1) Keeping interest rates too low from 2002-2004 despite rising inflation contributed to the growth of the housing market bubble as it encouraged excessive borrowing.
2) Then sharply raising rates from 2004-2006 may have triggered the bursting of the housing bubble in 2007.
3) The combination of higher rates and high debt levels had a devastating effect as borrowers could no longer afford their mortgage payments, leading to a collapse in demand, falling GDP, and bankruptcies.
Present study questions the role of monetary policy in general and inflation targeting in particular with the help of important issues related to it and concludes that it is high time for a change. An irony of the inflation targeting is that price stability has amazingly been achieved in Canada simultaneously with an over-leveraged financial system and an over-exposed economy to the debt and assets. And also, the low policy rate regime under the framework has not been able to stop the investment from decline and the real economy from stagnation.
Daily i-forex-report-1 by epic research 22 july 2013Epic Daily Report
A great product gains acceptance and recognition if it is delivered correctly and at the end, the customer is satisfied. The sales force at Epic treats its customers with high regard. We realize what our clients are looking for and we strive to meet their financial goals in a smooth manner.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
This commentary investigates how the targeted inflation rate has been achieved successfully amidst stagnant economic growth, declining domestic manufacturing, boiling asset economy, and piling financial vulnerabilities in the developed economies. It re-examines the modus operandi of the inflation targeting as an integral part of the management of the macroeconomy in these economies.
Mercer Capital's Bank Watch | April 2020 | Ernest Hemingway, Albert Camus, an...Mercer Capital
Brought to you by the Financial Institutions Team of Mercer Capital, this monthly newsletter is focused on bank activity in five U.S. regions. Bank Watch highlights various banking metrics, including public market indicators, M&A market indicators, and key indices of the top financial institutions, providing insight into financial institution valuation issues.
Present study questions the role of monetary policy in general and inflation targeting in particular with the help of important issues related to it and concludes that it is high time for a change. An irony of the inflation targeting is that price stability has amazingly been achieved in Canada simultaneously with an over-leveraged financial system and an over-exposed economy to the debt and assets. And also, the low policy rate regime under the framework has not been able to stop the investment from decline and the real economy from stagnation.
Daily i-forex-report-1 by epic research 22 july 2013Epic Daily Report
A great product gains acceptance and recognition if it is delivered correctly and at the end, the customer is satisfied. The sales force at Epic treats its customers with high regard. We realize what our clients are looking for and we strive to meet their financial goals in a smooth manner.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
This commentary investigates how the targeted inflation rate has been achieved successfully amidst stagnant economic growth, declining domestic manufacturing, boiling asset economy, and piling financial vulnerabilities in the developed economies. It re-examines the modus operandi of the inflation targeting as an integral part of the management of the macroeconomy in these economies.
Mercer Capital's Bank Watch | April 2020 | Ernest Hemingway, Albert Camus, an...Mercer Capital
Brought to you by the Financial Institutions Team of Mercer Capital, this monthly newsletter is focused on bank activity in five U.S. regions. Bank Watch highlights various banking metrics, including public market indicators, M&A market indicators, and key indices of the top financial institutions, providing insight into financial institution valuation issues.
Charting the Financial Crisis: A Narrative eBookShavondaBrandon
The global financial crisis of 2007-2009 and subsequent Great Recession constituted the worst shocks to the United States economy in generations. Books have been and will be written about the housing bubble and bust, the financial panic that followed, the economic devastation that resulted, and the steps that various arms of the U.S. and foreign governments took to prevent the Great Depression 2.0. But the story can also be told graphically, as these charts aim to do.
What comes quickly into focus is that as the crisis intensified, so did the government’s response. Although the seeds of the harrowing events of 2007-2009 were sown over decades, and the U.S. government was initially slow to act, the combined efforts of the Federal Reserve, Treasury Department, and other agencies were ultimately forceful, flexible, and effective. Federal regulators greatly expanded their crisis management toolkit as the damage unfolded, moving from traditional and domestic measures to actions that were innovative and sometimes even international in reach. As panic spread, so too did their efforts broaden to quell it. In the end, the government was able to stabilize the system, re-start key financial markets, and limit the extent of the harm to the economy.
