Macro Economy Weekly
December 24, 1999
- No 137 -
The Crisis of History
Kazuo Mizuno
Chief Economist
Financial Market Research Department
Edited by Corporate Research Section
Equity Research Department
Kokusai Securities Co., Ltd.
The Crisis of History
K. Mizuno
Chief Economist
Financial Market Research Department
Summary
A situation very similar to the ?crisis of history? (revolution, war, invasion, etc.) that occurred 200 years ago with the French Revolution is being repeated today in the nations of eastern Europe, the political losers of the Cold War?s end. Furthermore, with the advancement of globalism, the situation is also the same in Japan, which lags far behind economically. A nineteenth century Swiss historian once said, ?Even if it is nothing more than a relatively minor event, history requires exorbitant preparation and incomparable uproar? (Noda, 1992). Since the end of the Cold War, globalism has been redrawing the map of the world?s excess supply capacity, and, if we interpret things in this way, Japan is currently in the middle of its own ?crisis of history?. Since August 1992, Japan has implemented nine separate economic stimulus packages worth a combined 125 trillion yen, yet these have managed to boost Japan?s economic growth rate by mere tenths of a percent.
As a result, while the benefit of a slight degree of positive economic growth would be obtained if the economy mounted a sustained recovery (although it is questionable whether this would outweigh the cost of 647 trillion yen in debt), at this rate a sustainable economic recovery is unrealistic. In Japan?s non-manufacturing sector, which has no choice but to take unprofitable assets off the books, little if any progress has yet been seen. During the first half of FY 99, the average ROA level of corporate borrowers in the non-manufacturing sector improved by a mere 0.3 percentage points versus the year earlier. This despite the fact that in FY 98, extraordinary losses exceeded extraordinary profits by 70%, and companies (as a whole) posted red ink (on a net income basis) for the first time in the post-war era. Accordingly, ROA levels remain no better than the already low (near zero) interest rates on borrowed funds. Unless companies made significant progress in restructuring their existing assets and liabilities, marginal ROA levels will either remain where they are or sink even lower on average.
Just like the corporate borrowers that are unable to carry out fundamental restructuring, Prime Minister Keizo Obuchi will also be regarded as nothing more than ?the debt king of the world?, and he will find it impossible to promote meaningful policy measures. If the focus remains fixed on an immediate economic recovery only, then FRB chairman Alan Greenspan, who has already made globalism his primary ally, will certainly choose Japan as the adversary in his plan to bring about a soft landing for the U.S. stock market. The benefits to the U.S. of such a soft landing will necessarily be offset by disadvantages to foreign economies. This is in start contrast to the case of Japan, where there is currently a trade-off between the interests of the present generation and the interests of future generations. During the year 2000, Japan will be forced to choose between the interests of today?s generation or the interests of future generations. If Japan decides to move ahead with quantitative monetary easing, then it will clearly be prioritizing the interests of the present generation in every sense of the word, and this will make Japan one of the biggest losers in the game of ?globalism?.
1. The Year 2000: ?A Global Shortage of Savings?
A Revival of Investment in U.S. Securities America?s current account deficit continues to swell. According to third-quarter figures released on Dec. 14, the U.S. deficit grew to $359.8 billion on an annualized basis, the largest deficit on record. Furthermore, America?s goods/services trade deficit1 for October (figures released on Dec. 16) also grew to a record $25.94 billion, which equates to an annualized current account deficit of $387 billion. In short, the FY 2000 and FY 2001 U.S. current account balance projections announced by the OECD back on November 16 ($411.6 billion for FY 2000, $421.9 billion for FY 2001) are in the process of becoming reality. Although such growth in the U.S. current account deficit would normally be accompanied by a decline in the value of the U.S. dollar, a renewed increase in foreign investment activity in the U.S. securities market (Figure 1-1) has created a condition where the value of the yen is climbing all by itself. Consequently, although the dollar is weak relative to the yen, it remains strong relative to the euro.
