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Lucky
Greenspan
How many among you governors out there would employ
economists to prove that your high reputation as a consummate
central banker was nothing more than the result of pure
luck? And then publish the results in your house journal?
That seems
to be what Alan Greenspan has allowed to happen, with
the publication of a paper by three researchers at the
Board of Governors offices in Washington saying that
the reduced volatility of the US business cycle is the
result of good luck:
"Although
better practices and better monetary policies have played
some role in explaining the decline of US output volatility
in the past 10-15 years, good luck is probably the leading
explanation", they say in a paper posted on the Fed's
website (http://www.federalreserve.gov/pubs/ifdp/2002/730/default.htm),
i.e. the economy had been subject to fewer adverse shocks.
In a gesture
of generosity towards their boss, they say that better
monetary policies might have helped reduce expectation
of future inflation - but apparently that was too difficult
for their econometric models to test.
Memo to the
boss: keep trying.
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Unlucky
Trichet...
The fact that Jean-Claude Trichet's ascension to the
throne of the ECB has once more been thwarted will by
now have escaped the notice of few, if any, members
of the central banking community. But many are still
puzzling about why on earth Philippe Courroye, France's
top magistrate, is apparently compromising France's
chance for such a top job? It was pointed out in a letter
to the Financial Times that the same principles could
be applied to Trichet as were applied to Valery Giscard
d'Estaing who now heads the European Union Convention
despite the scandals that marred the end of his presidency.
Likewise the French accepted Jacques Chirac as their
president despite the corruption charges he faced. And
as for Mitterand, well, we all know what he got up to.
Certainly, Trichet will earn much sympathy among his
peers if it seems he is being made a scapegoat or is
a victim of a witch-hunt.
Although
not fully clear yet, the answer to the puzzle seems
to be that France is in the midst of one of those almost
puritan "cleansing of the stables" episodes that afflicts
many Christian countries from time to time.
There is
a populist, anti-elitist mood abroad in the country.
The feeling is - "those top dogs, those inspecteurs
des finance, together with the fat cats of industry,
have had it all their own way for far too long."
Then there
is the sheer scale of the losses at Credit Lyonnais
when Trichet was head of the Treasury and the alleged
connivance of the Treasury in allowing the bank to present
inaccurate accounts - concealing the true scale of the
losses. The fact that central banks have in the past
turned a blind eye to commercial bank manipulation of
their true profits - often with the full approval of
governments - in order to keep confidence in the banking
system counts for little in this new age of transparency.
Trichet is expected to deny that he played any role
in preparing Credit Lyonnais' accounts and he was merely
doing his job as a public servant.
As for France's
right to the top job at the ECB, most central bankers
accept that it will be a Frenchman.
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...Opens
The Door For Lemierre?
But which one? And will the take-over be next year,
which is when Duisenberg says he wants to retire? Remember
Duisenberg was only pushed into the rather humiliating
private "promise" not to serve out his term because
of a messy compromise reached at the 1998 European summit.
Will Duisenberg now stay on after all?
Few think
so, which puts the governments on the spot - and puts
the ECB in the political limelight again, as this will
not leave enough time for Trichet's name to be cleared
since his trial will not start until at least March
next year. The favourite now is probably Jean Lemierre,
currently head of the European Bank for Reconstruction
and Development - and another typical traditional top
civil servant. Herve Hannoun, a deputy governor of the
Banque de France, is probably too much on the left for
the Chirac government - he was an adviser to Mitterand.
A bid from Dominique Strauss-Kahn, former finance minister,
should not be ruled out.
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Duisenberg
Bears His Crosses
For all the downsides of being president of the ECB,
there are certainly one or two perks that come with
the job. This week Wim Duisenberg gained another laurel
for his wreath when the German president decorated him
with the much-envied Grand Cross 1st class of the Order
of Merit of the Federal Republic of Germany in recognition
of the part he has played in achieving European unity,
establishing the single currency and ensuring the stability
of the euro. Duisenberg is no stranger to such accolades,
and over his career has been showered with quite a number
of them.
