interests are in the forefront of everybody’s mind. Not only Germany’s; everybody’s. Or do you think the French would agree to a change in agricultural subsidies if it were ‘commonly beneficial’?

      Since I no longer believe that the Eurozone can survive in its present structure, I think it is smart to consider alternatives like Germany (or several Northern countries) leaving the Eurozone. If Southern politicians start talking like AEP suggests, that will happen rather soon. But it would happen in a terrible form. If it happens, it should happen based on a consensus that it is the best solution for all concerned and in a constructive fashion. If it happens as the result of a shootout, then resulting damage won’t be able to be repaired for a very, very long time.

    3. Quite a long reply Klaus.

      Let's keep it simple. The real issue here is whether there should be a level of protectionism or not. That's the whole issue with having your own currency. So the Eurozone is a unique experiment at seeing whether less competitive countries can become more competitive without protectionism (including targeted investments from the EU).

      Draghi explicitly said so today: "The best way to do it from our viewpoint is do it without weakening the strongest - weakening the strongest doesn't make the weaker stronger".


      I happen to disagree strongly with Draghi. If such a thing was possible, then there would be no inequality amongst humans either. Everybody would be able to become more "competitive" and there would be no rich and poor.

      That's baloney. It is one thing to not promote indolence by keeping a level of competition, but it is another thing altogether to promote competition by removing the barriers of protection for the less capable (in the mistaken belief that you can achieve equality this way).

      I'd say the Eurozone would be an interesting experiment if it wasn't for one thing: the cost of human lives involved (unemployment, bankruptcies etc).

  2. Did you see the Ambrose article in the Telegraph Comments section 5th November. What are "macro -imbalances" rules. So much for the original aims of the Internal market.

    1. I have just read this article. It is a lot more balanced than his blogpost. Just one example: "Why do German households have to pay a premium on their electricity bills to cross-subsidise much cheaper energy for industrial exporters?" Yes, I believe certain large German companies have a waiver from certain electricity charges so as to not lose international competitiveness. I don't know the details but if this were so, it would definitely be something that would require correction.

      But AEPs bias is still there. He thinks one could take the ECB to court over violating its statutes in connection with inflation but the thought would never cross AEPs mind that one could take the ECB to court for much more serious violations of statutes (unlimited bond purchases; accepting below-value collateral; etc.).

      Now I see that AEP is really in love with France. I wasn't aware of that before. Well, France is a great country; I have studied there. As far as politics, economics and self-interest are concerned, I would remind of what Margaret Thatcher once said: "In my lifetime, all problems have come from Continental Europe and all solutions from the Anglo-Saxon world". As far as I am concerned, I can think of no other European country which consistently pursues self-interest without any feelings of shame as does France.

    2. Hi,
      I was referring to the one titled "EU opens door to showdown with Germany on trade surplus" it is about topics you have posted on.

  3. Klaus

    You have lost me. I was under the impression you had no problem with a German trade surplus and now I dont know, if you know, if you have.

    For example

    You start by saying

    "Almost forever have I argued that the principal issue within the Eurozone are current account balances. I have always argued that Germany can’t pursue a policy of having the cake and eating it at the same time. "

    ah okay, I was wrong, you do have an issue with a German trade surplus.

    But then you say

    "If third countries prefer to buy more expensive German instead of much less expensive French and Italian cars, there is more to blame than just the Euro or German austerity"

    Which is it?

    Does the German trade surplus cause a problem, or is the problem with the third countries? It cannot be both because we are arguing on a matter of principle!

    Also, Im not sure what you mean about Germany having its cake and eating it.

    What does that mean?

    German firms must be owed billions by foreigners. German factories have IOUs and the third country people have the products, how is that having the cake and eating it?

    And at the end of the day Germany sucking up all the Euro makes no difference. Same currency, different currency, it is irrelevant.

    I think people are getting hung up on "currencies" and "surpluses" and forgetting about the reality.

    Germany is sucking up Euros due to its surplus.

    What does this mean in reality?

    More Euro in Germany, less Euro in Spain.

    What does this mean to the average German? Higher wages, higher living costs basically inflation. Keeps government finances on the up and up, increases debt and taxes, people spend as money loses it value in Germany, decreases surplus.

    What does this mean to the average Spaniard? Lower wages, lower living costs basically deflation. Drives degenerate governments to default, good, fixes deficit. Great for savers, also good, stops people spending outside of country because of cost, good for deficit.

    As I said before, if taxes and regs remain constant and there are no bailouts everything will balance out. It is impossible for the surplus to continue forever.

    ECB and EU need to say the opposite because they are trying to justify their existence.