(Figure 1-1) Investment in U.S. Securities Increasing Again
Because U.S. hedge funds and other institutional investors are building positions by borrowing euros and buying the NASDAQ, we are seeing increased selling of euros for dollars. Additionally, because the increase in U.S. stock prices reduces the relative weighting of institutional investors? Japanese stock holdings, investment in Japanese equities is also increasing, and this is putting further upward pressure on the yen. Finally, in the third quarter of 1999, investors in the 15 EU member countries started increasing their investments in U.S. corporate bonds in addition to U.S. equities (Table 1-1), and this accelerated the euro?s decline relative to the dollar. Accordingly, on the surface what we are seeing is an unusually strong yen rather than a weak dollar, but in reality this is a reflection of America?s external financing troubles.
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1) * Current account balance equals the ?goods/services trade balance? released each month by the U.S. Commerce Dept., plus net current account transfers and net investment income.
* America?s net investment income has been negative (deficit) since the fourth quarter of 1997, and for the first nine months of 1999 the deficit totaled $13.8 billion ($18.4 billion annualized). Accordingly, the deficit is on pace to exceed the $12.2 billion deficit posted in 1998.
* Because this net investment income is the result of America?s net external debt ($1.5 trillion at current market values), it will continue to exert upward pressure on America?s current account deficit.
(Table 1-1) European Investment in U.S. Securities is Increasing [Box-1]
After the Russian/Latin American financial crisis of August 1998, America?s dollar financing deteriorated to the point that it could be covered only by the selling off of U.S. assets overseas. In the third quarter of 1999, however, the crisis was temporarily averted thanks to a renewed increase in investments in U.S. securities by the fifteen members of the EU. From August 1998 through June 1999, U.S. interests sold off large amounts of their European stock holdings, but since July the pace of selling has slowed substantially. Along with European investment in the U.S. stock market, forex market intervention by the BoJ (buying dollars for yen)2 has also facilitated U.S. dollar financing, and since August there has been a noticeable increase in U.S. securities investment by Japan?s private sector. Since the G7 meetings in late January 1999, the U.S. has been pressuring Japan to ease its monetary policy and, more directly, has been demanding that the Bank of Japan increase the scale of its ?JGB buying operations? and carry out more unsterilized intervention, and the primary objective of this policy?which has so far proven successful?is to resume the flow of Japanese capital to the U.S. by preventing an increase in Japanese long-term interest rates and keeping the gap between U.S. and Japanese rates as wide as possible.
Global Savings Not Keeping Pace With America?s Current Account Deficit However, even if the U.S. has been able to shed its external financing problem, this only means that it has secured sufficient ?quantity?, and U.S. dollar financing needs, which continue to increase steadily, still carry the tremendous costs of a weak dollar (relative to the yen) and rising long-term interest rates. In short, the price adjustment mechanism of the markets is working. Because rising long-term rates in the U.S. will put the brakes on the high-leverage strategies of U.S. companies3, America?s external financing via the combination of a weak dollar, higher interest rates, and soaring stock prices is self-contradictory. This is because rising U.S. stock prices effectively boost the purchasing power of U.S. households, which tends to increase the potential amount of dollar financing required by the U.S., and this, in turn, puts even more downward pressure on the dollar and upward pressure on U.S. interest rates. In fact, although there still appear to be no immediate signs of inflation, on November 20, the day before the FED was expected to shift toward a ?tighter bias? at its FOMC meeting, the yield on 30-year Treasury bonds jumped to 6.44%, the highest level in over two years (since 22 October 1997, shortly after the Asian monetary crisis).
In terms of interest rate levels, America is quickly rebounding back to the conditions seen immediately after the Asian monetary crisis of 1997?to say nothing of those after the Russian/Latin American financial crisis. However, corporate bond yields are still not anywhere near their levels of October 1997. Looking at the credit risk of corporate bonds, the spread relative to 30-year Treasury bonds remains very large (Figure 1-2). This is because the spread did not widen as a result of Y2K-related concerns, but rather as a result of the increasing dependence of U.S. companies on overseas investors for financing. Although U.S. corporate bond purchases by overseas investors, which were already on an upward trend, increased further in the third quarter of 1999 (Table 1-1), roughly three-fourths of the 17.13 billion yen increase versus the previous quarter can be attributed to European investors. Despite a strong U.S. dollar, these European investors, the largest group of investors relative to the U.S., are clearly demanding large yield spreads. If we assume that America?s growing external imbalance will eventually lead to a weaker dollar, foreign investors have no choice but to demand corporate bond yields that are both higher than normal and higher than Treasury bond yields. Because the U.S. economy is growing at a 5% annual pace, there is no reason to expect that corporate bankruptcy risk is increasing.
