 |
||||
Open for business 6am to 6pm coast to coast! |
||||
| (Home Page) | (How to Buy Gold) | (Gold Coin Images) | (Daily Market Report) | (Live Gold Price) |
| (First-time Buyers) | (Gold Discussion) | (ABCs of Gold Book) | (Gold IRA) | (Buy Gold Coins Online) |
| (European Clientele) |
|
(About Us) | ||
Welcome to the Central Bank Insider Archives. We are pleased to be able to provide you with this intimate look at central banking events, policies, and staff. Commentary is updated as available (generally bi-weekly) and archived monthly. The source commentary "Newsmakers" is reprinted at USAGOLD with permission and by courtesy of Central Banking Publications Ltd.
26 July 2002
******************************************
A selection of news stories from CentralBankNet
http://www.centralbanknet.com/
By Benedict Mander
Central Banking Publications
******************************************
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.
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.
...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.
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."
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".
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."
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.
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.
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."
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.
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.
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".
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
12 July 2002
******************************************
By Benedict Mander
Central Banking Publications
******************************************
CROCKETT''S MOVE
Andrew Crockett triggered a feeding frenzy by the financial media when he announced his intention to stand down next March from his role as general manager of the Bank for International Settlements. In the job since 1994, his stepping down will coincide with his sixtieth birthday; more significantly, it also leaves the way open for him to succeed Sir Eddie George when his term as governor of the Bank of England ends in June (the markets expect the decision to be announced by the government before the end of this year). The financial media has delighted in the opportunity to speculate as to Crockett's reasons for giving up the job some nine months before his term ends. As might be expected, Crockett is keeping mum: "I have no plans as to what I will do and I don't intend to make any plans until I have left here. That's all I am going to say."
All manner of theories have been put forward, although few omit to claim that Crockett's motives are opaque: he is quite clearly gunning for Eddie George's job, says the press. Well, that's as may be, but what are his chances? The Cantor Index has cut Crockett's odds from 12-1 to 8-1, and then a few hours later to 5-1, and they currently stand at 3-1 -- he had started the race as a rank outsider at 25-1. Mervyn King is still said to be the favourite, favoured because of the continuity of policy his tenure would offer, while Howard Davies, who was previously tipped to come second, now seems to be languishing in the rear. According to the FT, "Whitehall rumours have suggested Sir Howard is out of the running." Opinions are increasingly being voiced that if there is to be a euro referendum, Crockett, who is very much pro-Europe, would be the best man to have in the position with all the international contacts and experience he has amassed while at the BIS. The choice will be made by the Chancellor, which means in effect by Ed Balls, his economic advisor and former FT journalist.
CENTRAL BANK WISE MEN HEAD FOR BUENOS AIRES
The comprehensive failure of the IMF and the Argentine government to see eye to eye and agree on terms over which a critical new loan can be disbursed, and more generally to come up with a practicable solution to the crisis, has prompted the decision to appoint a handful of trouble-shooting central banking luminaries to save the day. Among their number is counted Andrew Crockett, as well as former central bank governors John Crow from Canada, Hans Tietmeyer from Germany and Luis Angel Rojo from Spain. The one name that one would expect to find on this list is that of Paul Volcker who has recently been a natural member of all these squads. The IMF says they are to visit the erstwhile austral superpower from July 22 to 24. While some have remarked on the IMF's seeming inability to resolve the situation by itself forcing it to resort to outside help -- far from usual IMF practice -- Managing Director Horst Koehler explains that he sees the panel "as advising the Argentine government and ourselves on aspects crucial to the design of a monetary framework." Key aims will be to restrain inflation and ensure the central bank's independence: "These are critical components of a strong and comprehensive stabilization program for Argentina," says Koehler.
BALCEROWICZ UNDER FIRE
The latest indignity directed at Poland's beleaguered central bank chief, Leszek Balcerowicz, is the use of his image as a target at a local shooting range. While gun-toting Poles take pot shots at the central banker, the owner of the range has pleaded guilty to charges of "insult and contempt", and if convicted faces a possible two-year jail term. But this probably provoked little more than a raised eyebrow from Balcerowicz who is perpetually besieged by fierce remonstrations from his unappreciative countrymen.