    Target2 is unnecessary, the free market will work it out on a case by case basis.


    1. Start with the following formula:

      current account surplus = export of capital
      current account deficit = import of capital

      Germany not being able to have the cake and eat it at the same time means that Germany cannot have current account surpluses on one hand but avoid having to export capital (as loans and/or investments) on the other. As a result of mathematics (not of economics), Germany MUST export capital as long as it has current account surpluses. It is NOT ‘more Euro (or other currencies) in Germany’. Instead, it is more Euro (and other currencies) which Germany receives and must transfer abroad.

      Net cross-border debt can ONLY come into existence when there are current account imbalances! The only choice Germany has is whether it makes the loans directly to the deficit countries or not. For the sake of argument, Germany could invest all of its foreign reserves in US treasuries. Ok; but then somehow those monies would have to find their way to the deficit countries (not all of it because the US is a deficit country itself).

      I have continually made the above point because Germans seemed to feel like they didn’t want to finance foreign countries. They have no choice but to do so as long as they have current account surpluses. Otherwise, they would be having the cake and eating it; which is not possible.

      The French car example related to the question of who is responsible for correcting trade imbalances. If the French car makers cannot successfully compete with other countries’ car makers in the global market, it is the French who have to do something about it. Airbus can successfully compete with Boeing. Why not Peugeot? If the French car makers cannot handle it, they are the cause for unemployment in France.

      Your statements in the last couple of paragraphs I cannot follow.

      I do not think that a trade surplus is a problem per se; neither is a trade deficit. What matters in the final analysis is the current account and not the trade balance. And then it matters whether those balances are within ‘normal’ ranges and whether they balance out over the economic cycle. If they are excessive and chronic, they are very bad, be they positive or negative.

      I have written tons of material on this issue. The one below might show you a bit more clearly how I think.


    2. Here is my South-Sea island analogy again. Assume such an island produces nothing, i. e. it imports everything and has a huge trade deficit. No sweat as long as the island can attract enough foreign revenue from tourism to pay for the imports. Its trade deficit is offset by its surplus in services and the current account is in balance.

      The only question is whether all islanders can be employed in services, i. e. in tourism. If not, they may have to start thinking about producing something. But only for the sake of employment and not for the sake of having external accounts balance.

  4. And your point is, Mr. Klausner,......?

  5. > Klaus

    do you think if surplus countries banks were realistic about the conditions concerning loans to deficit countries in the future , then that would be a regulating factor enough to regulate trade and money flows across the Eurozone and prevent excess imbalances

    1. If Greece were still a Drachma-country, the willingness (or lack thereof) of foreign banks to lend would be a regulative factor. If foreign banks were no longer willing to lend foreign currency to Greece, Greece would not have enough foreign currency to import, to finance the current account deficit. Greece might have to impose tariffs, impose FX controls and/or devalue.

      With the Euro, the regulative aspect has been all but eliminated. Banks may no longer be prepared to lend to Greece but, through target2, there are no restrictions on making payments abroad. So as long as Greeks had enough Euros in their bank accounts, they could run up current account deficits as they pleased. All that would happen is that Greece's liabilities to the ECB under target2 would increase all the time.

      The significant reduction in imports in the last couple of years did not come about as a result of any target2 stop on the part of the ECB. It came about as a result of insufficient Euros in Greek bank accounts.

    2. Oh I see , and so there is no way to differentiate between the different countries in the Eurozone from which a credit funded purchase originates.

    3. >Klaus

      Can you explain something please.

      If a man in Volos in Greece borrows a lot of money from his bank and uses it to buy things from Athens in Greece, at some point the bank considers that his spending is not going to be accompanied by an income of comparable size and stops lending. In that way debt is controlled.

      Why then does the process not apply if the man in Volos Greece is buying things from Stuttgart Germany.

    4. I will answer your question the way I understand it (am not sure, though).

      All EZ-countries participate in the ECBs target2 payment system. That means that every bank, be it in Germany or Greece, can always transfer money to other countries (in a local currency situation, banks have to transfer foreign currency to other countries and when they have no foreign currency, they cannot transfer). Even if Greece as a country had run out of foreign supply of Euros, Eurobank could still effect a customer order to transfer 1 BEUR from his account to an account in Germany. The only limitation is: in order to make that transfer, the Greek customer must have the money in his account at Eurobank.

      This is why Greece could happily continue importing and running huge current account deficits long after May 2010. Greeks had sufficient money in their bank accounts and that was all that was needed. As the economy collapsed, domestic demand collapsed as well and the money in bank accounts became a scarce resource. Thus, the imports went down. As I said before, the imports did not go down because of the lack of financing in the crisis. They went down because domestic demand collapsed.