(Figure 1-2) Yield Spread Between Corporate Bonds and Treasury Bonds Fails to Narrow
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2) BoJ intervention during 1999 was as follows: (in trillion yen)
99/1 6 7 9 11
1.23 2.78 1.46 1.04 0.41
3) * The high-leverage strategy of U.S. companies is possible only as long as Treasury bond yields do not exceed 7.00%. This concept is illustrated in Figure 1-3 in our report of 8 December 1999 (No. 135).
* U.S. long-term interest rates began rising in step with the increase in external financing (= growth of current account deficit) in early 1999. Please see Figure 1-1 in our report of 24 November 1999 (No. 133).
* In the third quarter of 1999, America?s current account deficit totaled a record 3.9% of GDP (previous peak was 3.5% in the fourth quarter of 1986).
* If America?s current account deficit reaches $420 billion (annualized), then it will total 4.5% of GDP, and 30-year Treasury bond yields could climb to 7.0% regardless of inflation.
The rest of the world simply does not have sufficient savings to cover U.S. external financing in excess of $400 billion. According to IMF projections, in the year 2000 the world?s non-debtor nations (current account basis) will record a combined current account surplus of just $270 billion. And even if we consider the ?errors and omissions? of both the debtor nations and the creditor nations, the world?s aggregate current account surplus still totals no more than $430 billion. Further, if the world?s creditor nations (those with current account surpluses) do not amend their fiscal and monetary policies, then it will eventually become impossible for debtor nations other than the U.S. to post a current account deficit. In reality, however, it is unrealistic to suppose that the very survival of debtor nations other than the U.S. could become threatened. For instance, after emerging economies suffered a currency crisis so severe as to dwarf the Russian/Latin American crisis of 1998, debtor nations would become creditor nations. However, because the Latin American region ranks second behind the U.S. as the world?s largest net debtors, any future monetary crisis will be none other than a U.S. financial crisis. If so, then a U.S. current account deficit in excess of $400 billion could not happen without drastically altering the present system of market-determined prices.
2. Globalization and the ?Crisis of History?
Japan to Face Growing Pressure for Quantitative Monetary Easing During the Year 2000 If the U.S. attempts to secure over $400 billion in external financing in order to keep the present system of market price determination from changing?in other words, to keep stock prices and the value of the dollar from declining, then Japan?s fiscal and monetary policies could not remain unchanged in the year 2000. Fiscal policy would have to be even more aggressive than it was in 1999, and in addition to the current policy of 0% effective interest rates, quantitative monetary easing would also have to be carried out in order to further expand the money supply. If this were to happen, Japan would see even more of its capital exported overseas, thus facilitating America?s external financing demands. However, Japan?s zero-interest policy, which the BoJ has justified by asserting that ?interest rates and money supply are two sides of the same coin?, would then become separated from interest rates and become the opposite side of the same coin with a strong U.S. stock market. The fact that Japan?s 0% interest rate policy is barely linked to ?interest rates? is justified in the sense that it is keeping the level of interest rates on borrowed funds below the ROA levels of Japanese companies (see Box-2).
Just as aggressive fiscal spending became unrelated to economic recovery and must be continued indefinitely from the standpoint of money creation, the interpretation of monetary policy is also on the verge of being changed to ?until there is evidence that deflationary risks have abated?. On the surface, at least, if ?interest rates and money supply are two sides of the same coin?, then excessive fiscal spending will eventually be halted?albeit one or two months later?in the form of rising long-term interest rates. However, if the linkage between interest rates and money supply is severed, and the focus turns to money supply alone, then the creation of money in Japan will effectively be implemented without limit. At this point Japan?s fiscal and monetary policies would be intimately linked to the support of America?s external financing and a strong U.S. stock market. If a weaker dollar and falling U.S. stock prices became a concern, the risk of Japan?s own economy crumbling would increase, and Japan would then be forced to maintain its policy of 0% effective interest rates indefinitely.