No collection of charts, even as extensive as this, can convey all the complexities and details of the crisis and the government’s interventions. But these figures capture the essential features of one of the worst episodes in American economic history and the ultimately successful, even if politically unpopular, government response.
Dr. Alejandro Diaz-Bautista, Korea Mexico Economy Presentation, University of...Economist
“Competitiveness and Economic Growth. An Analysis of Mexico and Korea.” Crecimiento Económico y Competitividad. Un Análisis de México y Corea.
Dr. Alejandro Díaz-Bautista
Professor of Economics and Researcher at
El Colegio de la Frontera Norte (COLEF)
Profesor Investigador del Colef. Miembro del SNI Conacyt.
adiazbau@hotmail.com
Prepared for the Conference at the Faculty of Economics, University of Colima, April 29-30, 2010. Colima, Colima, Mexico.
Preparado para la Conferencia en la Facultad de Economía de la Universidad de Colima, para los estudios en Cuenca del Pacífico en la Universidad de Colima, los días 29 y 30 de abril de 2010.
As the global financial crisis entered its most dramatic phase, in the second half of 2008, the International Monetary Fund (IMF), many governments and several distinguished scholars advocated expansionary fiscal olicy as the second most effective tool (after monetary stimulus) to fight deep recession and deflation. Now, more than a year later, the previous excitement surrounding the supposed power of fiscal stimulus largely disappeared and instead has been replaced by ising concerns over the sustainability of public finances in many countries. Unfortunately, the previous enthusiasts of the active counter‐cyclical fiscal policy have not always realized the causality between the two.
Authored by: Marek Dąbrowski
Published in 2009
Similar to Inflation targeting misfiring on development of housing market bubble (17)
Inflation targeting misfiring on development of housing market bubble
1. Effects of inflation targeting misfiring on
development of housing market bubble
and its bursting in 2008 credit crisis
Author: George Perendia, LMBS
e-mail: george@perendia.orangehome.co.uk
2. Background:
The so called "years of
great moderation", the
years of relatively stable
and low inflation since
early 1980,
a period of reduction in
government spending and
period of the new inflation
targeting mechanism
providing
stable and
– low inflation (2%) and
– low interest rates,
-4
0
4
8
12
16
20
24
50 55 60 65 70 75 80 85 90 95 00 05 10
R_FED_TGT
PI100*4
PRIME_R
R_INTRBNK
Inflation and interest rates: FED, Inerbank and Prime Loan
5
10
15
20
25
30
50 55 60 65 70 75 80 85 90 95 00 05 10
GC_PC_DFLT
Government spending per capita (deflated)
3. Background:
They were all but that!
in the long term, low
interest rates were a
green light for many:
– the consumers,
– the households,
– the investors, and
– the governments,
to start borrowing
excessively with
expectation of ever
low repay interest
rates!
30
40
50
60
70
80
90
100
50 55 60 65 70 75 80 85 90 95 00 05 10
PDEBT_PER_GDP_DFLT
8
12
16
20
24
28
1985 1990 1995 2000 2005 2010
INV_REAL_EST_LNS_PERGDP
4. Background:
The more the households
borrowed,
the more they would consume
creating higher demand, and,
the resulting higher GDP output
enabled governments to borrow
and spend even more.
The low inflation was supported
by import of cheaper goods from
developing countries, and
the trade deficit was balanced
by government debt being sold
to the same, mainly exporting
countries of East Asia
whose foreign reserves
rocketed since 2002.15
20
25
30
35
40
45
50 55 60 65 70 75 80 85 90 95 00 05 10
GDP_PC
0
2000
4000
6000
8000
10000
12000
14000
50 55 60 65 70 75 80 85 90 95 00 05 10
GDP
5. Crisis at The Gate: Despite IMF advices,
several authors show, that in
some cases increased debt may
be beneficial for growth.
