Paul Tucker: Money and credit, twelve months on
Speech by Mr Paul Tucker, Executive Director and Member of the Monetary Policy
Committee of the Bank of England, at the Money, Macro and Finance Research Group 40th
Annual Conference, Birkbeck College, London, 12 September 2008.
* * *
As many people have said, this is a challenging time for policymakers. But the real challenge
is for households and firms in the real world who are having to navigate the fallout from the
extraordinary combination of financial and commodity shocks rippling through the world
economy. Our job as policymakers is to make that process as smooth as it can be over the
medium term. And having our eye on the medium term means we must ensure that the gains
of the past ten-to-fifteen years in stabilising inflation are not frittered away.
In confronting that task, policymakers are having both to make big picture judgments about
the balance of forces buffeting the UK economy; and to apply areas of economic theory that
stretch the frontiers of existing research. So, in joining your research conference this
morning, I want to sketch, broadly, what the current conjuncture suggests, from the
policymaker's perspective, should feature in the future research agenda of monetary
economists.
The current conjuncture, and policy
By way of establishing the context, I will begin with the Bank of England's most recent
economic forecast. In August, the Monetary Policy Committee published our latest
projections for output growth and inflation. On the then profile of market interest rates, the
Committee as a whole1 judged that, most likely, output growth would slow quite sharply
during the current year and would be anaemic for a period thereafter. Crucially, the balance
of risks to that most likely (or modal) outlook was judged to be on the downside. In other
words, the mean forecast for output was somewhat weaker still. For inflation, meanwhile, the
most likely outlook was that, after an uncomfortably high and protracted spike, it would fall
back to a little below the 2% target by the end of two years, and would continue to drift down
thereafter. In other words, the crucial judgment was that the accumulation and persistence of
slack in the economy would most likely be enough to avoid inflation getting out of control.
That was the part of the August projections that captured the attention of the markets and
commentators.
But, collectively, we also concluded that the balance of risks to the inflation outlook was to
the upside, so that the mean for inflation was actually above the 2% target at around two
years or so. That's not without significance given that most analytical models suggest that
policymakers should set policy in the light of the mean, not the mode - although a better
description of the MPC's approach would be to say that we take account of the nature of the
entire distribution of risks.2
Now, putting this together, the following inference can be drawn; and I hope that I shall be
excused if I plod through this in slow motion. Focusing on a roughly two-year horizon, if
inflation was most likely to be below target in the context of the August modal forecast for
output, then it would be even further below target if the MPC's view in August of the
downside risks to growth were to materialise (ie consistent with the mean path for output but
above
no further adverse shock to costs). But, in fact, the mean path for inflation was target
at around two years. That underlines the hefty upside risk to inflation that featured in the
Committee's August projections.
Indeed, we cannot be remotely complacent about the risks in either direction. This is a
delicate balance, and one that is developing from month to month. It is a convenient but in
some ways misleading shorthand to characterise the Committee as currently balancing a
growth risk against an inflation risk. Given our mandate - and, indeed, given how the
economy works - that is better thought of as our having to balance the downside risks to
inflation over the medium-term against the upside risks to inflation over the medium-term. So,
perhaps contrary to some recent commentary, the MPC remains as focused on medium-term
inflation as ever. No shift in the underlying reaction function. No shift in the aversion to
inflation (or to deflation). But, of course, the current environment is highly unusual and our
reaction function cannot be written down as a fully specified state-contingent rule; and so
everyone is discovering that we truly are committed to low inflation in the medium term.
The mandate is expressed in terms of stable low inflation because that is what central banks
can deliver over the medium term, and because nominal stability is a precondition for
sustainable growth.
There is not a comfortable medium-term trade off between growth and inflation. Inflation is
just the opposite of a free lunch. If in the interests of sustaining growth in the short run, we
were to risk letting inflation become established at higher levels, things could easily get out of
control as higher medium-term inflation expectations would become embedded. We would
then find it much harder to bring inflation back to target, and could well end up having to
generate a serious recession to put the genie back in the bottle. The experience of the thirty
years before the current regime demonstrated the economic and social costs - to
households, livelihoods and businesses - of what that entails. The MPC's inflation targeting
mandate is the expression of those lessons that - tragically for millions of people, given the
chances of getting stuck in unemployment - UK policymakers had to learn. We're not about
to give up on the mandate. Success in anchoring inflation expectations in line with the target
will give us more scope over time to cushion the economy from the adverse shocks to growth
- which of course we would want to do when we can, consistent with medium-term stability.