Despite his sterling efforts to keep Poland on the rails that will bring the nation closer to European integration, recently a radical farmer's trade union has filed a draft resolution in the lower house of parliament for his dismissal, and it is expected that this will be widely backed. They accuse Balcerowicz of sabotaging the Polish economy, aggravating matters by doggedly following a monetary policy that is too restrictive. They allege that he cares more about international financial institutions and foreign investors than Poland's economy -- another drearily familiar refrain from the critics of central bankers. This is much in line with the government's own view, which has recently removed Balcerowicz's bodyguards, signalling its mounting disregard for his person. In the face of such denigration, some have, perhaps wishfully, averred that Balcerowicz wants to resign, although he has brushed aside such claims as nothing more than rumours.
ANTI-CENTRAL BANK CENTRAL BANKER PROMOTED
A peculiar choice has been made to replace Roumen Avramov on the Bulgarian National Bank's board of governors. The government has chosen the outspoken Professor Nikolay Nenovsky to take his place, who was head of the Monetary and Financial Analysis department until March 2002; but he is also a sworn enemy to the very concept of a central bank. Far from seeing central banks as the lubricant that allows for the smoother running of the wheels of the financial markets, he subscribes to what some would call a hard-line "market fundamentalist" view that central banks are quite superfluous inventions. He believes that the financial system would function best with only private credit institutions.
In his book, "The Free Money", he expounds his firmly held belief that the central bank's monopoly is artificially imposed and is an obstruction to free competition. But sooner or later he will have his way, he says, as e-money will eventually supplant old-fashioned banknotes and coins, thus rendering central banks redundant. Inconsistently, he is also a great enthusiast for the euro, which he thinks would work wonders for Bulgaria's financial stability, and an immeasurably more desirable option than the current currency board arrangement. He was one of the group that declared in 1999 that Bulgaria should introduce the euro, much to the chagrin of the bank's governor, Svetoslav Gavriisky. The fact that the euro is issued by a body called the European Central Bank does not seem to bother him.
THUS SPAKE MILTON FRIEDMAN
Ninety at the end of this month, Milton Friedman has recently declared that the euro will be lucky to make it to a sixth of his age. He gives the Eurosystem at the very most fifteen years before it goes to wrack and ruin because of irreconcilable cultural and economic differences between member states. Friedman says that different languages and cultures between the states will bring about its demise, as well as divergent reactions to external economic shocks. The mighty monetary mystic told the German magazine, Capital: "That's why the monetary policy of the European Central Bank, while suitable for Ireland, is completely inappropriate for Germany." [Randy's note to Uncle Miltie: "Huh???"]
KING BILLY AT THE BANK
Time for a history lesson, says the Bank of England. It has launched an exhibition commemorating the 300th anniversary of the death of William of Orange in 1702. It was during King Billy's reign that the Bank was established in 1694 to finance the war against France. But the exhibition, rather than trumpeting its standing as one of the country's most venerated institutions, or as one of the oldest central banks in the world (second only to Sweden's Riksbank, established in 1668), puts the spotlight on the Bank's Dutch roots. Entitled "The Dutch Legacy", in true British style it modestly directs attention to influences from across the Channel. A remark made at the time is quoted - "Others said this project [the idea of a national bank] came from Holland, and therefore would not hear of it, since we had too many Dutch things already" - and the exhibition focuses on how the Dutch were inextricably involved in shaping much of contemporary England.
CENTRAL BANK OF THE UK
While the Bank has been busy playing up the significance of the Dutch connection, it is facing trouble again up North. The Scots have been complaining again about the Bank's name. Doesn't Scotland get a mention? And what about Wales and Northern Ireland, for that matter? Labour MP Jim Sheridan has expressed his discontent at the state of affairs by proposing a motion requesting that the House of Commons should consider "the unifying and long-term benefits of changing the name to the UK Central Bank", and he has support from 28 other MPs including both Welsh and Ulster Unionists. Sheridan says: "The Bank of England touches our lives throughout the United Kingdom and, as such, it should be reflected by its name." The Bank counters that it does indeed regularly describe itself as the central bank of the UK, but the fact is, it is bound by its charter of 1694 - which was, ironically, set in motion by a Scotsman, William Paterson.
