Pursued Economy E-Book

Richard C. Koo

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 879

Veröffentlichungsjahr: 2022

Beschreibung

In Pursued Economy: Understanding and Overcoming the Challenging New Realities for Advanced Economies, celebrated economist and thought leader Richard C. Koo dives deep into the failure of traditional economic solutions to address the economic and social problems of post-Great Recession and post-pandemic economies. Starting with the original concepts of balance sheet recessions and global competition for capital, the author explains why the Great Recession lasted for so long and why well-intentioned policies that worked so well in the past are no longer working today. Readers will discover that advanced economies moved from what the author calls the "golden era" to the "pursued era" of economic development long ago, but the policy debate in these countries continues to be informed by golden era assumptions that are no longer relevant but are still taught in universities. That mismatch has led to an over-reliance on monetary policy and an under-reliance on fiscal policy that are distorting economies and worsening inequality in a profoundly transformed world. With many real-world examples from the author's extensive involvement in the policy debate on economic, banking and trade issues in several countries, including the U.S., the book describes the correct policy mix in the pursued era as distinct from that in the golden era. It also explains the challenges central banks face in fighting inflation after a decade of over-reliance on monetary policy that flooded the world's economies with unprecedented liquidity. Instead of simply assuming the existence of "trend growth rates", this book tackles the issue of economic growth head-on so as to elucidate the symmetry between the drivers of growth and the drivers of recession. It also argues that the fundamental disconnect between free trade and free capital movements must be addressed in order to maximize the gains from globalization while minimizing its costs. Written in simple language and with a great sense of urgency, Pursued Economy should be of interest to anyone who is concerned about the global economy, financial stability and geopolitics.

Leseprobe

Praise for the Author's Previous Works

The Other Half of Macroeconomics and the Fate ofGlobalization (2018)

“Richard Koo has had some of the most important economic ideas of the last two decades. This book extends his important perspective to a wider range of long-run issues. Koo's arguments deserve the attention of everyone who cares about achieving strong, sustained economic growth in the industrial world.”

—Lawrence H. Summers, Charles W. Eliot University Professor, Harvard University

“Richard Koo is the most important economist of our time because he alone has devised a revolutionary framework that accurately explains the global economic crisis. His work is revolutionary not because it overthrows all the economic theory that preceded it, but rather because it completes it. Koo's policy prescriptions offer the world the best chance of restoring prosperity before this economic crisis becomes a political crisis and then a geopolitical crisis. The sooner our policymakers understand the implications of this extraordinary book—and act upon them—the safer we all will be.”

—Richard Duncan, Author, The Dollar Crisis; Publisher, Macro Watch

“Richard Koo is one of the most astute analysts of macroeconomic policies, showing that only fiscal policy is effective in balance sheet recessions. He now expands his view to the world economy and the history of advanced countries' economic development, arguing that fiscal expansion is the only effective macroeconomic policy for the foreseeable future. But instead of John Maynard Keynes' suggestion that burying money and digging it up helps, he argues forcibly that socially productive investments are needed for advanced economies to keep up with emerging ones.”

—Peter Temin, M.I.T.; Author, The Vanishing Middle Class: Prejudice and Power in a Dual Economy (2017)

“In the wake of the Great Recession, Richard Koo challenges us in his latest book to look at ‘the other half of macroeconomics,’ one in which the primary concern of the private sector is to ‘minimize debt’ rather than ‘maximize profit.’ Koo brings a wealth of knowledge and real-world experience working in both the U.S. and East Asia to his discussion of the stages of economic development. I find his examples from Japan and China especially compelling. I warmly recommend this book.”

—Axel Leijonhufvud, Professor Emeritus, UCLA and University of Trento, Italy

“Richard Koo's The Other Half of Macroeconomics and The Fate of Globalization will soon rival Piketty's Capital as the economics book to-date of our century. Koo's book, as its title suggests, divides in half. The first, like John Maynard Keynes' The General Theory, deeply subverts traditional economic theory. The second, like Karl Polanyi's The Great Transformation, sets out a new analysis of recent economic history and maps a new fork in the road to humankind's future. Except for dogmatists and anti-humanitarians, it is required reading.”

