The White Swans of 2020


Nouriel Roubini

roubini137_Mikhail SvetlovGetty Images_xi putin

NEW YORK – In my 2010 book, Crisis Economics, I defined financial crises not as the “black swan” events that Nassim Nicholas Taleb described in his eponymous bestseller, but as “white swans.” According to Taleb, black swans are events that emerge unpredictably, like a tornado, from a fat-tailed statistical distribution.

But I argued that financial crises, at least, are more like hurricanes: they are the predictable result of built-up economic and financial vulnerabilities and policy mistakes.

There are times when we should expect the system to reach a tipping point – the “Minsky Moment” – when a boom and a bubble turn into a crash and a bust. Such events are not about the “unknown unknowns,” but rather the “known unknowns.”


For starters, the United States is locked in an escalating strategic rivalry with at least four implicitly aligned revisionist powers: China, Russia, Iran, and North Korea. These countries all have an interest in challenging the US-led global order, and 2020 could be a critical year for them, owing to the US presidential election and the potential change in US global policies that could follow.

Under President Donald Trump, the US is trying to contain or even trigger regime change in these four countries through economic sanctions and other means. Similarly, the four revisionists want to undercut American hard and soft power abroad by destabilizing the US from within through asymmetric warfare. If the US election descends into partisan rancor, chaos, disputed vote tallies, and accusations of “rigged” elections, so much the better for America’s rivals. A breakdown of the US political system would weaken American power abroad.

Moreover, some countries have a particular interest in removing Trump. The acute threat that he poses to the Iranian regime gives it every reason to escalate the conflict with the US in the coming months – even if it means risking a full-scale war – on the chance that the ensuing spike in oil prices would crash the US stock market, trigger a recession, and sink Trump’s re-election prospects. Yes, the consensus view is that the targeted killing of Qassem Suleimani has deterred Iran, but that argument misunderstands the regime’s perverse incentives. War between US and Iran is likely this year; the current calm is the one before the proverbial storm.

As for US-China relations, the recent “phase one” deal is a temporary Band-Aid. The bilateral cold war over technology, data, investment, currency, and finance is already escalating sharply.

The COVID-19 outbreak has reinforced the position of those in the US arguing for containment, and lent further momentum to the broader trend of Sino-American “decoupling.”

More immediately, the epidemic is likely to be more severe than currently expected, and the disruption to the Chinese economy will have spillover effects on global supply chains – including pharma inputs, of which China is a critical supplier – and business confidence, all of which will likely be more severe than financial markets’ current complacency suggests.

Although the Sino-American cold war is by definition a low-intensity conflict, a sharp escalation is likely this year. To some Chinese leaders, it cannot be a coincidence that their country is simultaneously experiencing a massive swine flu outbreak, a severe bird flu, a coronavirus epidemic, political unrest in Hong Kong, the re-election of Taiwan’s pro-independence president, and stepped-up US naval operations in the East and South China Seas.

Regardless of whether China has only itself to blame for some of these crises, the view in Beijing is veering toward the conspiratorial.

But open aggression is not really an option at this point, given the asymmetry of conventional power. China’s immediate response to US containment efforts will likely take the form of cyberwarfare. There are several obvious targets. Chinese hackers (and their Russian, North Korean, and Iranian counterparts) could interfere in the US election by flooding Americans with misinformation and deep fakes. With the US electorate already so polarized, it is not difficult to imagine armed partisans taking to the streets to challenge the results, leading to serious violence and chaos.

Revisionist powers could also attack the US and Western financial systems – including the Society for Worldwide Interbank Financial Telecommunication (SWIFT) platform. Already, European Central Bank President Christine Lagarde has warned that a cyberattack on European financial markets could cost $645 billion. And security officials have expressed similar concerns about the US, where an even wider range of telecommunication infrastructure is potentially vulnerable.

By next year, the US-China conflict could have escalated from a cold war to a near-hot one. A Chinese regime and economy severely damaged by the COVID-19 crisis and facing restless masses will need an external scapegoat, and will likely set its sights on Taiwan, Hong Kong, Vietnam, and US naval positions in the East and South China Seas; confrontation could creep into escalating military accidents.