His collection
of honours features a couple of other Grand Crosses
of the Order of Merit, from Luxembourg and Senegal,
together with a Grand Cross of the Order of the Crown
from Belgium. The Swedes, for their part, preferred
to ornament him with the more romantically named Knight
Grand Cross of the Royal Order of the Star of the North.
The ECB president can also boast a couple of more military
embellishments: Commander of the Order of Orange-Nassau,
Commander of the Order of the Netherlands Lion and Commander
of the Légion d'Honneur (from France).
Such a refulgent
array of honours would be enough to sate even an ambitious
man's ego. Indeed, despite his ever-youthful appearance,
Duisenberg has indicated he may be growing weary of
his burdensome duties by remarking, in accepting the
latest honour, that it "makes the responsibility I am
bearing as president of the ECB indeed feel somewhat
lighter."
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Thus
Spake Milton Friedman (Part Two)
In the last issue of Newsmakers, I made a passing reference
to Milton Friedman's scepticism over the euro. Since then,
Central Banking Publications has done an interview of
its own with the great man, which will appear in the forthcoming
issue of Central Banking journal (available from 16 August).
He reaffirmed his feelings on the euro and cautioned that
"If I were a Briton I would be against joining it". |
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Postbusters
One Washington insider - and doubtless anyone else working
in the official sector in Washington feels the same -
is disgruntled with the sorry condition in which he receives
his post. This is now routinely and irreparably mauled
by over-enthusiastic post monitors. On receipt of his
brand new copy of the Financial Regulator journal, he
was, quite understandably, not a little upset. He explained:
"Unfortunately, the security measures that were put in
place for mail passing through DC last autumn have not
treated it kindly. Basically, to prevent the spread of
anthrax through the mail everything is now subjected to
heavy pressure (squeezing the life out of credit cards)
and then irradiated (which produces some nasty chemical
reaction with paper with the result that it becomes as
brittle as 500 year old parchment). In my view this is
a typically American overreaction to risk, but it does
mean that much of our mail arrives in terrible shape."
This particular item was "not an exception to this and
it arrived in the form of a single solid board which can
be opened between pages 44 and 45, but at none other."
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Ignatyev's
New Deputy
Recent shuffling among the upper ranks of the Central
Bank of Russia continues as Sergey Ignatyev, the new governor,
signed an order appointing Konstantin Korishchenko as
his number two. He worked at the bank between 1992 and
2000 after which he made off to the private sector to
become managing director of a local investment company.
He will work alongside the other deputy chairmen amongst
whom duties will be redistributed to accommodate the new
arrival. |
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Downsizing
The Banco de España is to depart from the current trend
among EU central banks of increasing staff numbers with
its announced closure of 31 of its offices by December
2004, to affect some 340 employees. They will either take
early retirement or be relocated. With a current total
of 54 branch offices, the central bank intends to cut
this back to just one per autonomous region. In fact this
is not a new plan, and has been in the offing for a number
of years, although it was put on hold with the advent
of the euro. |
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Uruguay:
Julio De Brun Chosen
Just weeks after Argentina's central bank saw its governor
Mario Blejer walk out the door, the directorship of
neighbouring Uruguay's central bank has now also been
infused with fresh blood. After the resignation of the
country's economy minister Alberto Bension at the beginning
of this week, the central bank's board followed suit
in quick succession. Bension had been facing increasing
pressure to resign after losing the confidence of a
part of the ruling coalition government as Uruguay's
traumatised economy seemed to show no signs of improving
under his direction. Brought down with him were the
central bank's president, César Rodríguez Batlle, its
vice-president, Eva Holz, and its director, Rosario
Medero. Although the president of the central bank is
also the cousin of the president of Uruguay, Jorge Batlle,
this by no means ensured the sanctity of his tenure,
and he cited a lack of political support to explain
his resignation.
The president
appointed a new economy minister, Alejandro Atchugarry,
who in turn chose Julio de Brun as new president of
the central bank. He is a trained economist who previously
headed the state-run National Development Corporation,
which promotes investment, and he has also worked as
a consultant to businesses. He was instated last Thusday
along with Miguel Vieytes (a lawyer) as vice-president
and Andrés Pieroni (another economist) as director.