—Edward Fullbrook, Founder, World Economics Association; Editor, Real-World Economics Review

“Anyone who has a deep interest in globalization should read this book. It is at one time thoughtful, analytical, original, policy-relevant and highly engaging.”

—Jeffrey E. Garten, Dean and Professor Emeritus, Yale University School of Management

“The Great Depression produced Keynes, and the Great Recession produced Koo. With this book, he not only ushers economic analysis into the 21st century but also goes back centuries to show what has been missing in economics all along. This highly accessible book contains new insights worthy of a Nobel Prize.”

—Shousaku Murayama, CEO, iPS Academia Japan, Kyoto University; former Research Director, Bank of Japan

The Escape from Balance Sheet Recession and the QE Trap: A Hazardous Road for the World Economy (2014)

“Richard Koo has been a pioneer in recasting macroeconomics for the current era of financial crisis and potential deflation. This book presents his latest thinking in a clear and powerful way. Agree or disagree his work deserves close study if the next decade in the industrial world is going to be better than the last.”

—Lawrence Summers, President Emeritus and Charles W. Eliot University Professor, Harvard University; former U.S. Secretary of the Treasury

“This is an important, stimulating, exciting and timely book. Guided by the ideas in this book, growing numbers of experts are appreciating the parallels between the current world-wide crisis and the crisis Japan experienced 15 years ago. The basic insight—that in the presence of persistent liabilities, the private sector minimizes debt—is one that needs to be fully appreciated in order for appropriate policies to be devised. This is a must-read for all those seeking to respond to the current economic malaise.”

—Dennis J. Snower, President, Kiel Institute for the World Economy; Professor of Economics, Christian-Albrechts University, Kiel

“Koo's The Escape from Balance Sheet Recession and the QE Trap provides the most insightful guide to current macroeconomic policy available today. Koo's concept of ‘balance sheet recessions’ adds depth and detail to observations of the ‘liquidity trap’ and ‘zero lower bound’ of interest rates. He explains what needs to be done and how long it could take. Everyone concerned with macroeconomic policy needs to read this analysis to learn how the world economy can be revived.”

—Peter Temin, Elisha Gray II Professor Emeritus of Economics, Massachusetts Institute of Technology

“I have always liked the Richard Koo style – succinct theories, razor-sharp points, self-sustaining logic, and, more importantly, a set of workable solutions. It's definitely a worthy read.”

—Gao Xiqing, Professor, School of Law, Tsinghua University; former Vice Chairman and President, China Investment Corporation

“In the wake of the financial crisis of 2008, governments and financial institutions have instituted a wide range of changes in such areas as risk management, regulation, market organization, and fiscal and monetary policy. Unfortunately, however, these measures have suffered from lack of a unified recognition of the fundamental problem. In a clear, engaging and penetrating way, Richard Koo has diagnosed the core nature of the challenge and the appropriate response. The Escape from Balance Sheet Recession is an essential guide for anyone interested in the future of the global economy.”

—Jeffrey E. Garten, Juan Trippe Professor of International Trade and Finance and former Dean, Yale School of Management; former Undersecretary of Commerce

“When the history of this depression is written, policymakers who ignore Koo's findings will be judged harshly for imposing unnecessary suffering on their societies.”

—Richard Duncan, Author, The Dollar Crisis; Publisher, Macro Watch

The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession (2008, revised 2009)

“… the Japanese policymakers who (said) the U.S. was in danger of falling into a prolonged period of economic weakness were right. To understand why … you need to read a brilliant book by Richard Koo…”

—Martin Wolf, Financial Times

“There will probably never be a last word on the Japanese financial catastrophe of the 1990s but Richard Koo's book may be the most significant analysis ever published. Agree or disagree, any analyst of the current United States situation must consider Koo's arguments.”

—Lawrence H. Summers, Director, National Economic Council; former President, Harvard University and U.S. Secretary of the Treasury

“Richard Koo does it again. By presenting a unique theory regarding the Great Depression and Japan's recession of the last 15 years, Koo offers a new understanding of current problems in the U.S. and other economies. With many pearls of analytical wisdom, The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession is a must-read for economists, policymakers and individual investors alike.”