It could also pursue the financial “nuclear option” of dumping its holdings of US Treasury bonds if escalation does take place. Because US assets comprise such a large share of China’s (and, to a lesser extent, Russia’s) foreign reserves, the Chinese are increasingly worried that such assets could be frozen through US sanctions (like those already used against Iran and North Korea).

Of course, dumping US Treasuries would impede China’s economic growth if dollar assets were sold and converted back into renminbi (which would appreciate). But China could diversify its reserves by converting them into another liquid asset that is less vulnerable to US primary or secondary sanctions, namely gold. Indeed, both China and Russia have been stockpiling gold reserves (overtly and covertly), which explains the 30% spike in gold prices since early 2019.

In a sell-off scenario, the capital gains on gold would compensate for any loss incurred from dumping US Treasuries, whose yields would spike as their market price and value fell. So far, China and Russia’s shift into gold has occurred slowly, leaving Treasury yields unaffected. But if this diversification strategy accelerates, as is likely, it could trigger a shock in the US Treasuries market, possibly leading to a sharp economic slowdown in the US.

The US, of course, will not sit idly by while coming under asymmetric attack. It has already been increasing the pressure on these countries with sanctions and other forms of trade and financial warfare, not to mention its own world-beating cyberwarfare capabilities. US cyberattacks against the four rivals will continue to intensify this year, raising the risk of the first-ever cyber world war and massive economic, financial, and political disorder.

Looking beyond the risk of severe geopolitical escalations in 2020, there are additional medium-term risks associated with climate change, which could trigger costly environmental disasters. Climate change is not just a lumbering giant that will cause economic and financial havoc decades from now. It is a threat in the here and now, as demonstrated by the growing frequency and severity of extreme weather events.

In addition to climate change, there is evidence that separate, deeper seismic events are underway, leading to rapid global movements in magnetic polarity and accelerating ocean currents.. Any one of these developments could augur an environmental white swan event, as could climatic “tipping points” such as the collapse of major ice sheets in Antarctica or Greenland in the next few years. We already know that underwater volcanic activity is increasing; what if that trend translates into rapid marine acidification and the depletion of global fish stocks upon which billions of people rely?

As of early 2020, this is where we stand: the US and Iran have already had a military confrontation that will likely soon escalate; China is in the grip of a viral outbreak that could become a global pandemic; cyberwarfare is ongoing; major holders of US Treasuries are pursuing diversification strategies; the Democratic presidential primary is exposing rifts in the opposition to Trump and already casting doubt on vote-counting processes; rivalries between the US and four revisionist powers are escalating; and the real-world costs of climate change and other environmental trends are mounting.

This list is hardly exhaustive, but it points to what one can reasonably expect for 2020.

Financial markets, meanwhile, remain blissfully in denial of the risks, convinced that a calm if not happy year awaits major economies and global markets.


If rates stay low, get set for tougher macroprudential tools

Central banks are trying to make the financial system as boom-bust resistant as possible

Edward Smith

FILE PHOTO: Federal Reserve Board Governor Lael Brainard speaks at the John F. Kennedy School of Government at Harvard University in Cambridge, Massachusetts, U.S., March 1, 2017. REUTERS/Brian Snyder/File Photo
Fed governor Lael Brainard gave a speech last November that suggested America’s central bank would become a more active regulator, using 'tools other than tightening monetary policy to temper the financial cycle' © Reuters

The next time the Bank of England’s Monetary Policy Committee meets, it will be headed by a new governor, a career regulator. The new president of the European Central Bank is a lawyer, as is the US Federal Reserve chair. As economists urge central banks to find weapons to fight recessions, the message is coming back loud and clear: the best offence is a good defence.

The rationale is plain to see. If your ability to use interest rates to combat boom and bust is compromised, you had better make sure that the financial system is as boom-bust resistant as possible. Financial cycles have grown in intensity over the past 40 years, surpassing the highs and lows of the business cycle. We require tools to deal with them.

Most investors accept that we are never returning to the lackadaisical days of pre-crisis regulation. But it is doubtful that many really appreciate that regulation is likely to get tougher.

A better buttressed financial system is no bad thing when the greatest threat to investment returns is a deep balance-sheet recession. In capitalism’s “golden age” of the 1950s and 1960s, economic growth was so strong because there was no deep recession. This was achieved by institutional reforms that promoted financial stability, long-term thinking, and outsized investment.

