Austrians vs Market Monetarists on Canadian Fiscal Austerity

One of the more popular tales of 'expansionary austerity' was Canada in the mid-to-late 1990s. During this time Canada slashed government spending and brought down its debt-to-GDP ratio. Despite this fiscal stringency, the economy grew steadily and the unemployment rate fell. How was this possible?

Ramesh Ponnuru and I have argued this outcome occurred because the Bank of Canada (BoC) provided a monetary policy offset to the fiscal policy tightening. The evidence we point to in support of this view was the BoC cutting its target interest rate more than 500 basis points between 1995 and 1997. Some folks like David Henderson and Bob Murphy did not find this evidence compelling. It did not help our case that we shared the same view as Paul Krugman. Apparently, we were taking the "Keynesian view". Guilt by intellectual association?

Nonetheless, I laid out further evidence for the monetary offset view in a later post.  Bob Murphy has now replied to me in a new post and concedes that at least one of my points, the permanent increase in the monetary base, does lend some support to our view. (However, he correctly points out there are timing issues with the increase in the monetary base.) So he does concede the story is more complicated than he originally envisioned. 

In my view, however, the strongest evidence for the monetary policy offset view is not to be found in the monetary base. It is found is the divergence between the BoC's and the Fed's target interest rates. I made this point before and reiterated it in the comment sections of his new post. Below is an edited and extended version of the comment I left there. 

Bob, the monetary base data does raise some questions for both sides as you note. But let me share what I think is the most compelling evidence for the monetary offset view by making a set of observations.

First, Canada is a small open economy. During the period in question, Canada’s GDP was about 7% of US GDP on average. Canada, in other words, is very susceptible to external economic shocks, particularly ones coming from the US.

Second, Canada’s financial markets are highly integrated with US markets. This is especially true with short-term money markets which means there should be over the long run very little arbitrage opportunities between the two countries interest rates once one controls for risk and other country specific-factors.

Third, given the points above it should be the case that when the Fed (large economy) sets its short-term interest rate target in the US it also influencing short-term interest rates in Canada (small economy). This understanding would imply that the BoC generally follows what is happening to US monetary policy. That seems to be the case as seen here:

 

 But now take a closer look at the period in question:

The figure shows that Canada’s central bank interest rate differed as much as 250 basis points for a sustained period from the federal funds rate during the period in question.

How can this be possible given the observations above? Are not Canadian financial conditions tied closely to US financial conditions? The answer is yes, but they can deviate if the BoC exogenously intervenes and tinkers with interest rates. Put differently, had the BoC not intervened Canadian short-term interest rates probably would have more closely tracked the Federal Reserve’s target rate. As shown above, they typically do. But this time the BoC defied external money market pressures coming from the United States and struck its own interest rate path.

As a robustness check on this understanding I estimated the relationship between the BoC's target interest rate against the federal funds rate as well against the core inflation rate and the output gap in Canada. I estimated the model from 1980:Q1 to 1994:Q4, the period right before the BoC eases. This way we can ask the following question: given how the BoC adjusted interest rates in the past, how would one have expected it to do so going forward into the 1995-2000 period as new realizations of the federal funds, core inflation, and the output gap occurred?

If there were a deviation between the actual path and predicted path of the BoC's interest rate target during the 1995-2000 period, then this would constitute an exogenous movement or 'shock' to monetary policy. The figure below shows the results of this exercise.

The actual easing, then, was not something one could have easily predicted based on past BoC behavior. What is nice about this is that it provides a kind of a natural experiment for the monetary offset view. It provides (1) an exogenous easing of monetary policy (2) in a period of fiscal tightening and (3) results in stable aggregate demand growth. In my view the evidence provided by this natural experiment is very clear.

Nick Rowe rightly notes in the comments, though, that one should also look at the exchange rate. It depreciated during this time indicating monetary easing was at work. So it is hard for me to understand how one could view this experience as anything but strong evidence for the monetary offset view. 

China's Devaluation: Impossible Trinity, Deflationary Shocks, and Optimal Currency Blocks

So China devalued its currency peg almost 2% against the dollar. It happened just as I was wrapping up a twitter debate on this very possibility, a very surreal experience. Many more twitter discussions erupted after the announcement of this policy change and I got sucked into a few of them. My key takeaways from these discussions on the yuan devaluation are as follows. 