However, if the BoJ were to move ahead with quantitative monetary easing, then the U.S. would become increasingly inclined to suffer from a shortage of financing even if it were to attract all of the surplus savings the rest of the world has available, and eventually the shortfall would have to be made up via the fiscal and monetary policies of Japan. In short, the adjustment mechanism of the markets would eventually operate in the process of balancing out this swollen dollar financing. A decline in the value of the dollar would lead to an increase in U.S. long-term interest rates, and the resulting decline in U.S. stock prices would put further downward pressure on the dollar. Under normal circumstances, if U.S. stock prices had declined just as the value of the dollar was starting to fall relative to the yen as a result of the problems associated with America?s $400 billion in external financing (Figure 2-1), we would have see a dramatic decline in the dollar along with a sharp rise in the value of the yen. The ultimate result of aggressive fiscal spending and quantitative monetary easing by Japan will be the removal of Japan?s high value-added manufacturing industries to offshore locations. Indeed, policies intended to preserve the status quo will actually lead to the opposite result. By the end of 2000, Japan?s massive national debt of over 647 trillion yen will no longer be able to be covered by Japan?s remaining unprofitable capacity. The only way to repay this debt will be to raise the consumption tax level to double digits.4 In order for Japan to reach its FY 2000 target of 1.0% real GDP growth, it will have to accept a period of steep tax hikes in the future, and this will cause a deflation shock that will dwarf that of 1997, when the consumption tax rate was boosted from 3% to 5%. In other words, the current economic recovery is simply being bartered for a severe recession in the near future.
(Figure 2-1) All of the World?s Savings are Still not Enough
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4) According to estimates by the Economic Strategy Council, ?? in order to merely keep the national long-term debt from increasing further (not reduce it), if public works spending and social welfare spending is not reduced, the consumption tax rate would have to be gradually hiked to at least 14%? (Asahi Shimbun, 21/12/99).
America?s ?Net Bubble? Versus Japan?s ?Fiscal Bubble? The strength of the U.S. stock market since the beginning of 1999 can be attributed largely to the acceleration of global capital transactions facilitated by Japan?s 0% interest rate policies and 40 trillion yen in economic stimulus programs (Figure 2-2). Although monetary crises put the brakes on America?s foreign capital transactions in 1997 and 1998, the pace increased again during the first three quarters of 1999. During the 1990s, America?s foreign capital transactions have outdistanced those of the world?s other industrialized economies, and the U.S. has reaped the benefits of globalization in the form of a soaring stock market. In order for the U.S. to continue reaping those benefits in 2000, Japan will have to carry out quantitative monetary easing. At the present time, the FRB is carrying out the ?most extensive monetary easing? in the post-war era in response to Y2K-related concerns, and America?s immediate financing needs are being met through the borrowing of euro and buying of the NASDAQ. Unfortunately, however, such a scenario can only continue through the first part of April 2000.5
(Figure 2-2) Global Capital Transactions Heat Up Again
After April 2000, Japan will be expected to finance America?s capital requirements. Because the 18 trillion-yen economic stimulus package laid out in November 1999 will create additional money in Japan between March and May of 2000, there should not be any major problems immediately after the FRB?s Y2K-related spending measures expire. Nevertheless, Japan?s 18 trillion yen in spending will only generate new money creation through May. From America?s standpoint, quantitative monetary easing by the BoJ will be necessary in order to facilitate a smooth hand-off from Europe to Japan. In other words, a ?fiscal bubble? in Japan will be needed to support a ?net bubble (NASDAQ appreciation)? in the U.S. (Figure 2-3). As for this ?fiscal bubble? in Japan, it will lack steam in terms of the initial FY 2000 fiscal bubble compared to that following the FY 99 supplementary budget. According to the Finance Ministry proposal announced on Dec. 19, the amount of new government debt to be issued in FY 2000 will be 32.6 trillion yen, 6 trillion yen less than after the FY 99 supplementary budget (Table 2-1). Accordingly, until additional new money is created via a supplementary budget for FY 2000, it will be necessary for the BoJ to move ahead with quantitative monetary easing.
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5) FRB, ?Century Date Change News, Fall 1988?
(Figure 2-3) America?s ?Net Bubble? Vs. Japan?s ?Fiscal Bubble?