What does, of course, shift as the months pass is our assessment, as nine individuals, of the
balance of risks to inflation, given changes in the economic environment. And quite a lot has
happened since our August forecast.
In the six weeks or so since the Committee's August report was finalised, the signs of
weakening in the UK's major trading partner, the euro area, have intensified. Growth appears
to be slowing in parts of Asia too. And in the US, the housing market has not yet obviously
stabilised, which is probably a precondition for broader recovery there. Domestically, the
output data have been on the soft side, moving into line with the battery of surveys and the
Bank's regional Agents. The labour market also appears to have softened, with
unemployment rising and fewer vacancies advertised. It is perhaps not surprising that,
compared with recent slowdowns, there should be less hoarding of labour if firms expect the
adverse environment to persist for a while; and with tighter credit conditions, stretching
working capital, making it harder for firms to finance the retention of a
less-than-fully-occupied labour force. In the manufacturing sector, input and output price
inflation have edged down very slightly. In the service sector, the data are less timely, though
surveys have started to indicate some slowing in the pace of inflation. Commodity prices -
not only energy, but food too - have continued to fall, perhaps reflecting the effects on global
demand of the earlier price rises and the reduction of subsidies by a raft of emerging-market
countries. Equities have fallen around 3%. But sterling's exchange rate has fallen - by
around 4% since the MPC's August meeting; and by about 15% since the beginning of 2007,
so that, in sterling terms, the fall in oil prices has been less pronounced over the past month
or so.
On balance, those developments mostly comprise downside news, since the August Inflation
Report, to the outlook for demand and for inflation. But the recent depreciation of the
exchange rate has to be offset against that. And headline inflation has reached 4.4%. It will
probably rise further. The Committee can and will ensure that this is a temporary state of
affairs. But, for the moment, inflation expectations do continue to flash an amber light.
Meanwhile, credit has remained tight, and underlying money growth has decelerated,
implying that monetary conditions may be leaning against those incipient inflationary
pressures.
At the end of the last year - some months' after the onset of the market turmoil - I set out
some of the thinking that guided my interpretation of the monetary data and how it related to
my policy decisions.3 I stressed that "we must try to avoid a vicious circle in which tighter
liquidity conditions, lower asset values, impaired capital resources, reduced credit supply,
and slower aggregate demand feed back on each other". A vicious circle between the world
financial system and global economy has so far probably been kept at bay; global growth has
slowed not collapsed. But there is no denying an adverse feedback loop between tightening
credit conditions, the macro slowdown, and the perception that that will in time impair banks'
asset portfolios. So it seems timely to revisit some of the issues of "money and credit".
The Taylor-rule framework for thinking about policy
It is well over a decade since John Taylor set out what has become part of the current
orthodoxy of monetary economics. His rule looks something like this:
= +r* - Π* ) )
it Πt t+ a(Πt t +b(yt-y* t
This is, at its roots, a Wicksellian view of the world.4 By fixing the short-run nominal rate, the
central bank can, given stickiness in prices over the short run, shift the short real interest rate
- both in absolute terms and, more particularly, relative to the short-run real rate that would
equilibriate demand and supply.5 So that gap between the short real rate and its "equilibrium"
can be thought of as representing the stance of monetary policy, which should be chosen by
the central bank in the light of the extent to which inflation deviates from target, and to which
aggregate demand deviates from the supply capacity of the economy. Implicit in this rule is
that the textbook policymaker knows how the degree of slack in the real economy acts on
future inflation (or the slope of the Phillips curve).
The two forces sweeping through the world economy test the way policymakers typically
apply various elements of this set up in more routine circumstances.
For example, how do the commodity price rises and, separately, the credit crunch affect the
"equilibrium" short-term real rate? Is the actual short real rate still an adequate proxy
measure of monetary conditions? Is the "normal" relationship between economic slack and
future inflation intact?