First, this devaluation was almost inevitable. The figure below superficially shows why: the economic outlook in China had been worsening.

The question is why? As I explained in my last post, the proximate cause is the Fed's tightening of monetary conditions. China's currency is quasi-pegged to the dollar and that means U.S. monetary policy gets imported into China. The gradual tightening of U.S. monetary conditions since the end of QE3 has therefore meant a gradual tightening of Chinese monetary conditions. Recently, it has intensified with the Fed signalling its plans to tighten monetary policy with a rate hike. U.S. markets have priced in this anticipated rate hike and caused U.S. monetary conditions to further tighten. Through the dollar peg this tightening has also been felt in China and can explain the slowdown in economic activity. Consequently, China had to loosen the dollar choke hold on its economy via a devaluation of its currency. 

There is, however, a more fundamental reason for the devaluation. China has been violating the impossible trinity. This notion says a country can only do on a sustained basis two of three potentially desired objectives: maintain a fixed exchange rate, exercise discretionary monetary policy, and allow free capital flows. If a country tries all three objectives then economic imbalances will build and eventually give way to some kind of painful adjustment. China was attempting all three objectives to varying degrees. It quasi-pegged its currency to the dollar, it manipulated domestic monetary conditions through adjustment of interest rates and banks' require reserve ratio, and it allowed some capital flows. This arrangement could not last forever, especially given the Federal Reserve's passive tightening of monetary policy.

One  manifestation of the tightening monetary conditions in the United States has been the appreciation of the dollar. Given the peg, the yuan has been appreciating too and appears to have become overvalued. China maintaining its peg against an apppreciating dollar would only have worsened this yuan overvaluation and intensified the drag it created for the Chinese economy. Already, the resulting slowdown and anticipation of Chinese authorities devaluing the yuan has lead to a $800 billion capital outflow from China. Since China desires its currency to become fully convertible in the future and because party leaders in China are unlikely to give up control of domestic monetary policy, it is almost a given that the adjustment to Chinese policy would have to come through a change to the yuan exchange rate. So this is the deeper reason for the devaluation. And it is the reason that the devaluation is probably just the first step toward an eventual floating of the yuan.

Second, those folks who are worried about the deflationary shock from this devaluation seem to forget the existing peg was creating its own deflationary shock. The idea behind the former concern is that via the devaluation Chinese goods will become cheaper to the rest of the world and given their abundance will drive down prices globally. My reply is that the tightening of U.S. monetary policy was already slowing down the Chinese economy and, as a result, creating deflationary pressures across the world. Just look at commodity prices. Moreover, the yuan devaluation need not necessarily cause a deflationary shock if the other central banks ease in turn. For example, it is likely the Fed will put off its interest rate hike this year and maybe do more easing if the yuan devaluation truly causes a large deflationary shock. 

Third, this experience highlights the importance once again of carefully choosing the currency block you join. Just like the ECB's application of a one-size-fits-all monetary policy to the very different economies of the Eurozone has proved harmful, so has the the one-size-fits-all monetary policy of the Fed to the dollar block countries proved harmful. In this case, it has proved harmful to China. Of course, the Eurozone is a currency union with a central bank that should be mindful of the entire Euro economy whereas the dollar block is number of countries that chose to peg to the dollar on their own and therefore are not the responsibility of the Fed. Still, the same principles apply: if you do not share the same business cycle or have adequate economic shock absorbers you probably should not join the currency block/union.

Update: To clarify on the impossible trinity note that prior to devaluation China had cut its benchmark interest rate four times since 2014 and cut its required reserve rate 50 basis points while maintaining the dollar peg. The domestic monetary easing has put downward pressure on the yuan and requires Chinese authorities to burn through its dollar reserves to defend the peg. As noted  above this has cost the Chinese $800 billion over the past year. Investors realize that at some point this will be too seen too costly as the dollar continues to appreciate. China will have to devalue. This anticipation only hastens the capital outflow. China, in short, has been trying to do too much: defend the peg, tinker with domestic monetary policy, and allow capital flows. China is running up against the impossible trinity.  