—Nobuyuki ldei, Founder & CEO, Quantum Leaps Corporation; former Chairman & CEO, Sony Corporation

“Richard Koo's pioneering work on balance-sheet recession has been invaluable in understanding the difficulty faced by Japan's economy and monetary authorities during the past 15 years. In this book, he has shown that the U.S. Great Depression was also driven by the same balance sheet concerns of the private sector, indicating that this kind of recession can happen to any post-bubble economy. I sincerely hope that the lessons contained in this book are put to good use in fighting similar recessions elsewhere, including the U.S. subprime crisis.”

—Yasushi Mieno, former Governor, Bank of Japan

“The Holy Grail of Macroeconomics presents a brilliant and original framework for understanding—and overcoming—a post-bubble economic crisis such as the one the world faces today. By discrediting the conventional view that monetary policy is effective in combating a post-bubble recession, Richard Koo has made an invaluable contribution to economic theory and at just the right time.”

—Richard Duncan, Author, The Dollar Crisis: Causes, Consequences, Cures; Partner, Blackhorse Asset Management

Balance Sheet Recession: Japan's Struggle with Uncharted Economics and its Global Implications (2003)

“Balance Sheet Recession offers a breakthrough in understanding recessions, especially the serious and prolonged one that has plagued Japan for so long. Richard Koo presents a unique angle to look at the Japanese economy and many other economies in the world that are in a similar predicament.”

—Nobuyuki Idei, Chairman and CEO, Sony Corporation

“Richard Koo writes with a strong sense of urgency, bringing a fresh and needed perspective to the long debate about Japan's economic future.”

—Paul Volcker, Chairman of the Board of Trustees, Group of Thirty (G30); former Chairman, Federal Reserve

“As the book indicates, Japan has been conducting a historic economic experiment the success of which is in the interest of not just Japan but also for the world. I regard Mr Koo highly for his insight into balance sheet recession and his courage to warn both the government and the people of the danger of abandoning the experiment in this extraordinary recession.”

—Yasuhiro Nakasone, Member of the House of Representatives; former Prime Minister, Japan

“Richard Koo's analysis of widespread balance sheet deterioration—and its primary role in the zero-growth “90s—is provocative but persuasive. The ramifications of “balance sheet recession” on the Japanese banking system and the economy in general cast a different light than the usual macro-economic explanations. His analysis leads to an interesting endorsement of the much-criticized Japanese government's fiscal policy.”

—Anthony M. Solomon, Chairman of the Executive Committee, Institute for International Economics; former President and Chief Executive Officer, Federal Reserve Bank of New York; former Under Secretary of the Treasury for Monetary Affairs, USA

Pursued Economy

Understanding and Overcoming the Challenging New Realities for Advanced Economies

RICHARD C. KOO

This edition first published 2022

Copyright © 2022 by Richard C. Koo. All rights reserved.

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To my dearest wife, Chyen-Mei

Preface

The last few years have been difficult ones for many people, including economists, as the COVID-19 pandemic and the war in Ukraine have ravaged economies around the world. But economists' problems started earlier. The failure of the vast majority of economists in government, academia, and the private sector to predict either the post-2008 Great Recession or the degree and length of its severity has raised serious credibility issues for both the political establishment and the economics profession. After all, the Great Recession started from within—it was not caused by exogenous factors such as a new virus strain or military adventurism by an autocrat.

The widely varying opinions of these “experts” on how this recession should be addressed, together with the repeated failures of central banks and other policy makers to meet inflation or growth targets in spite of astronomical levels of monetary accommodation, have left the public rightfully suspicious of the establishment and its economists.

The concept of the pursued economy, together with the author's earlier concept of balance sheet recessions, is an attempt to explain why an economy that was strong and vibrant loses momentum and stagnates for an extended period of time. While the war in Ukraine and post-pandemic supply constraints have recently pushed inflation rates higher, many people have experienced stagnant real incomes for years, if not for decades, prompting a large part of the population to feel left behind and angry.

The author is old enough to remember how vibrant and hopeful people were in the United States in the 1960s, in Japan in the 1980s, and in Taiwan in the 1990s. In those eras, almost everyone was benefiting from economic growth. The air might not have been as clean as it is today, but everything else was moving forward, and people were confident about the future. That is no longer the case in many advanced countries today.