The cost shocks, and monetary conditions
Although they have fallen by nearly $50 since the peak reached in July, oil prices are still up
more than 200% since the middle of 2003; and, indeed, around 3% since the beginning of
this year. As oil is a key input to production, this acts like a negative supply shock for the
Western economies: it costs firms more to produce the same level of output than before the
run up in oil prices. And, like a tax, it acts to redistribute spending power from energy
consumers to energy producers. In those circumstances, real-take home pay has to grow
more slowly for a while in order to avoid the capital stock shrinking as firms sought to
maintain the internationally-determined required rate of return. The role of monetary policy is
to facilitate that process, recognising the potential redundancy of some capital resources
given higher energy prices, and the upward pressure on real interest rates as households
seek to borrow to tide them over the tough times.
In other words, in the now standard set up, taking the cost shock on its own, the equilibrating
short-term real rate (r star) has risen and the economy's potential supply (y star) has
probably fallen. So, ignoring other developments, policy would have to be tighter than
otherwise, even if the direct effects of the cost rise on the price level were accommodated.
But, of course, other things have been going on, and it is the net effect for our policy rate that
matters. And that involves making a judgment about the tightness of credit conditions.
The credit shock and monetary conditions
In conducting policy, commentators usually take the short-run nominal interest rate, Bank
Rate, as a summary measure of monetary conditions. If Bank Rate is increased, monetary
conditions are being tightened; and conditions are being loosened if Bank Rate is cut. There
are a few important simplifying assumptions being made here - assumptions whose validity
in current circumstances is doubtful.
In the first place, that view of the world implicitly assumes that the equilibrium real rate is
stable over time, whereas in fact it will move about.6 Sometimes the central bank will need to
change its policy rate simply in order to maintain unchanged monetary conditions (as proxied
in the literature by r minus r star). In the same vein, if near-term inflation expectations rise or
fall, our nominal policy rate may need to change just to leave the actual short real rate
unchanged. In other words, we can fix only one thing - the short nominal rate - but what any
particular level of Bank Rate means for monetary conditions will depend on short-run inflation
expectations and on the equilibrium real rate needed to balance the economy. Both will likely
have changed materially in the face of the cost and credit shocks.
What our Bank Rate will mean for monetary conditions will depend on how it relates to the
panoply of other interest rates on financial contracts. In fully efficient markets, the risk-free
rate is a fully satisfactory summary statistic; other rates fall into line through arbitrage, with
differences reflecting risk premia. More practically, it can typically be assumed that the rates
charged on private sector loans are maintained at fairly stable spreads relative to the
riskfree yield curve (ie given the expected path of the policy rate). And, related to that, it can also
typically be assumed that the degree of credit rationing in the economy is broadly constant
over time. Obviously, neither of those things is true at present.
The most unusual, and stretched, circumstances lie within the global financial system itself.
The premium on unsecured interbank lending has risen (Chart 1); and growth of such lending
has slowed. This reflects a desire to hoard liquidity in a hazardous environment; and
heightened aversion to taking on unsecured credit exposures for term maturities. Banks are,
in consequence, deleveraging7 their balance sheets. Broadly, they can do so in two ways -
raise extra capital, or shrink (the pace of growth in) their balance sheets. Both have been
underway. The balance sheet shrinkage is reducing the supply of credit to households and
firms. But there is differentiation across the banking industry, according to size and strength.
In that environment, spreads on corporate bonds are higher. Many corporate and household
lending rates have been affected by the rise in Libor relative to risk-free rates. And retail
rates - for both loans, and some deposits - have risen relative to the relevant risk-free rate.
Effective rates on some types of lending are not much changed since last summer, but we
have cut Bank Rate by 75bp and the risk-free curve has shifted down (Chart 2).
All this is true in the US too, probably more so. That has led John Taylor himself to suggest8
that, to maintain an unchanged policy stance, the policy rate should be reduced by the extent
of the widening in spreads. In fact, as I am sure Taylor recognises, it is nowhere near so
straightforward - if for no other reason than that, for the real economy, the most severe
feature of the credit shock is the rising incidence of quantity rationing.9
There appears to be some discrimination between lower-risk and higher-risk borrowers in the
household sector. Rates on fixed-rate mortgages have recently been cut for lower
loan-tovalue borrowers. We have added a question to our current Credit Condition Survey, due out
later this month, to gauge conditions in that part of the market. Plainly, conditions have
tightened a lot for riskier borrowers - households and firms. That means we need to look at
quantity data as well as at the price of credit. For companies, money growth has fallen very
sharply. Lending held up for a while, but possibly in part because firms were drawing on
committed lines of credit while they were still available on pre-turmoil terms. The Credit
Conditions Survey has signalled a clear tightening (Chart 3).