The Monetary Superpower Strikes Again

China's economy has been slowing down for the past few years and many observers are worried. The conventional wisdom for why this is happening is that China's demographic problems, its credit binge, and the related malinvestment have all come home to roost. While there is a certain appeal to these arguments, there is another explanation that I was recently reminded of by Michael T. Darda and JP Koning: the Fed's passive tightening of monetary policy is getting exported to China via its quasi-peg to the dollar. Or, as I would put it, the monetary superpower has struck again.

The Fed as a monetary superpower is based on the fact that it controls the world's main reserve currency and many emerging markets are formally or informally pegged to dollar. Therefore, its monetary policy is exported across the globe and makes the other two monetary powers, the ECB and Japan, mindful of U.S. monetary policy lest their currencies becomes too expensive relative to the dollar. As as result, the Fed's monetary policy also gets exported to some degree to Japan and the Euro. This understanding lead Chris Crowe and I to call the Fed a monetary superpower, and idea further developed by Collin Gray. Interestingly, Janet Yellen implicitly endorsed this idea in a 2010 speech:

For all practical purposes, Hong Kong delegated the determination of its monetary policy to the Federal Reserve through its unilateral decision in 1983 to peg the Hong Kong dollar to the U.S. dollar in an arrangement known as a currency board. As the economist Robert Mundell showed, this delegation arises because it is impossible for any country to simultaneously have a fixed exchange rate, completely open capital markets, and an independent monetary policy. One of these must go. In Hong Kong, the choice was to forgo an independent monetary policy.

[...]

As in Hong Kong, Chinese officials are concerned about unwanted stimulus from excessively expansionary policies of the Fed and in other developed economies. Like Hong Kong, China pegs its currency to the U.S. dollar, but the peg is far less rigid.

[...]

Overall, we encountered concerns about U.S. monetary policy, and considerable interest in understanding the Federal Reserve's exit strategy for removing monetary stimulus. Because both the Chinese and Hong Kong economies are further along in their recovery phases than the U.S. economy, current U.S. monetary policy is likely to be excessively stimulatory for them. However, as both Hong Kong and the mainland are currently pegging to the dollar, they are both to some extent stuck with the policy the Federal Reserve has chosen to promote recovery.

The original context of the monetary superpower argument was that the Fed was exporting its easy monetary policy to the rest of the world in the early-to-mid 2000s. Now the argument is that its normalization of monetary policy is creating a passive tightening of monetary conditions for the rest of the world, especially the dollar peggers like China. 

So what evidence is there for this view? First, note that China's accumulation of foreign reserves begins to slowdown at the end of the pre-taper portion of the Fed's QE3 program, something that also happens with the other QE programs:

A slowdown in reserve accumulation means a slowdown in domestic money base creation and a tightening of monetary conditions more generally. A close look at the figure shows this slowdown accelerated in mid-2014. So what happen at that time?

This next figure suggests it was an increased tightening of U.S. monetary policy starting around mid-2014. This development can be seen in the rising values of the 1-year treasury rate (an average of expected short-term rates over the next year plus a small term premium) and the trade weighted value of the dollar. Both amount to a passive tightening of monetary conditions that in turn got transmitted into China. 

The trade weighted dollar is just one indicator of the stance of U.S. monetary policy. But it seems to be an important one when looking at the U.S. monetary policy-China link over the past decade. It tracks the growth of China's nominal GDP relatively closely during this period. 

So it appears the monetary superpower has struck again. Maybe it is time for dollar peggers like China to recognize that your tango partner may not have your best interests in mind.

A Closer Look at the Decline in Government Expenditures

Yesterday I shared the following on twitter:

This tweet generated a number of questions that sent me back to the data for a closer look. In the process I gained a few insights that I discuss below. These comments draw upon an excel file that compiles all the relevant BEA data and is accessible here. 

First, I want to be clear what the figure above is measuring. It is the sum of government spending, transfer payments, and interest payments across all levels of government. So it is a thorough measure. 

I learned, however, that it has one shortcoming: it subtracts out depreciation of fixed government capital which means it actually understates total dollar expenditures. Below is an updated version of this measure that corrects for this practice. As you can see this correction is not too large, it adds only a few basis points and does not change the sharp decline seen since 2010. The huge run up in total government expenditures during the crisis is largely gone. 

One observer asked how this decline breaks down among the various levels of government. I was able to create the figure below to answer this question. Most of the decline comes from reductions in federal government expenditures though there is a non-trivial reduction in state government expenditures too.