      If you search the internet long enough for "target2 balances", you will find statistics which show which country owes which Central Bank money under the program.

    5. Dinero
      Regarding the man from Volos, the same bank that gives him credit for buying things in Athens would have to give him credit for buying a Mercedes. If the man has no money on his own and if no bank (or car dealer) gives him credit, he cannot buy a Mercedes.

      Mind you, he doesn't buy the Mercedes in Stuttgart; as a general rule, he buys it from a Greek car dealer. If he bought it from Stuttgart directly, Stuttgart would require cash payment upfront.

      I know that there is a notion around suggesting that foreign banks extended far to many loans to Greeks who could not afford them. Well, Greeks as individuals did not take up any loans from foreign banks.

      The loans from foreign banks were made either to the state or to the banking sector (divided about 50:50); not to end-customers.

      The money which was borrowed by the state was recycled to Greeks via public sector salaries, pensions, public works orders, etc. The money which was borrowed by Greek banks was recycled to Greeks via loans which the Greek banks made to them.

      Was Greece being taken on a ride by foreign lenders in similar fashion as innocent Americans were driven by banks into taking up housing loans which they couldn't afford? I don't think one can compare the two. The Greek borrowers (state and bank) were represented by top professionals who knew what they were doing. The Greek public debt agency (which arranges the public borrowing) had a top professional reputation (I believe ex-Goldman people among managers). And I guess one should assume that Greek bankers also knew what they were doing. Not to mention the fact that the Bank of Greece always monitored the rise in foreign debt (and expressed concern about it).

    6. I see, so the conclusion of the description here, is that the process is not that Germany finances the trade deficit by lending money to the deficit countries.

      What happens instead is that debt to Germany builds up through the Target2 payments system.

    7. Dinero - yours of 11:06 am
      Your conclusion is more or less correct. I say more or less because Germany - as well as the other countries - are also financing Greece directly via the rescue loans and some of those rescue loans - to the extent that they are not used for debt service - also go to finance the current account deficit.

      Legally, Germany's share of rescue loans and target2 is about 27%, so whatever is out to Greece by way of target2 financing, Germany has a share of it. But here is an important side effect to note.

      Rescue loans (and target2) served to get private lenders off the hook, including major private lenders in Germany. As long as the private lenders were lending, the loans of German banks were 100% net German foreign assets in Greece. By replacing those loans of private banks with rescue loans and/or target2, Germany, as a country, has essentially reduced its country exposure to Greece from 100% to 27%. I am surprised that none of Germany's critics has really focused on this gigantic risk improvement on the part of Germany.

      Mind you, this legal 27% share is somewhat academic. Every country has its share of the total depending on its equity share in the ECB. So Greece also has a share of the total. If Greece were to fall into the Aegean, it would be very difficult for Germany to tell Greece to come up with their share of the total damage... So Germany is more likely to end up sitting on much of its target2 exposure which, as of last September, was 570 BEUR (the record level was 751 BEUR in August of 2012!).

    8. Dinero - addendum
      Germany's total target2 claims may appear high to you because they are much more than the sum of current account deficits. This is because target2 also includes capital flight. In fact, capital flight represents the bulk of the total. To give you an idea: the Greek banking system still has about 160 BEUR of deposits. If all the holders of those deposits decided to transfer their money offshore, target2 claims of the ECB would increase by 160 BEUR (and Germany's share thereof 27%).

  6. Klaus
    The German import figures you miss are, for 2012, in %: Netherlands 14, France 7.5, China 6.7, Belgium 6.4, Italy 5.5, UK 4.9, Austria 4.4, Russia 4.4, Czech Republic 4.1. (Does it read like European Song Contest)? The source is CIA World Factbook, they are usually quite reliable. They have a very nice feature, once you have looked up an info for one nation, you can link to the same info for all other nations, in alphabetic order.

    1. The European Song Contest seems to suggest that the share of Germany's imports from the Eurozone is even less than its share of exports to the Eurozone. Makes it look like the Eurozone is becoming something like a sideshow for Germany (if it didn't have so many loans out to the Eurozone...).

      Critics would say that Germany is using its (relatively small) economic base in the Eurozone as a trampolin for doing business successfully in the rest of the world. Offhand, that would be difficult to argue against...

      From an ivory tower perspective, one could argue that Germany should shift its imports from the rest of the world to the Eurozone and its exports from the Eurozone to the rest of the world. I suppose the rest of the world wouldn't be very happy with that.

      So, whichever way you slice it, it is a real mess!

    2. Here is a Bloomberg article on the subject.