For evidence that things are changing, consider a speech by Lael Brainard, a Federal Reserve governor, at the end of November last year. She strongly hinted at interest rate cuts currently unanticipated by the market. Such cuts would be the result of a technical change to the policy framework and not a response to a deteriorating economic outlook, and as such, they would be a boon to investors. But her speech had a second, perhaps overlooked, message: expect America’s central bank to become a more active regulator, using “tools other than tightening monetary policy to temper the financial cycle”.

Ms Brainard offered preliminary findings from a once-in-a-generation review of the Fed’s policy framework. The review was motivated by persistently low inflation expectations; by an apparent insensitivity of prices to the utilisation of resources; and by the Fed’s inability to cut interest rates by the usual amount to counter recession, because rates are so low to begin with.

Christine Lagarde has announced a similarly motivated review at the ECB. In early January, Mark Carney said that the BoE would follow suit.

One of the intellectual drivers behind the need for change is Christopher Waller, research director at the St Louis Fed and persistent advocate of low rates. His nomination to the Fed’s board of governors, if approved by the Senate, would be a strong signal that the central bank is receptive to challenges to conventional thinking.

The debate about monetary policy’s firepower is not new: discussion over monetary “impotence” began in the 1930s and has never come close to resolution. Yet these days policymakers seem increasingly honest about their inability to fully understand the inflation process, let alone influence it.

But a consensus on the need for tougher defences is emerging from this uncertainty. Agustín Carstens, general manager of the Bank for International Settlements — the overseer of all central banks — gave a speech last year that explored the importance of central banks’ enhanced role as independent supervisors of the entire financial system.

Since 2008, the BoE has been given a specific financial stability mandate; the Fed created a vice-chair for financial stability; the ECB established the Single Supervisory Mechanism for the eurozone’s largest institutions. Tighter regulation was not a one-and-done response to the financial crisis, it is a work in progress and not just for the bad times.

If new inflation-targeting frameworks result in even lower interest rates, we should expect even greater use of regulatory tools in the good times, to guard against potential excesses caused by abundant liquidity. These could include structurally higher capital requirements or capital requirements for specific types of activity, designed to stop systemically important banks from failing.

A second set of tools could include more dynamic use of countercyclical bank capital buffers or liquidity requirements, so lending would shift from less resilient to more resilient banks.

A third category of measures could be deployed to ensure the resilience of borrowers, or to moderate the demand for credit. These can include limits on debt-to-income or loan-to-value ratios, which could have the effect of moderating the financial cycle.

Such tools are vital to ensure that financial imbalances do not arise from knee-jerk responses to cheap money — imbalances that the traditional weapons of central banks no longer look sharp enough to combat. Change is coming, and long-term investors should welcome it.

The writer is head of asset allocation research at Rathbones

Will the Coronavirus Cause a Major Growth Slowdown in China?

Some fear that the timing of China’s coronavirus outbreak – at the start of the country's week-long New Year celebration, and in the middle of traditional school-break travels – will exacerbate the economic fallout from the epidemic. But three important factors may limit the virus’s impact on Chinese and global GDP.

Shang-Jin Wei

wei23_Kevin FrayerGetty Images_empty china

NEW YORK – The panic generated by the new coronavirus, 2019-nCov, which originated in Wuhan, one of China’s largest cities and a major domestic transport hub, reminds many of the fear and uncertainty at the peak of the 2003 SARS crisis.

China’s stock market, after rising for months, has reversed itself in recent days, and global markets have followed suit, apparently reflecting concerns about the epidemic’s impact on the Chinese economy and global growth. Are these worries justified?

My baseline projection is that the coronavirus outbreak will get worse before it gets better, with infections and deaths possibly peaking in the second or third week of February. But I expect that both the Chinese authorities and the World Health Organization will declare the epidemic to be under control by early April.

Under this baseline scenario, my best estimate is that the virus will have only a limited negative economic impact. Its effect on Chinese GDP growth rate in 2020 is likely to be small, perhaps a decline on the order of 0.1 percentage point. The effect in the first quarter of 2020 will be big, perhaps lowering growth by one percentage point on an annualized basis, but this will be substantially offset by above-trend growth during the rest of the year.

The impact on world GDP growth will be even smaller.