Many commentators seemed curious as to what was driving the sharp decline in expenditures. The figure below partially answers this question by decomposing total government expenditures (at all levels of government) into four categories: consumption and investment spending, transfer payments, interest on debt payments, and other. 

Because of the sequester I was not surprised to see the sharp decline in government spending. I was surprised, though, to learn transfer payments have not come down that much. I was expecting the rise in transfers to be temporary, tied to the business cycle. That seems to be the case for some transfer programs like  programs like unemployment insurance and SNAP.  Maybe the increase in transfer payments reflects the ongoing growth of social security and medicare against a denominator (NGDP) that never has returned to its pre-crisis trend. 

The big takeaway, then, is that even though the overall level of total government expenditures as percent of GDP has come back down to pre-crisis levels it composition appears to have permanently changed. 

I would also note that even though total government expenditures as a share of the economy has declined, government's reach has only grown through the increasing number of regulations. Patrick A. McLaughlin and others at the Mercatus Center have been quantifying this growth for some time now. Among other things, they have shown the growth of regulations during the time in question above has accelerated. So this post is not arguing the reach of the government into the economy has shrunk. Rather, it is only showing that government expenditures as a share of the economy have fallen to its pre-crisis levels.

Update: Some have questioned whether the striking changes in the graph are nothing more than the changes in the denominator, the sharp collapse in nominal GDP. The answer is no. There were both expenditure increases from the ARRA and decreases from the sequester and other fiscal consolidation measures. Consequently, in current dollar terms that had meant total government expenditures have flatlined since 2010 and fallen in inflation-adjusted terms. So this is far more than a simple story about changes in the denominator.

The Big Lesson of the Eurozone Crisis

Paul Krugman notes that Eurozone crisis is a vindication of that optimum currency area (OCA) theory. I agree but would note the crisis also sheds light on the specialization versus endogeneity debate surrounding the OCA criteria. Interestingly, Krugman himself wrote some of the literature in this debate back in the early-to-mid 1990s.

So what is the specialization versus endogeneity debate? To answer this question, first recall that the OCA theory says members of a currency union should share similar business cycles, have economic shock absorbers (fiscal transfers, labor mobility, and price flexibility) in place, or some combination of both. Similar business cycles among the members of a currency union mean a common monetary policy will be stabilizing for all regions. If, however, there are dissimilar business cycles among them a common monetary policy will be destabilizing unless these regions have in place economic shock absorbers. This understanding can be graphically represented as follows:

Regional economies in this figure need to be outside the OCA boundary to be a viable part of a currency union. There they have a sufficient combination of business cycle correlation with the rest of currency union and economic shock absorbers. Inside the OCA boundary they do not.  In terms of the Eurozone, Greece would be inside the boundary and Germany outside of it.

Okay, those are the basics of the OCA theory. A question that emerged from this theory is whether a country like Greece that did not originally meet the OCA criteria could eventually do so. There were two answers to this question which led to the specialization versus endogeneity debate in  the OCA literature as noted by Mongelli (2002):

[W]hat type of forces might monetary unification unleash? Looking ahead, we may be confronted with two distinct paradigms -- specialisation versus “endogeneity of OCA” -- which have different implications on the benefits and costs from a single currency... 

The first paradigm is the “Krugman specialisation hypothesis” that is based upon the “Lessons of Massachusetts” i.e., the economic developments experienced by the US over the last century (Krugman (1993) and Krugman and Venables (1996)). This hypothesis is rooted in trade theory and increasing returns to scale as the single currency removes some obstacles to trade and encourages economies of scale. It postulates that as countries become more integrated (and their reciprocal openness rises) they will also specialise in the production of those goods and services for which they have a comparative advantage... Members of a currency area would become less diversified and more vulnerable to supply shocks. Correspondingly their incomes will become less correlated...An increase in integration would move a country away from the OCA line... 

The second paradigm is the “endogeneity of OCA” hypothesis... The basic intuition behind this hypothesis is that... [if] countries join together and form a “union,” such as the European Union (EU), both trade integration and income correlation within the group will rise: i.e., they will gradually move to... the right of the OCA line. This point carries important implications. A country’s suitability for entry into a currency union may have to be reconsidered if satisfaction of OCA properties is endogenous or “countries which join EMU, no matter what their motivation may be, may satisfy OCA properties ex-post even if they do not ex-ante!” (Frankel and Rose 1997).