To translate this back into a Taylor-rule world, we would need to know the so-called "shadow
prices". Of course we don't know those unobservable prices. But we can, perhaps, get a
broadbrush handle on the materiality of the tightening by using estimated equations for credit
(and money) demand, holding all other influences constant.10 There is just huge uncertainty
7
See Tucker, PMWT (2008), "The credit crisis: lessons from a protracted peacetime", remarks given at the
Chatham House conference on "The New Financial Frontiers". These remarks are also forthcoming in the
2008 Q3 edition of the Bank of England Quarterly Bulletin.
8
See Taylor, JB., (2008) "Monetary Policy and the State of the Economy", testimony before the Committee on
Financial Services, US House of Representatives, February and Mculley, P and Touli, R (2008) "Chasing the
Neutral Rate Down: Financial Conditions, Monetary Policy, and the Taylor Rule", Global Central Bank Focus,
PIMCO.
9
Another reason reflected in the Curdia and Woodford (2008) paper is the fact that borrowers and savers have
different propensities to consume. Consequently a change in spreads will affect the "average rate" faced by
borrowers and savers in a different way from a change in the policy rate.
10
Based, for example, on Brigden, A and Mizen, P (1999) " Money, credit and investment in the UK corporate
sector", Bank of England Working Paper number 100.
BIS Review 112/2008
about such estimates but, for what it's worth, they indicate a material tightening from this
source.
Alternatively, that can be thought of as being equivalent to a fall in the real risk-free rate of
interest that would equilibriate supply and demand.11 Taken on its own, this rather leans
against the proposition, advanced by a number of commentators, that monetary conditions
loose
are on the grounds that deducting CPI inflation of between 4 and 5% from a Bank Rate
of 5% leaves a "real rate" close to zero. First, as I have been arguing, it is vital to take into
account the possibility that the real rate warranted in the current conjuncture has fallen.
Second, headline CPI might not be the best deflator for calculating the relevant real rate of
interest. CPI may not necessarily be the price - the "own real rate" - relevant for individual
households' and businesses' spending decisions.12 For example, firms' investment might be
more dependent on the price of capital goods. Despite the pickup in oil prices, the pace of
inflation for capital goods has been much lower than for CPI. So that might suggest a
correspondingly higher real rate for businesses than one based on CPI (Chart 4). A similar
question could be posed about the real rate facing households, given that the CPI currently
excludes the costs of owner occupation.
So one can safely conclude that it is not all straightforward at present to calibrate monetary
conditions.
For researchers, that underlines the importance of renewing work directed at gauging
monetary conditions. A recent paper by Michael Woodford13 concluded that information from
money and credit quantities could not add anything to spreads; and, what is more, that they
were not as useful as spreads because the quantity effects of a tightening become apparent
only with lags. The set up in Woodford's paper does not, however, involve quantity rationing.
When such rationing occurs, data on the quantity of lending and money may be more useful,
even with a lag, than the shadow prices that cannot be observed! Of course, I absolutely do
not want a reversion to oversimplified Monetary Conditions Indices, which set a trap for
policymakers by ignoring the nature of the shocks that shift credit supply and other financial
variables. But we do need to have a better quantitive understanding of how the equilibrium
real rate (r star) shifts with shocks to the financial parts of the economy.
For UK policymakers, overall, the sharp slowing in corporate and household credit and
money growth signals that monetary conditions are quite tight. Tighter bank lending
conditions will make it harder for households to maintain their spending during this testing
period - when the rise in energy and food prices has squeezed disposable incomes; and
when the savings rate was already low. Similarly, with less easy access to credit, it will be
harder for firms to bridge to the expected recovery without cutting costs. On the whole, the
corporate sector probably entered this episode with stronger balance sheets, leveraged
buyouts aside, than the household sector. But, as the months have passed, firms have been
registering a greater sensitivity to tighter financial conditions.
The lags between the incidence of the financial shock last summer and its impact on
spending in the economy have been fairly drawn out. It is striking that through the autumn
and perhaps even into the spring, a number of commentators thought this was essentially a
problem for Wall Street not Main Street. We need more research to help understand those
lags, and whether the credit shock has been more potent for its coinciding with the climb in
commodity prices.