Such a prediction recalls the experience of the 2003 SARS crisis: a big decline in China’s GDP growth in the second quarter of that year was then largely offset by higher growth in the subsequent two quarters. While the full-year growth rate in 2003 was about 10%, many investment banks’ economists over-predicted the epidemic’s negative impact on growth.

Looking at annual real GDP growth rates from 2000 to 2006, it is very hard to see a SARS effect in the data.

Some fear that the epidemic’s timing – at the start of the week-long Chinese New Year celebration, and in the middle of traditional school-break travels – will exacerbate the economic fallout by keeping many people away from shops, restaurants, and travel hubs. But three important factors may limit the virus’s impact.

First, in contrast to the SARS outbreak, China is now in the Internet commerce age, with consumers increasingly doing their shopping online. Much of the reduction in offline sales owing to the virus will likely be offset by an increase in online purchases. And most of the vacations canceled today will probably be replaced by future trips, because better-off households have already set aside a holiday travel Budget.

Many factories have scheduled production stoppages during the Chinese New Year holidays anyway, so the timing of the epidemic may minimize the need for further shutdowns. Similarly, many government offices and schools had planned holiday closures independently of the virus outbreak.

The government has just announced an extension of the holiday period, but many companies will find ways to make up the lost time later in the year. The short-term negative impact is thus likely to be concentrated among restaurants, hotels, and airlines.

Second, all reports indicate that the Wuhan coronavirus is less deadly than SARS (although it may have a faster rate of transmission initially). Equally important, the Chinese authorities have been much swifter than they were during the SARS episode in moving from controlling information to controlling the spread of the virus.

By implementing aggressive measures to isolate actual and potential patients from the rest of the population, the authorities have improved their chances of containing the epidemic much sooner. That, in turn, increases the likelihood that the lost economic output this quarter will be offset by increased activity in the remainder of the year.

Third, whether or not China’s trade negotiators realized the severity of the Wuhan virus when they signed the “phase one” trade deal with the United States on January 15, the timing of the agreement has turned out to be fortunate. By greatly increasing its imports of facemasks and medical supplies from the US (and elsewhere), China can simultaneously tackle the health crisis and fulfill its promise under the deal to import more goods.

The virus’s impact on other economies will be even more limited. During the last half-decade, many major central banks have developed models to gauge the impact of a slowdown in China on their economies. These models were not built with the current health crisis in mind, but they do take into account trade and financial linkages between China and their respective economies.

As a rule of thumb, the negative impact of a decrease in China’s GDP growth on the US and European economies is about one-fifth as large in percentage terms. For example, if the current coronavirus epidemic lowers China’s growth rate by 0.1 percentage point, then growth in the US and Europe is likely to slow by about 0.02 percentage point. The impact on Australia’s economy may be twice as large, given its stronger commodity-trade and tourism links with China, but a 0.04-percentage-point reduction in growth is still small.

Such calculations assume that the coronavirus does not spread widely to these countries and cause direct havoc. This currently seems unlikely, given the low number of cases outside China.

Of course, the impact on China and other economies could be more severe if the coronavirus crisis were to last much longer than this baseline scenario assumes. In that case, it is important to remember that Chinese policymakers still have room for both monetary and fiscal expansion: the banking-sector reserve ratio is relatively high, and the share of public-sector debt to GDP is still manageable compared to China’s international peers. By using this policy space when necessary, China’s authorities could limit the ultimate impact of the current health crisis.

The coronavirus outbreak is understandably causing alarm in China and elsewhere. But from an economic perspective, it is too early to panic.

Shang-Jin Wei, a former chief economist at the Asian Development Bank, is Professor of Finance and Economics at Columbia Business School and Columbia University’s School of International and Public Affairs.

Signs Of A Market Top, Part 2: Investors “Give Up Bargain Hunting,” Pile Into Big Tech

One of the last things to be tossed overboard in the late innings of a bull market is discrimination. Instead of comparing the valuations of different assets and buying relative bargains, investors (known in retrospect as “dumb money”) just pour cash into the things that have been going up. This gives those favored assets one last parabolic spike before the inevitable end-of-cycle crash.

It of course has to be noted that critics of the current financial bubble have been predicting its end for a while, and anyone who listened passed up what turned out be easy money.

Still, what’s happening now is ridiculous.