(Table 2-1) New Revenue Bond Issuance Scheduled for FY 2000 Down by 6 Trillion Yen Versus FY 99
The fact that Japan?s national debt will not level off without the consumption tax rate climbing to 14% is just as unsustainable as the threat of America?s external financing on the survival of the world?s other debtor nations. However, what is actually unsustainable is currently being facilitated by Japan?s aggressive fiscal spending and 0% effective interest rate policies. Nevertheless, there is a very clear gap between the respective perceptions of the U.S. and Japan. In Japan?s case, as seen in the statement by Prime Minister Keizo Obuchi (?I have finally become the ?debt king? of the world. The Japanese Prime Minister is the only one in the world with a debt of 600 trillion yen.?6), there appears to be nothing but indifference toward the ultimate result of aggressive fiscal spending and 0% effective interest rates. After a period of super-deflation caused by an overly strong yen and super-low interest rates [Box-3], Japan will likely be buffeted by a period of hyper-inflation caused by an overly weak yen and a sharp rise in long-term interest rates, and by then it will be too late to act.
Greenspan?s Long-term Strategy On the other hand, the interest rate policies of FRB Chairman Alan Greenspan are based on a long-term strategy that reflects America?s national interests. This strategy is to buy some time while hiking interest rates gradually for the purpose of stimulating stock sales by households and achieving a soft landing for the U.S. stock market, and after these sales are absorbed by foreign investor buying, it will be acceptable to hike interest rates more sharply. Consequently, U.S. households will be able to sell high and then buy shares back after prices decline. Net buying by U.S. households would mean an increase in the U.S. personal savings rate and a narrowing of America?s current account deficit. In short, America would be able to correct its external imbalance while simultaneously reducing the impact on U.S. households. This is Greenspan?s so-called ?American water is truly delicious!? strategy. The pattern of interest rate hikes since May 1999, when the FRB shifted from a ?neutral? monetary stance to a ?tighter? bias, has taken some time, with the FRB returning to a ?neutral? stance after each rate hike. The Fed, in fact, has never carried out successive rate hikes. In fact, at last week?s FOMC meeting (Dec. 21), the Fed even delayed shifting its monetary stance back to a ?tighter? bias.
Just as Greenspan must have planned, there has been a dramatic increase in Japanese investment in U.S. securities since this past September. This is because Japanese investors, who were net sellers throughout most of 1999 (through August), have become net buyers (Figure 2-4). Indeed, the ?buy high, sell low? scenario that Japanese investors experienced in the U.S. real estate market during the 1980s could happen again. This is because Japan?s aggressive fiscal spending and 0% effective interest rates are stimulating the creation of too much new money. The end result of policies that have put the highest priority on economic recovery could ultimately be a double-digit consumption tax rate, the transfer of manufacturing operations overseas, and hyper-inflation. Because this will trigger a weaker yen and higher interest rates, however, tax receipts will not increase. Accordingly, the national debt will not be erased.
(Figure 2-4) Japanese Investment in U.S. Securities Has Been Climbing Since August
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6) ?A source close to the Prime Minister describes the Prime Minister?s inner feelings as abstract rather than dire. ?With apologies to the Japanese people, I have no choice but to approve the increased issuance of deficit bonds.? This is how the Prime Minister appears to feel recently.? (Asahi Shimbun, 21/12/99)
This can only be called a ?crisis of history? (Noda, 1992). ?The 19th century Swiss historian Jacob Brookhapt, who wrote ?An Examination of World History? with the French Revolution as a clear point of reference, wrote that within ?crises of history?, revolutions and other individual ?crises of history? show signs of innumerable changes, and that within the cumulative span of ?crisis?, there is a mysterious sameness based on ubiquitous human nature. ? In most cases ?crisis? begins with this kind of ?comedy of gaudy desires?, with even the most pessimistic of individuals becoming raving optimists. Just as Brookhapt says, at each stage of a ?crisis? people blindly cling to the representatives of the previous stage and continue to push the crisis forward. Terrible tyrants can then be replaced only by tyrants who are even worse? (Noda, 1992). During the 1990s, the fact that Japan?s political reforms have been steadily reduced, while at the same time an administration that pursued fiscal rebuilding was replaced by an administration that has optimistically vowed to continue spending aggressively until the economy recovers, could lead to a repeat of the history that occurred two centuries ago in Europe, and this must not be allowed to happen.
* As we will be off next week, our next report is scheduled for January 5.
<Box-1>
Investment in U.S. Securities ? Activity by Hedge Funds Heats Up Again ? P2
* Investment in U.S. securities by European and Latin American investors is increasing (see Figure-a). In particular, investment money from Latin American tax havens increased in both the second and third quarters of 1999 (Figure-b). At the same time, the amount of ?errors and omissions? in America?s international balance of payments is also increasing.