Traum and Yang (2009) show
that if increased government
debt was used to
– reduce capital gains taxes or
– for business investment,
then further investment can be
attracted (I.e. crowded-in)
instead of being discouraged
(and crowded-out),
leading to increase of GDP
see: Nora Traum And Shu-Chun S.
Yang (2009): Does Government
Debt Crowd Out Investment? A
Bayesian Dsge Approach;
0
2000
4000
6000
8000
10000
12000
14000
50 55 60 65 70 75 80 85 90 95 00 05 10
GDP
30
40
50
60
70
80
90
100
50 55 60 65 70 75 80 85 90 95 00 05 10
PDEBT_PER_GDP_DFLT
6. Crisis and the Bubble Burst: Inflation mis-targeting
in spite of the rising inflation in
2003 and 2004,
the federal funds target rate
was lowered even further from
2002 to 2004 (left) and
the resulting, “real” fed. funds
target rate (lower left), i.e. the
rfft – π (inflation) was actually
around 2.5% below 0 in Q1 of
2004!
then it rose, from Q2 of 2004,
to nearly +3.5% by Q4 of 2006
and
stayed rather high throughout
2007.
-4
0
4
8
12
16
20
24
1985 1990 1995 2000 2005 2010
R_FED_TGT PI100*4 PRIME_R
-4
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
rr_fed_tgt_pi=r_fed_tgt-pi100*4
PI100*4
7. Crisis and the Bubble Burst: Inflation mis-targeting
Several authors showed that
lowering of federal funds target
rate from
– 6.5% in 2000 to a
– mere 1% by mid 2003
may have accelerated both
– the industrial and
– the private housing investment
and the sale of both:
– the prime and
– the sub-prime mortgages
see e.g.: Dokko, J., Doyle, B., Kiley, M.
T., Kim, J., Sherlund, S., Sim, J., and
Van den Heuvel, S.: Monetary Policy
and the Housing Bubble,; Finance and
Economics Discussion Series Divisions
of Research & Statistics and Monetary
Affairs Federal Reserve Board,
Washington, D.C. 2009
-4
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
rr_fed_tgt_pi=r_fed_tgt-pi100*4
PI100*4
8
12
16
20
24
28
1985 1990 1995 2000 2005 2010
INV_REAL_EST_LNS_PERGDP
8. Crisis and the Bubble Burst: Inflation mis-targeting
Whilst US Fed (and Mr B.
Bernanke) reject that FED
facilitated the housing bubble
J.B.Taylor (2007) indicated
that such “too loose” monetary
policy during 2003-2004 period
probably lead to the extensive
housing activity.
See: Taylor, John B. (2007).
Housing and Monetary Policy,
NBER Working Paper Series
13682.Cambridge, Mass.: National
Bureau of Economic Research,
December 2007.
-4
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
rr_fed_tgt_pi=r_fed_tgt-pi100*4
PI100*4
8
12
16
20
24
28
1985 1990 1995 2000 2005 2010
INV_REAL_EST_LNS_PERGDP
9. Crisis and the Bubble Burst: Inflation mis-targeting
Gordon (2009) also points to
many similarities between
1927-29 and the 2003-06
bubbles, from
– highly leveraged (90%), low
interest loans for stock and
housing purposes
respectively, to
– the regulatory failures caused
by repeal of Glass-Steagall
Act.