From today’s Wall Street Journal:  
Why Mess With a Winning Strategy? Investors Bet on Tech

Investors have given up bargain hunting so far this year. 
Instead, they are piling into shares of some of the market’s biggest winners: so-called growth stocks, shares of companies that promise rapidly increasing profits and revenue. 
They remain as hungry as ever for shares of software providers and cloud-computing companies, flocking to heavyweights like Microsoft, Apple, Amazon and Google parent Alphabet. These stocks are sitting on double-digit gains in 2020 and have powered 45% of the S&P 500’s total return. 
big tech versus the S&P 500 market top
“Investors believe they’re better positioned to weather any economic storm,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Co., speaking of growth stocks. “Even if there’s a recession, people will keep using Facebook.” 
It is a shift from the Fall when value stocks—those that tend to trade at low prices relative to their earnings or net assets—outperformed growth shares and pundits predicted their long-awaited rebound had arrived after years of disappointing returns.  
Those hopes were buoyed by three interest rate cuts by the Federal Reserve that were expected to spur a rally in bank stocks and other traditional value plays. 
Since then, markets have been rattled by tensions between the U.S. and Iran and the coronavirus outbreak in China, which has sickened tens of thousands of people around the world and crimped business activity. Oil prices tumbled into a bear market and investors have flocked to traditionally safer bets like U.S. Treasurys. 

But through the turbulence, investors kept snapping up shares of companies promising high growth, confident they can survive these challenges. Many are eager to hold on to stocks they view as enduring winners of a period of technology disruption.
As other sectors have muddled through, big tech companies, which have become nearly synonymous with growth in recent years, have continued to stand out. Overall corporate earnings have been roughly flat for the fourth quarter, but 84% of companies in the tech sector have reported profits that beat expectations, according to FactSet. Apple posted record revenue, while Microsoft’s cloud business continued to shine. Shares of both companies are near highs. 
The S&P 500’s tech sector is up 11% this year, leading the way as it has for much of the decadelong bull run. The enthusiasm has even extended to initial public offerings like Uber Technologies Inc. and Pinterest Inc. that made a big splash last year. Though they initially floundered, the stocks have raced past the broader market, rising 33% and 25%, respectively, in 2020. 
“The market is going to continue to reward these companies,” said Daniel Morgan, senior portfolio manager at Synovus Trust Co. “There’s still a large appetite for growth.”

To sum this up, high-growth tech stocks have become this cycle’s safe haven assets. Like houses in the previous bubble and dot-coms in the one before that, “they always go up,” so they’re positioned to weather any storm.

History teaches that this kind of thinking fails for at least two reasons. First, in hard times many people need to raise cash. And that cash resides in the things that went up most in the preceding bull market. So even assuming that Amazon, Apple, et al continue to grow (a very big assumption in an uncertain world), they’ll still be sold to plug the suddenly gaping holes in investors’ balance sheets.

Which means they can’t be both safe havens AND sources of cash for worried investors. The two roles are mutually exclusive.

Second, when most of the market is down, investors tend to harvest tax losses by selling their losers. Then they sell some of their winners to match capital gains to capital losses. This kind of tax management puts downward pressure on the (previously) best performing stocks. So in the next recession/financial crisis/bear market, today’s winners will necessarily be among the big losers.

At least that’s what history says. Soon we’ll find out if past is still prologue.

George Friedman’s Thoughts: From the Carpathians to Virginia

By: George Friedman

Last week, I wrote about two brothers who lived as enemies and stopped speaking to each other. They believed, and others concurred, that the breach between them was political because they were loyal to opposing political parties.

On the surface, this explanation for their rift seemed reasonable, but when you step back, you realize that the situation would have required intense debate but not a silence that lasted for decades.

And the silence was punctuated by extremely risky acts to save each other’s lives. One saved his brother from the communists; the other tried to save his brother from the anti-communists. If the silence between them was really about politics, why would either not only take such great risk to himself but also betray his fundamental beliefs?

This led me to think about other forces at work, the forces generated by the tensions that build up in families and create rifts not over issues but over one’s existential reality. In the case of the two brothers (my father and my uncle), it was a rift that derived from such primordial forces that neither appeared to me to be aware of them.

The political explanation overlaid this deeper one and had the virtue of making sense and relieving the brothers from the need to confront the unbearable pain that both endured in a childhood of loss and uncertainty. The political explanation was true but self-evidently insufficient to explain the agony and the acts of love and betrayal of political principles that took place.