In terms of the above figure, these two competing views can be drawn as pushing Greece either toward the OCA boundary or away from it.

The endogenous view of the OCA criteria fed right into what Lars Christensen calls the fatal conceit of Eurozone planners. It provided an ex-ante justification for believing all would work out well in this grand monetary experiment. The specialization view, on the other hand, was par for course with the tendency among American economists to be pessimistic about its success.

We all know now which view was right. Greece did not over time become better suited to be a part of the Eurozone.  And relative to Germany, many of the periphery countries, including Greece, became more specialized as seen in the figure below. This figure is constructed by looking at the agricultural, industry, manufacturing, and service shares of Eurozone economies relative to Germany and seeing how this ratio change over time. 

More sophisticated evidence suggests that at a minimum the periphery economies failed to further diversify after joining the Eurozone. So the great hope of Eurozone countries like Greece endogenously conforming to OCA criteria never happened. If anything, joining the Eurozone pushed Greece and the periphery further away from the OCA boundary. So probably the biggest lesson of the Eurozone crisis is to take the OCA criteria seriously before joining a currency union.

Who Predicted the Eurozone Crisis?

According to a recent Bloomberg article, nine people saw the Eurozone crisis coming years before anyone else. Wow, only nine people saw it coming? That is remarkable, these folks must be truly prescient if only they foresaw the crisis. 

Except that this claim is terribly wrong. There were many economists who saw the problems of a European monetary union before it formed. One prominent economist not on the Bloomberg list is Martin Feldstein who wrote a famous 1997 Foreign Affairs article that began as follows;

Monnet was mistaken... If EMU does come into existence, as now seems increasingly likely, it will change the political character of Europe in ways that could lead to conflicts in Europe...What are the reasons for such conflicts? In the beginning there would be important disagreements among the EMU member countries about the goals and methods of monetary policy. These would be exacerbated whenever the business cycle raised unemployment in a particular country or group of countries. These economic disagreements could contribute to a more general distrust among the European nations.

Feldstein was one among many American economists who doubted a currency union in Europe would work. In fact, an entire article in Econ Journal Watch provides a survey of the skeptical tendencies of most American economists over the Euro prior to its inception. The authors, both Europeans, went on to claim these skeptical Americans had been proved wrong by history:

The main finding of our survey is that US academic economists were mostly skeptical of the single currency in the 1990s. By now, the euro has existed for more than a decade. The pessimistic forecasts and scenarios of the U.S. academic economists in the 1990s have not materialized. The euro is well established. It has not created political turmoil in Europe, and it has fostered integration of financial, labor and commodity markets within the euro area. Trade within the euro area has increased, and so has business cycle synchronization. Inflation differentials within the euro area are presently of the same order of magnitude as in the United States.

Why were U.S. economists so skeptical towards European monetary integration prior to the physical existence of the euro? 

Ironically, the article was published in early 2010 just as the Eurozone crisis was unfolding. For our purposes the most interesting thing about this article is not its incredibly wrong Euro triumphalism, but its documentation of the many American economists who were skeptical of the Euro. The article looks at American economists in the 1990s both at the Federal Reserve and in academia. Below is the list of academics covered in this paper. 

Add to this list another 43 surveyed from the Federal Reserve. So yes, there were a few more than nine people who expressed some level of doubt and worry about the viability of the Eurozone. So next time you hear someone touting the few who saw the Eurozone crisis coming, understand there were actually many who foresaw it.

Update: Presumably most of the UK residents who were against the Maastricht Treaty in 1992 did so because they understood the problems of a European currency union. After all, they had just gone through the Exchange Rate Mechanism crisis. So add these folks to the list of people who saw the Eurozone crisis coming.

Did Monetary Policy Really Offset Fiscal Austerity in Canada?

The blogosphere is once again talking about Canada's successful fiscal austerity in the mid-to-late 1990s. Paul Krugman rekindled the conversation with this statement:

[L]ook at everyone's favorite example of successful austerity, Canada in the 1990s. Canada came in with gross debt of roughly 100 percent of GDP, roughly comparable to Greece on the eve of the financial crisis. It then proceeded to do a pretty big fiscal adjustment -- 6 percent of GDP according to the IMF's measure of the structural balance, which is about a third of what Greece has done but comparable to other European debtors. But unemployment fell steadily. What was Canada's secret?