see: Gordon,R. J. (2009). Is
Modern Macro or 1978 Era Macro
More Relevant to the
Understanding of the Current
Economic Crisis? Northwestern
University, September12, 2009
-4
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
rr_fed_tgt_pi=r_fed_tgt-pi100*4
PI100*4
8
12
16
20
24
28
1985 1990 1995 2000 2005 2010
INV_REAL_EST_LNS_PERGDP
10. Crisis and the Bubble Burst: Inflation mis-targeting
They however note:
…“It is widely acknowledged
that the Fed maintained short
term interest rates too low for
too long in 2003 04, in the
sense that any set of
parameters on a Taylor Rule
type function responding to
inflation and the output gap
predicts substantially higher
short term interest rates during
this period than actually
occurred… thus indirectly the
Fed’s interest rate policies
contributed to the housing
bubble”-4
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
rr_fed_tgt_pi=r_fed_tgt-pi100*4
PI100*4
12. Crisis and the Bubble Burst:
Through 2003 FED moved from
targeting headline to targeting the
lower core inflation, however,
Mishkin (2007) and Jonas and
Mishkin (2005) state that the net
(core) inflation model is frequently
– more volatile and
– it leads to targets being missed
more than would have been case
with the headline inflation.
See:
– Mishkin, F: Monetary Policy
Strategy, MIT Press, 2007
– Jonas and Mishkin (2005)
Inflation targeting in Transition
Economies, in Bernanke, B. and
Woodford, M. Inflation targeting
debate, NBER 2005-4
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
rr_fed_tgt_pi=r_fed_tgt-pi100*4
PI100*4
13. Why the Bubble Burst: Similarly to the 1929 Great
Depression crisis, when
a sudden and sharp monetary
tightening triggered the rash,
the target rate rising 6% in period
form 2004-2006,
may have been the main trigger
for the 2007 bubble burst too.
See:
Bernanke, Ben S. (1983), Non-
Monetary Effects of the Financial
Crisis in the Propagation of the Great
Depression, American Economic
Review,73(3), June 1983, 257-76.
Bernanke, B. 1995: The
Macroeconomics of Great
Depression, Journal of Money, Credit
and Banking v.27, No. 1 (Feb. 1995)
1-28-4
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
rr_fed_tgt_pi=r_fed_tgt-pi100*4
PI100*4
-4
0
4
8
12
16
20
24
1985 1990 1995 2000 2005 2010
R_FED_TGT PI100*4 PRIME_R
14. 10000
20000
30000
40000
50000
60000
70000
80000
90000
1985 1990 1995 2000 2005 2010
BNKRPC
Why the Bubble Burst: Debt accelerator
I.e., the 2007 bubble burst was
triggered by a combination of
interest rate increase and
an un-foreseen accelerating
effect of high debt:
the unusually high borrowing
caused by the low rates in the
previous period
had devastating effect on the
disposable income of the
borrowers once the rates
suddenly rose, and, caused
a drop of the consumption
demand and
the resulting drop in GDP
and bank bankruptcies-4
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
rr_fed_tgt_pi=r_fed_tgt-pi100*4
PI100*4
15. Why the Bubble Burst: Debt accelerator
E.g. a cash and a interest only
mortgage strapped household,
with mortgage 30% of
disposable income
after interest rates doubled,
could not continue repaying
mortgage which
now amounted to 60% - 90%
of their disposable income.
Nor it could spend as usually.
This dual accelerating effect
then lead to
– collapse of demand
– GDP drop, and
– bank bankruptcies, further
accelerated by
– mortgage defaults
-4
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
rr_fed_tgt_pi=r_fed_tgt-pi100*4
PI100*4
16
20
24
28
32
1985 1990 1995 2000 2005 2010
PC_PC
16. How the Bubble Burst accelerated:
than the known mechanisms of
– financial a(de)ccelerator and
– credit rationing
– animal (hurd) instinct
were also triggered fuelling the
crisis further and,
CDO & CDS contagion farther.
Bernanke, B, Gertler, M. and
Gildchrist, S. 1999: The Financial
Accelerator in a Quantitative
Business Cycle Framework, O J.
Taylor and M. Woodford, eds.
Handbook of Macroeconomics,
North Holland, Amsterdam, 2000.