That assessment has informed my view that slack will accumulate, leaning against - but not
eliminating - the current upside risks to inflation. Indeed, the best gauge of our view of
monetary and credit conditions is to be found in our periodic forecasts for growth and
inflation.
Nominal trends
A hazard, given the current paradigm in monetary economics, is that its all too easy for
policymakers to fall into the habit of never mentioning anything nominal - apart from inflation
expectations.
One of the key challenges for monetary researchers is, accordingly, to discover more about
what determines inflation expectations. Meanwhile, whatever is incorporated into forecasting
models, policymakers cannot sensibly just take it for granted that expectations are anchored,
so that inflation will painlessly come back into line with the target whenever it is driven away
by temporary cost shocks. What that means right now is that arresting the upside risk to
inflation cannot rely entirely on real-economy interactions.
So what diagnostics have we got on nominal trends, right now?
On the whole, they are not signalling an imminent resurgence in inflationary psychology.
Nominal demand growth has slowed quite sharply (Chart 5). Adjusting for various misleading
technicals,14 broad money has decelerated sharply (Chart 6). The rate of growth of so-called
Divisia money, a measure of transactions balances, has similarly fallen sharply. And in the
labour market, nominal earnings growth has recently been below 3.5%, although the annual
wage round lies ahead. Sterling's exchange rate has fallen, however. That might be
consistent with the foreign exchange markets expecting a nominal shock in the future. But
there are other possible explanations, notably that a risk premium may have become
incorporated to compensate for uncertainty in the outlook.
Had there been a shift in the market's inflation expectations, the obvious place for that to
show up would be in the yields on nominal government bonds. For medium-term maturities,
so-called "breakeven inflation rates" - derived from the difference between the yields on
conventional and inflation-indexed gilts - have stabilised over the past few months. Given the
frictions that many believe distort indexed-linked yields,15 I also like to look directly at nominal
forward rates. The underlying thought is that, relative to fluctuations in bond yields brought
about by past shifts in inflation regimes, longer-term risk-free real rates may not move around
a great deal, so that any systematic inflationary impulse would be quite likely to show up in
nominal yields. Consistent with that, following the UK's disinflation in the early-1990s,
medium-term nominal forward rates fell by around 400bp. Since the new monetary regime
became established in the late 1990s, they have been more or less stable, and currently
remain within the range prevailing over the past decade or so.
Surveys of household inflation expectations tell a broadly consistent story. For near-term
horizons, they have picked up sharply. What limited information we have on the public's
medium-term expectations suggests that the expectations might have been more contained,
and might more recently have started to edge down a bit. But it is hard to know how much
weight to place on that.
But if the upside risks to medium-term inflation are not yet firmly embedded in expectations
and so are not evident across the nominal indicators, we certainly cannot conclude that the
risk has passed.
Headline inflation outturns remain elevated, and could top 5% - well above the 2% target -
for a number of months. Not only have goods prices accelerated, reflecting the direct impact
of food and energy prices, but services inflation has risen too (Chart 7). As a diagnostic of
the underlying upside risks, ignoring the direct effect of past increases in food and energy
prices, inflation has reached around 2%. Sterling's recent depreciation will give a further
impulse to import prices; and so, other things being equal, may stretch out the period of
uncomfortably high inflation, endangering inflation expectations.
Moreover, there remains a risk of continuing inflation impulses from the persistence of
imbalances in the global economy.
Global inflation, global imbalances and the international monetary regime
The rate of nominal expansion in much of the emerging market world has remained brisk.
From our point of view, up until recently that seemed to add to the upward impetus to
commodity prices, exacerbating the upward pressure on our firms' costs.
Of course, part of the rise in commodity prices over the past few years is explained by a
profound structural shift as the world economy is joined by large, rapidly developing
economies which are increasingly energy intensive. In addition, nominal demand has
probably played a role recently. Some EMEs have exchange rates that are fixed, more or
less, to the US dollar, and so have been importing a monetary easing, which they hardly
needed, as the FOMC cut the Fed funds rate to address domestic US circumstances. In
other countries, there has also been less than complete sterilisation of the monetary effects
of exchange rate intervention. Absent offsetting policy action, eventually the nominal
expansion permitted will be dissipated in rising inflation and so an appreciation in real
exchange rates. For a given path of nominal demand, that would tend to reduce the pressure
of demand on global commodity prices, as many of the largest EME economies are,
basically, commodity importers themselves. But persistent elevated inflation in the EMEs
would also increase the nominal price of some of our imports, unless an adjustment in
nominal exchange rates were permitted. In fact, over recent months there have been some
steps towards taking domestic monetary action across a number of emerging market
economies. But there is a risk that higher EME inflation will persist if, left unchecked, it
becomes embedded in inflation expectations.