I chose this very real example from my own childhood to make the case that understanding most human things requires an archaeological dig into the soul of humans, whether embedded in sub-Carpathian villages or in modern nation-states. The most important point is that neither brother chose the life they led. They were born where they were born.

The sense of jealousy and betrayal was produced by the nature of things. And neither understood fully why they lived as they did, nor why they risked so much for each other at a crucial moment.

Free will exists but only in those sunny and simple places where it is all comprehensible. It cannot exist in the dark corners of your life, when forces you barely sense compel you, because you are human and therefore live with the burdens that you barely remember.

Free will requires awareness, and all humans live in a world that gives them many things but rarely clarity on the question of how they have come to be who they are. We therefore live our lives propelled forward by forces barely remembered and poorly understood, making choices of lesser things.

Consider the founding of the United States, for the moment through one man: George Washington. Washington’s great grandfather, John Washington, arrived in Virginia in 1656.

John Washington’s father was a well-to-do Royalist and a don at Oxford who lost his wealth and his position as senior vicar to the Puritans during the English civil war.

After struggling in England, John Washington chose to go to Virginia, where he struggled to buy land and create his estate. His only vision of success was that of the landed aristocracy in England.

He wanted to own land, farmed by serfs or peasants bound to the land. There were no such peasants in Virginia so he used Africans instead. John and his descendants sought to emulate the life he had lost to the English wars.

They built a grand house, grew tobacco and cotton, and had overseers to handle the slaves.

They were reasonably educated but not so much as to be inappropriate to an Englishman.

John Washington came here with the bitterness of all of those who came to America. No one came to America because they were triumphant where they were born. They all came in a search, a risky one, for something better. But for all their bitterness from the place of their origins, their need to prove themselves always traced back to their homes. They wanted to show the world that they could capture the triumph that they deserved back in England or wherever they came from.

George Washington was born to the not-quite aristocracy of Virginia. With the service of African slaves, he lived, in his mind, as an English aristocrat would. He thought of himself, as his father and grandfather thought of themselves, as an Englishman and a nobleman without title but with all else. Washington was made a colonel in the Virginia militia during the French and Indian War and was appalled to discover that the English officers, particularly Gen. Edward Braddock, had utter contempt for him and treated him as unworthy of all things he aspired to be.

The entire generation of the Virginia gentry was drawn into that war and realized that the English regarded them as beneath them. It was this generation that signed the Declaration of Independence because they discovered that they were American settlers and nothing more. Virginia and Massachusetts were the center of gravity of the revolution.

Thomas Jefferson’s Monticello and Washington’s Mount Vernon captured their insistence that they were as good as any English nobleman. In Massachusetts there was John Adams, the second president of the United States, who descended from Puritan clerics.

The history of this period politically was defined by the struggle between the ancestors of men like Washington, victims of the Puritans, and men like Adams, victims of the Anglican Papacy, as they referred to it. The battle was fought in the 17th century and renewed in America.

The struggle between John Washington and the Puritans was embedded in the United States and defined the Civil War, the struggle between New England abolitionists and Southern gentlemen. If we were to ask the signers of the Declaration of Independence and framers of the Constitution whether all this was over their bitterness at England’s betrayal of them and contempt at their perfect replication of England, or if we were to ask the combatants of the Civil War whether this was another round of fighting between Southern Royalists and Northern Puritans, they might be startled.

The political issues were real. Yet there was a deeper reality, far older and more painful, that is undeniable. Seeing the courtly Washington and the brusque Adams face off would be like seeing John Washington’s father confront the Puritans at Oxford. (Much of this is incidentally stolen from my new book, “The Storm Before the Calm,” so I have plagiarized myself.)

The Southern search for a noble life created the plantations of the South, slavery and a mode of living they thought of as equal to that of any English Lord. The Northern search for honest labor as a lawyer, carpenter or ship builder is a reminder of the class that the Puritans spoke for. The anger toward England and each other undergirded the extraordinary vision of the founders. Just as two half brothers carried with them the sense of victimization and malice hidden under very real political lives, so too did these men hide their sense of betrayal.

In the inescapable past coupled with current necessity, the behavior of nations can be understood.

Beneath politics, there are the real and compelling needs of the citizens, that are not, as we might believe, about gross domestic product but a murky sphere in which the core of life exists.