Being personally familiar with these three economies, the author found it remarkable that all of them went through very similar processes of economic development despite having vastly different cultural backgrounds. The cultural or historical differences among these countries may have added or subtracted a few percentage points of GDP growth here and there, but all of them experienced similar stages of economic development and were facing—at least until the onslaught of the COVID-19 pandemic—extended periods of low interest rates and low inflation rates.

Moreover, this low inflation came in spite of vast amounts of monetary easing by most major central banks starting in 2008. And the low interest rates appeared despite massive increases in budget deficits and public debt, first in Japan after 1990, and then in the West after 2008. Bond yields actually turned negative in Japan and in many parts of the Eurozone.

These phenomena are totally inconsistent with the economics still taught in universities, which holds that massive “money printing” will result in pernicious inflation and that large budget deficits will lead to higher interest rates, if not to higher inflation rates. Simply trying to understand what zero or negative interest rates mean in a capitalist system sets the head spinning. One wonders how Karl Marx or Thomas Piketty would explain sub-zero interest rates.

It was twenty-five years ago that the author came up with the concept of balance sheet recessions in Japan to explain why post-bubble economies suffer years of stagnation and why conventional monetary remedies are largely ineffective during such recessions. The key point of departure for this insight was the realization that the private sector is not always maximizing profits, as assumed in textbook economics, but will actually choose to minimize debt when faced with daunting balance sheet challenges, that is, debt overhang.

Once this fundamental assumption of traditional macroeconomics is overturned and the possibility of debt minimization is acknowledged, everything that was built on the original assumption—including many standard policy recommendations—must also be reconsidered. This is because if someone is saving or paying down debt, someone else must borrow and spend those funds to keep the national economy running. If the private sector as a whole is paying down debt even with zero interest rates, the public sector must borrow and spend those funds to keep the economy going.

While the concept of balance sheet recessions was able to explain many of the phenomena observed since 2008 in the West and since 1990 in Japan, it could not explain all of them. This is because some of the changes in these countries predate 2008 or postdate their balance sheet recessions. For example, the slowdown in income growth in the West started long before the balance sheet recession struck in 2008, and sluggish economic growth in Japan continued long after the private sector finished repairing its balance sheet around 2006.

It then occurred to the author that there is another reason for the private sector to be minimizing debt—or simply refraining from borrowing—at a time of very low interest rates. The reason is that businesses cannot find investment opportunities attractive enough to justify borrowing and investing. After all, there is nothing in business or economics that guarantees such opportunities will always be plentiful.

When businesses cannot find investments, they tend to minimize debt—except when tax and return-on-equity considerations argue against it—because the firm's probability of long-term survival increases significantly in the absence of debt. Shortages of investment opportunities, in turn, have two possible causes.

The first is a lack of technological innovation or scientific breakthroughs, which makes it difficult to find viable investment projects. This probably explains the economic stagnation observed for centuries prior to the Industrial Revolution in the 1760s.

The second cause is higher overseas returns on capital, which forces businesses to invest abroad instead of at home. For companies in the advanced countries today, this factor probably plays as big a role as technological breakthroughs in investment decisions. And the rise of Japan in the 1970s and of the emerging economies in the 1990s has changed where Western companies invest. Businesses continue to maximize profits to satisfy shareholder expectations for ever-higher returns on capital, but the bulk of their investment no longer takes place in the home market. This realization that corporate investments are no longer limited to domestic locations led to the concept of pursued economy presented in this book.

The economics profession, however, failed to consider the macroeconomic implications of private-sector balance sheet problems or inferior returns on capital. Even though all the developed countries suffer from both of these issues, economists continue to recommend policies—including monetary easing and balanced budgets—that assume the private sector is still investing at home to maximize profits.

Because the promised economic recoveries took far longer to appear than expected and often did not materialize at all, the public is losing confidence in the competence of established political parties and is starting to vote for outsiders and extremists, a dangerous sign in any society. Although a much improved social safety net means that today's democracies are more resilient to recessions (and policy mistakes) than those in the 1930s, democracy cannot survive if center-left and center-right leaders continue to pursue fundamentally flawed economic policies that lead to suffering for ordinary people.

Once the root cause of stagnation and the failure of conventional economic policies is understood, the remedies turn out to be remarkably straightforward. To get there, however, we must discard conventional notions about monetary and fiscal policy that were developed at a time when the developed economies were not facing balance sheet problems or inferior return on capital problems relative to emerging economies.