With inflation also elevated across the major industrialised economies, this underlines the
risk to global inflation from imbalances in global supply and demand. Individual countries can
suffer exogenous shocks to inflation from commodity prices, but that is essentially a relative
price shift, to which the world economy has to adjust. By contrast, a persistent rise in
inflationary pressures cannot be exogenous for all countries collectively. In that respect, the
international monetary regime, and the global imbalances it has sustained, continues to pose
risks to the outlook for our economy.
Indeed, in terms of where we find ourselves, we must take care not to put the cost shock and
the credit shock in completely separate boxes. They both owe something to global
imbalances. Early commentators on the developing international monetary system,
combining a mixture of floating and fixed-rate exchange rates (so-called Bretton Woods II),16
were inclined to the view that current account imbalances would prove sustainable -
essentially because Asia would, they assumed, continue to finance the USA's savings deficit.
But, as has become apparent over time, that seemed to rely on the invisible hand smoothing
over the counterpart imbalances within some net debtor economies, notably the USA; or,
more crudely, of it making no difference that, in aggregate, American households had
effectively given up saving.
Given the now widely acknowledged ex ante imbalance a few years ago between global
investment and Asian-fuelled global saving, this was associated with a compression of
longterm risk-free rates and an associated rise in asset prices. And given frictions elsewhere in
the system, including the US GSE's guarantees reducing the headline returns on
primemortgage securitisations, that contributed to compression in risk premia. And that, I fear,
fuelled a "search for yield" in which investors, having enjoyed the extraordinary windfall gains
that accompany rising asset prices, extrapolated forward their elevated ex post returns into
ex ante requirements (Diagram A).17 (Such extrapolation amounts to a bubble, but via the
channel of a requirement or target rather than, directly, a simple expectation.) There's only
one way to deliver on such requirements in those conditions: take more risk and hope no one
prices for it. Leverage and maturity transformation were the order of the day. Macro met
finance, and the results were unhappy - a theme I shall return to later.
For too long without success, monetary policymakers and international institutions called for
resolution of the global imbalances. Perhaps with hindsight, the industrialised economies
should have been clearer about their own course in a second-best world in which some
important exchange rates have remained semi-fixed for longer than believed ideal. The
second-best probably involved measures to generate more domestic saving; may have
invited tolerance for temporarily lower inflation; and perhaps tighter regulation of liquidity
provision by the commercial banking system. But whatever the hindsight, there remains a
pressing need to evaluate now the continuing risks from the pattern of global current account
positions and capital flows.
For researchers, this unfinished episode in global economic history underlines the
significance of international monetary economics, but perhaps also a need to integrate it not
only with the theory of asset pricing but also with a rich appreciation of credit creation and
risk.
Risk premia, money, default and crises
Indeed, an implicit theme running through various threads in my remarks this morning, which
I shall now try to pull together, is the need for further progress in integrating macroeconomics
and finance - applied as well as theory. I will give a few reasons why.
As well as compensating for expected default, expected inflation and so on, yields on assets
embody risk premia to compensate for uncertainty in future returns. In the modern literature,
these risk premia are taken to be determined by how useful a financial asset is in helping
households to smooth the path of their consumption. Assets that deliver low returns during
bad times don't contribute much to helping households sustain consumption, and so carry a
higher risk premium. So risk premia might vary with the volatility of the asset return; the
volatility of consumption; and with the correlation between asset returns and consumption.
Like other economic variables, such premia may change as their underlying determinants
change, and given the nature of the "shocks" affecting the macroeconomy. All that is familiar,
fairly orthodox stuff these days. Indeed, an extraordinary amount of work at the
macro/financial frontier has been going on over recent years. But as John Cochrane has
commented, "work has barely begun".18 From a policymakers' perspective, that does seem to
be the case.