Ramesh Ponnuru and I have argued numerous times that Canada's secret was a monetary policy offset. That is, monetary policy eased to offset the drag of fiscal tightening. Paul Krugman agrees in the above post. The evidence that we and others have pointed to in support of this view is the Bank of Canada cutting its target interest rate more than 500 basis points between 1995 and 1997.  

Some of our conservative and libertarian friends, however, are not convinced by this evidence. David Henderson and Robert Murphy, in particular, have pushed back against this view. They contend there was no monetary offset. Henderson questions how much influence the Bank of Canada actually has over interests rates. Murphy goes further and provides a list of data points that he claims show the Canadian success story did not rely on loose money. So are Henderson and Murphy's skepticism of the monetary offset warranted?

The answer is no. Let us start with the Henderson's claim, echoed by Murphy, that the Bank of Canada has little control over interest rates. This point is generally true for long-term interest rates, but not for short-term interest rates. Central banks intervene in money markets and peg short-term interest rates all the time. It is true that if a central bank cares about price stability its short-run interest rate adjustments will conform over time to an interest rate path determined by the fundamentals. For example, Canada being a small open economy has its interest rates determined in part by capital flows from large economies like the United States. But this is a long-run tendency that still leaves a lot of wiggle room in the short run for central banks to tinker with interest rates. 

But do not take my word for it. See the figure below. It plots the target interest rates for both the Bank of Canada and the Federal Reserve over the period in question. The 500 basis point cut by the Bank of Canada is evident and occurs against a relatively stable federal funds rate. If the Bank of Canada has no control over its short-term interest rates then why was it able to create such large deviations around the federal funds rate? If the Henderson-Murphy view were correct this should not be possible.

Again, over the long-run the fundamentals will kick in and cause these two interest rates to follow a similar path. Henderson and Murphy assume this long-run relationship will also hold in the short-run. But it does not as shown above. The evidence, then, points to the Bank of Canada exogenously lowering short-term interest rates during the period of fiscal tightening.

I must say I was surprised to see an Austrian like Murphy makes this argument. Any Austrian worth his salt believes central banks can and do manipulate short-term interest rates. To go from this traditional Austrian position to one above is hard to reconcile. Put it this way: Murphy's reasoning, if consistently applied, would lead one to accept Bernanke's saving glut theory for the low interest rates during the housing boom. But Murphy does not accept this view. So it is hard to understand why he would suddenly embrace this emasculated view of central banks.

Murphy does attempt to provide other evidence to support his view on the Canadian austerity experience. It is impossible, though, to draw conclusions from his evidence because he does not provide the proper context for evaluating it. For example, one cannot simply look at the growth rates over a few years of the monetary base and nominal GDP as Murphy does and conclude with certainty whether monetary policy was tight or loose. Instead, one has to evaluate them against what was expected by the public and or desired by the central bank. 

So let us do that for the monetary base and nominal GDP. Consider first the monetary base (excluding required reserves) as seen below. This figure shows both the monetary base and its pre-1995 trend. Note the one-time permanent increase in it that occurs in the mid-to-late 1990s. A permanent increase in the monetary base is a sure way to raise aggregate demand and offset fiscal austerity. The above trend growth strongly suggests explicit monetary easing during this time.

Next, let us look at nominal GDP in the figure below. It shows the nominal GDP relative to its trend path. 

Note that nominal GDP follows its trend path rather closely during the period of fiscal austerity. The Bank of Canada, in other words, did what was necessary to keep aggregate demand on a stable growth path during this time. Given the evidence shown above, the Bank of Canada offset the fiscal tightening via lower interest rates and a permanently higher monetary base path. This story is completely missed by Murphy's cursory look at nominal GDP growth rates over a few years. So yes, monetary policy did offset fiscal austerity in Canada in the mid-to-late 1990s. 

The policy implications from this experience are clear. Economies undertaking fiscal austerity are best served by expansionary monetary policy. It provides a viable path to obtaining a more sustainable debt level. The ECB, however, tightened monetary policy twice during the Eurozone crisis. Given the one-size-fits-all approach problems, this tightening proved excessive for the periphery countries and helped spawn the soveriegn debt crisis. Just imagine how different the Eurozone would be today had the ECB began its QE program back in 2008.