Physics and chemistry evolved over the centuries in response to the discovery of new phenomena that defied existing theories. In many of these cases, it was eventually realized that what people thought they knew was not wrong but was in fact a subset of a bigger truth. Similarly, the economics taught in schools is not wrong, but it applies only to situations where the private sector has a clean balance sheet and enjoys an abundance of attractive domestic investment opportunities that are worth borrowing for. When these conditions are not met, we need to look for a new and broader paradigm that can explain what is happening without relying on those two assumptions.

This book was originally intended to be a revised and updated version of my last book, The Other Half of Macroeconomics and the Fate of Globalization, with similar structure and chapter headings. But the time freed up by working from home instead of commuting on Tokyo subway trains or commuting to other financial centers by airplanes allowed me to go far beyond the previous book, hence the new title.

It is the author's hope that this book will help explain why policies that worked so well in the past no longer work today, and why nostalgia for the “good old days” is no solution for the future. There are also right ways and wrong ways to respond to these changes. Once the key drivers of change are identified and understood, individuals and policy makers alike should be able to respond correctly to today's new environment without wasting time on remedies that are no longer relevant.

About the Author

Richard C. Koo is the Chief Economist of Nomura Research Institute (NRI), with responsibilities to provide independent economic and market analysis to Nomura Securities, the leading securities house in Japan, and its clients. Before joining Nomura in 1984, Mr. Koo, a US citizen, was an economist with the Federal Reserve Bank of New York (1981–84). Prior to that, he was a Doctoral Fellow of the Board of Governors of the Federal Reserve System (1979–81). In addition to conducting financial market research, he has also advised five Japanese prime ministers on how best to deal with Japan's economic and banking problems. In addition to being one of the first non-Japanese participants in the making of Japan's five-year economic plan, he was also the only non-Japanese member of the Defense Strategy Study Conference of the Japan Ministry of Defense for 1999–2011. Currently he is serving as a Senior Advisor to the Center for Strategic and International Studies (Washington, D.C.). He is also a columnist for the German Handlesblatt newspaper and a frequent contributor to The International Economy Magazine published in, Washington, D.C.

Mr. Koo is the author of many books on economics and the Japanese economy, and his The Holy Grail of Macroeconomics—Lessons from Japan's Great Recession (John Wiley & Sons, 2008) has become a required read in many university economics classes around the world. It has been translated into and sold in six different languages. Mr. Koo holds BAs in Political Science and Economics from the University of California at Berkeley (1976) and an MA in Economics from the Johns Hopkins University (1979). From 1998 to 2010, he was a visiting professor at Waseda University in Tokyo. In financial circles, Mr. Koo was ranked first among over 100 economists covering Japan in the Nikkei Financial Ranking for 1995, 1996, and 1997, and by the Institutional Investor magazine for 1998. He was also ranked first by Nikkei Newsletter on Bond and Money for 1998, 1999, and 2000. He was awarded the Abramson Award by the National Association for Business Economics (Washington, D.C.) for the year 2001. A piano manufacturer before becoming an economist, Mr. Koo, a native of Kobe, Japan, is married and has two children.

CHAPTER 1Introduction to the Other Half of Macroeconomics

Human progress is said to have started when civilizations sprang up in China, Egypt, and Mesopotamia over 5,000 years ago. The Renaissance, which began in Europe in the 13th century, accelerated the search for both a deeper understanding of the physical world and better forms of government. But for centuries, that progress benefited only the fortunate few with enough to eat and the leisure to ponder worldly affairs. Life for the masses was little better in the 18th century than it was in the 13th century when the Renaissance began. Thomas Piketty noted in his book Capital in the Twenty-First Century that economic growth was basically at a standstill during this period, averaging only 0.1 percent per year.1

Today, on the other hand, economic growth is largely taken for granted, and most economists only talk about “getting back to trend.” People actually become upset when they do not see enough economic growth. Economists arguing that growth will return to the high rates of the past if only inflation reaches the 2-percent target are typical of this group. But what they do not ask is how the growth trend was established in the first place. To understand how centuries of economic stagnation gave way to a period of rapid economic growth that was then followed by where we are today, with decelerating economic growth and rising social tensions, we need to review certain basic facts about the economy and how it operates.