Stiglitz J.E and Greenwald, B.:
Towards a New Paradigm in
Monetary Economics, CUP 2003
-4
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010
rr_fed_tgt_pi=r_fed_tgt-pi100*4
PI100*4
16
20
24
28
32
1985 1990 1995 2000 2005 2010
PC_PC
17. Possible rationale for keeping target rates low :
Keeping wolfs of Japan-like deflation outside gates
to encourage households’ consumption and growth
Fed unaware of looming inflation in 2003-4 due to
incomplete real-time data,
FED using starting to use core rather than the
headline inflation measure,
Model Insufficiencies
Distortionary political effect of Presidential elections
in 2004 and 2008
18. Model Insufficiencies
Bernanke, B, Gertler, M. and Gildchrist, S. 1999 as many
other authors use standard linarised Euler equation
• ct= -σrt + E(ct+1)
but it can not capture the time-variant effect of time
variable loans on σ or on E(ct+1) due to RE.
Also, most commonly used household budget constraint
equations such as Smets and Wouters
accounts for income but it does not account for the loan
borrowing effect.
See: Smets, F. and Wouters, .: Shocks and Frictions in US
Business Cycles: A Bayesian DSGE Approach, American
Ecnomic Revieew, 2007. (model in Appendix document)
19. Possible rationale for keeping target rates low :
Distortionary effect of Presidential elections in 2004 and 2008:
Alesina et al(1992) and find
“Our results can be summarized as follows: ….
2) We see some evidence of “political monetary cycles,” that is,
expansionary monetary policy in election years;
3) We also observe indications of “political budget cycles,” or
“loose” fiscal policy prior to elections;
4) Inflation exhibits a post-electoral jump, which could be
explained by either the pre-electoral “loose” monetary and fiscal
policies and/or by an opportunistic timing of increases in publicly
controlled prices, or indirect taxes.”
see: - Alesina, A. Cohen G. D., Roubini, N. Macroeconomic Policy and
Elections in OECD Democracies, Economics & Politics Volume 4, Issue
1, pages 130, March 1992
- Frenzese, R.J. : Electoral and Partisan Manipulation of Public Debt in
Developed Democracies, 1956-90, Institute for Social Research, The
University of Michigan working paper, May 1999
20. Conclusions: Keeping interest rates low
despite inflation and targeting
rule, and,
then rising them sharply
contributed to the housing market
bubble growing and
its bursting, respectively.
Consequently, some form of either
loan debt/GDP and/or
housing asset price bubble
targeting should be included in
the stricter followed Taylor rule, or,
additional FM control mechanism
in a richer, more complex, multiple
(heterogeneous) agent models so
that bubbles can be contained and
managed better.
8
12
16
20
24
28
1985 1990 1995 2000 2005 2010
INV_REAL_EST_LNS_PERGDP
30
40
50
60
70
80
90
100
50 55 60 65 70 75 80 85 90 95 00 05 10
PDEBT_PER_GDP_DFLT
21. Effects of inflation targeting misfiring on
development of housing market bubble
and its bursting in 2008 credit crisis
Author: George Perendia, LMBS
e-mail: george@perendia.orangehome.co.uk
Thank you for listening!
Editor's Notes
The above graphs show rapid rise in US public debt frm 30% of GDP to around 60% during Reagan adminstratin in those very same early 1980’s, rising further untill Clinton adminstraation inceased taxes and started reducing the debt in absolute value (left diagram) and as a percentage of GDP (right diagram). It reached its recent minimum in the 2nd Q of 2001 – that is, just before the 2001 September 11 events and henceforth started its rapid growth ever since
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings
On one hand, democratic governments had to spend more to please their voters and get re-elected and on the other hand (hand-in-hand), for the shear matter of credibility in their own publicised policies, the governments had to do what they also wanted themselves to do: to spend and borrow at a hight of their current incomes and resources, (rationally?) expecting that the perpetualy high growth and the low repay interest rates that will bring sustainability to their excessive borrowings