It is naturally hoped they will succeed in extirpating
the troubles dogging the benighted economy which shrank
10.1% in the first quarter, while this year almost 40%
of bank deposits have evaporated and international reserves
have plummeted nearly 70%. De Brun gallantly declared
as he accepted the presidency that he would "take all
the necessary measures to ensure the strength of the
financial system and to bring to justice those people
who do not respond to the need to maintain trust in
the banking system." He made clear that "there is no
room in this country either for negligence or for actions
that could undermine the confidence that there should
be in this financial system."
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Central
Banker Tells Prime Minister To Mind His Own Business
Pridiyathorn Devakula, Thailand's central bank governor,
defended his patch by reacting with protective vigour
when prime minister Thaksin Shinawatra stuck his oar
into affairs properly dealt with by central bankers.
Devakula betrayed extreme irritation at the prime minister's
remarks about the recent performance of the baht, now
at its highest level for two years. Devakula stated
his opinions in no uncertain terms: "The prime minister
should not comment on the exchange rate because this
is the business of the Bank of Thailand governor."
Elsewhere,
Devakula has hit the headlines by boasting of his no-nonsense
working style: he has no time for mincing his words
or dilly-dallying. He denies he is a grey technocrat,
and characterises his approach as "totally private sector"
- he is "just a problem solver". He explained, "When
you have to decide, decide and do it. Analysing, hanging
around for months, letting time solve the problem, it
won't work. We have to solve it now."
Well, there's
one central banker not afraid to live dangerously.
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Caribbean
Machinations
The tall, elegant, Winston Dookeran gracefully bowed
out of the Central Bank of Trinidad and Tobago when
his five-year term as governor expired after the government
decided not to renew his term. This provoked his supporters
to hint that he was politically unacceptable. Dookeran
was himself formerly the minister of finance for the
party now in opposition. In fact, he was the first politician
to be appointed governor of the central bank, according
to a local paper, which argued that it was "not unexpected"
that in a country beset by political stalemate, the
new government would have been "more comfortable with
someone bearing less political baggage."
It should
be said that Dookeran's successor, Ewart Williams, has
nothing but praise for the outgoing governor, and recently
said: "During his watch inflation was maintained at
a very low level… There was remarkable exchange rate
stability, a significant growth in reserves and a strengthening
of the banking system. If that is the mission of the
central bank governor, he has been very successful in
executing his mission." Williams himself has also been
widely praised, for what he has achieved both at the
central bank when he was a research economist in 1988-89,
and at the IMF where he moved to from the central bank
to become deputy director and senior personnel manager
in the western hemisphere department. He has given economic
policy advice to governments and central banks in Africa,
Latin America and the Caribbean and has thus brought
to the bank a wealth of experience in monetary and fiscal
affairs.
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Name
Games
With the euro changeover now comfortably out of sight,
south of the Mediterranean there have recently been murmurings
of preparing for a common African currency. Of course
there is a way to go, but planning has to start some time.
For his part, South African Reserve Bank governor Tito
Mboweni has mooted a possible name for the currency. Since
the currency would in some ways model itself on the euro,
why not extend that to the name? In his customary jovial
manner, Mboweni is reported by the South African Press
Association as suggesting that the new currency could
be called the "afro". |
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Prize
For Central Bankers
Budding central bankers wishing to earn their spurs may
wish to enter the competition held by the Centro de Estudios
Monetarios Latinoamericanos (Centre for Latin American
Monetary Studies). Each year it offers a prize for the
person who can submit the most impressive study on any
topic relevant to Latin American central banking. The
prize was established to honour the memory of revered
former governor of the Bank of Mexico Rodrigo Gómez, who
held the position for eighteen years from 1952-70. Previous
winners of the prize include the current governor of the
Bank of Mexico, Guillermo Ortíz Martínez (in 1978), as
well as Mario Blejer (in 1976) who recently resigned as
governor from the Argentine central bank. To find out
more, visit CEMLA's web site: http://www.cemla.org/premio.htm |
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