Basic Macroeconomics: One Person's Expenditure Is Another's Income

One person's expenditure is another person's income. It is this unalterable linkage between the expenditures and incomes of millions of thinking and reacting households and businesses that makes the study of the economy both interesting and unique. It is interesting because the interactions between these households and businesses create a situation in which one plus one seldom equals two.

Consider a world where there are only two economic entities, A and B, and each is buying $1,000 in goods from the other. If A decides to buy $100 less from B in order to set aside $100, or 10 percent of her income, as savings for an uncertain future, B will have $100 less income to use to buy things from A. If B, whose income has fallen from $1,000 to $900, then reduces his purchases from A by $100, A's income will also fall to $900. If A's original intention was to save 10 percent of her income, she will end up saving $90 instead of her original goal of $100. Thus, the interaction of the two players results in a situation in which one plus one does not equal two.

This feedback loop between A and B is easily recognized if there are only two entities, but not when there are millions. But the principle that one person's expenditure is someone else's income is unchanged.

This interaction between expenditure and income also means that at the national level, if someone is saving money, someone else must be doing the opposite (“dis-saving”) for the economy to keep running. If everyone is saving and no one is dis-saving—which usually takes the form of borrowing—those savings will leak out of the economy's income stream, resulting in less income for all.

For example, if a person with an income of $1,000 decides to spend $900 and save $100, the $900 that is spent becomes someone else's income and continues circulating in the economy. The $100 that is saved is typically deposited with a financial institution such as a bank, which then lends it to someone else, most often a business, who can make use of it. When that business borrows and spends the $100, total expenditures in the economy amount to $900 plus $100, which is equal to the original income of $1,000, and the economy moves forward.

But if there is no borrower for the $100, this amount will remain in the financial sector while total expenditures in the economy shrink to $900 from the original $1,000. If the recipient of the $900 decides to save 10 percent and spend $810, the economy will shrink another 10 percent if there are still no borrowers for the saved $90, and so on. This shows how important it is to have borrowers when there are savers in the country: if someone is saving money, someone else must borrow it in order to keep the economy from contracting. If all saved funds are not borrowed and spent, the economy will shrink.

The Importance of Financial Intermediation

In a normal economy, this critical function of matching savers and borrowers is performed by the financial sector, with interest rates moving higher or lower depending on whether there are too many or too few borrowers. If there are too many, interest rates will be bid up, and some potential borrowers will drop out. If there are too few, interest rates will be bid down, prompting potential borrowers who stayed on the sidelines to step forward. If all saved funds are borrowed and spent in this way, the economy will continue to move forward.

This also means that societies without a functioning financial sector to match savers and borrowers are seriously disadvantaged because some of the saved funds could leak out of the income stream. Ancient societies where money lending was considered a crime stagnated in part because saved funds could not re-enter the income stream until the saver himself chooses to dis-save at some point in the future.

One of the characteristics anthropologists look at when assessing how advanced an ancient society was is the use of money. But the invention of money as a store of value also made it easy for people to save for an uncertain future. That, in turn, increased the risk of leakages from the income stream unless those saved funds were made available to those who could borrow and use them. One of the characteristics economists should look for in determining whether an economy is functioning properly, therefore, is the financial sector's ability to match savers and borrowers.

It must be noted that the borrowings that are relevant here are those for real expenditures—such as for the construction of factories or the purchase of consumer goods—and not for purchases of existing assets such as houses and stocks. The former add to GDP; the latter, which merely involve a change of ownership, do not. Even though a typical lender may not care whether the money is being borrowed to build a new factory or to buy existing real estate as long as the loan is ultimately paid back, the distinction is critical for economists because the former adds to GDP, but the latter does not.

Unfortunately, there are no readily available data that distinguish between the two types of borrowing. Because of this limitation, the data used in this book refer to total borrowings. Readers should therefore keep in mind that the actual borrowing numbers—which are what matters—are smaller than the figures used here.

The Role of Fiscal and Monetary Policy

It would be ideal if the market-driven adjustments in interest rates previously noted were sufficient to match savings and borrowings, and thereby keep the economy from spiraling downward. However, there are many circumstances in which such adjustments are not enough. To address these situations, the government has two types of policy, known as monetary and fiscal policy, that it can use to help stabilize the economy by matching private-sector savings and borrowings.