* When the ?errors and omissions? shown in Figure-b are negative, this suggests that U.S. monetary authorities are not adequately supplementing the U.S. capital that is flowing overseas. The money flowing out of the U.S. as ?errors and omissions? is temporarily posted to the accounts of these tax haven countries, and most likely it then flows back into the U.S. after ?formally? being recognized as belonging to overseas investors.
* Figure-b shows that investment activity by hedge funds is increasing again.
<Box-2>
A Note Concerning the ROA Levels and Interest Rates on Borrowings (I)
of Non-manufacturing Companies ?. P4
* Despite losses posted in FY 98 due to massive extraordinary charges, ROA levels failed to rise significantly during the first half of FY 99.
* The average ROA level rose by just 0.3 percentage points during the first half of FY 99. Broad-based restructuring is showing relatively few results.
* In September 1995 the discount rate was lowered by 0.5% not to stimulate an economic recovery (although indirectly it did), but rather to reduce the interest burden on corporate borrowers and prevent any further increase in debt/interest forgiveness (to stabilize the financial system).
* Based on this interpretation, it will be virtually impossible to end the policy of 0% effective interest rates during FY 2000.
* Moreover, if corporate restructuring accelerates, long-term interest rates will not rise either. Consequently, if the discount rate and overnight call rate remain around 0.5% and 0.4%, respectively, the yield curve will flatten out, and corporate interest costs will not increase.
<Box-3>
A Note Concerning Japanese Government Bond Yields ? P7
* Even if a sharp appreciation in the value of the yen did not occur, long-term Japanese interest rates would still be expected to decline to the 1.2% level by the middle of 2000.
* During FY 2000, JGB issues (new funding) are expected to total 32.6 trillion yen, 6 trillion yen less than in FY 99 (after the second supplementary budget) (see Figure-d).
* If businesses proceed to trim their balance sheets (both assets and liabilities), and it is becoming increasingly vital that they do so, government bond holdings by private financial institutions will increase, and the JGB market will become tighter.
* If structural reforms in Japan continue to be delayed, the long-term extension of aggressive fiscal spending and 0% interest policies will create problems for dollar financing, triggering a sharp drop in the dollar and a dramatic rise in the yen. As a result, long-term Japanese interest rates (10-year JGBs) could drop below 1%.
* After Japan?s surplus capacity moves offshore, the value of the yen will decline and long-term interest rates will start rising.
[References]
<Section 2>
Noda, 1992
Nobuo Noda, ?The Crisis of History?, Bungei Shunshu
?Brookhart believed that so long as all historical phenomena are rooted in unchanging human nature, they will always display a common pattern regardless of how new and unusual they may seem. Last summer, when eastern Europe began to feel the unexpected winds of change, we should have been reminded foremost of the historical perspective of Brookhart. If so, we could have felt the inevitability of history before a chain of historical events took place at a rapid pace and contrary to our expectations, and with regard to eastern Europe we could have avoided useless expectations and phantom hopes.?
?Brookhart also calls the various stages of ?crises?, in which Utopian ideas reign supreme, ?a time of celebrations and flags?. However, ?crises? do not continue in this glorious and hope-filled stage for long, but rather quickly move on to a second, much more severe, stage. At this second stage, the leaders of the initial movement, are pressured by their status into representing the rest of the people. Furthermore, the movement continues to gain momentum, and when its leaders become even slightly tired or otherwise unable to keep pace with the movement, a new set of leaders soon emerges and assumes control.
?? According to the concepts, similar to those of Brookhart, that were laid out as the foundation for the French Revolution, the ?crises? after the first stage quickly developed in the following way. ? Furthermore, the ideas and principles that so excited the people in the beginning were completely forgotten, and eventually a fearsome political machine emerged and made it impossible for anything constructive to occur. However, up until this point the people are quickly thrown into chaos whenever a ?crisis? evolves, and unbelievable calm is manifest in stark contrast to when the ?crisis? first unfolds. In this way, once we as people awaken from our stupor, we begin to feel that we would settle for any kind of government, no matter how tyrannical, as long as it was able to restore order. Accordingly, the ?crisis? eventually comes to its final stage, and conditions start reverting back via the reign of a Napoleon-like autocracy? (P.14-18).
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