HEINRICH TO HEAD BIS MEXICO OFFICE
Negotiations with the Mexican Authorities complete, the Bank for International Settlements' Representative Office for the Americas will open (a year later than planned, but who is counting) with full fanfare in November 2002. This is only the second international outpost of the bank (after Hong Kong) and, to mark the occasion, a BIS board meeting of central bank governors will be held in Mexico City.
Chief representative at the new office will be Gregor Heinrich, formerly the BIS's payment system expert. Temporarily housed at the CEMLA - the Centro de Estudios Migratorios Latinoamericanos - the fledgling bureau has just secured office space of its own. Heinrich is joined by Andreas Butler, who will be spreading the word about the BIS banking department, and an (as yet unrecruited) senior economist. Mexico City represents something of a return to his roots for Mr Heinrich, who was born in Argentina, and schooled in Brazil, Portugal, Turkey and Germany. Mexico's gain though is Basel's loss, not least to the band that Mr Heinrich leaves behind. To find out more about the office you can reach him on gregor.heinrich@bis.org.
Taking an international perspective, the new office fills a time zone gap for the BIS. With Switzerland, Hong Kong and Mexico it can now truly be said that the sun never sets on the BIS.
FORMER GOVERNOR IN JAIL IN UGANDA
A recent enthusiasm in Uganda for locking people up to coax money out of reluctant debtors has unfortunately led to a former central bank chief winding up in prison. Dr Sulaiman Kiggundu is behind bars for allegedly not paying a $360,000 debt. Meanwhile his creditors are having to pay a dollar a day to pay the former economics professor living expenses in prison.
JORDAN TO GO
A gracious farewell to Jerry Jordan, the Cleveland Fed's president, who is retiring at the beginning of next year. Jordan was one of the most influential and long lasting of the monetarists who infiltrated central banks in many countries in the 1980s. Jordan said that he had "truly enjoyed the opportunity to serve as a policymaker and to work with esteemed colleagues". At 60, he is ready to leave his central banking career and instead spend more time with his family. David Hoag, chairman of the bank's board of directors, wished him well, saying he would miss Jordan's "extensive knowledge" and his "collegial manner". He has commissioned Robert Mahoney, deputy of chairman of the bank, to seek a replacement. Though many will be queuing to step up, it won't be easy to replace someone whose career spans a broad spectrum of jobs in government, (including sitting on President Reagan's Council of Economic Advisors), academia, commercial banking, as well as a stint at the St Louis Fed.
TRAINING/SEMINARS FOR CENTRAL BANK SPECIALISTS
Limited spaces remain for seven different courses specially designed for risk managers, bank supervisors, human resources experts, librarians, press officers, payment system heads and legal officers. Central bankers and supervisors, sign up now! The training course/seminar series takes place in Cambridge in the first two weeks in September 2002, hosted by Central Banking Publications. To find out more click here: http://www.centralbanking.co.uk/conferences/index.htm
© Copyright 2002 Central Banking Publications. All rights reserved. Reprinted at USAGOLD by permission.
Benedict
Mander
Email: bmander@centralbanking.co.uk
Central Banking Publications Ltd
6 Langley Street, London WC2H 9JA, UK
Tel: +44 (0)20 7836 3625
Fax: +44 (0)20 7836 3608
http://www.centralbanking.co.uk
Disclaimer of Warranty
Central Banking Publications assumes no responsibility for errors or omissions in these materials.
THESE MATERIALS ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT.
Central Banking Publications further does not warrant the accuracy or completeness of the information, text, graphics,links or other items contained within these materials. Central Banking Publications shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, lost revenues or lost profits, which may result from the use of these materials. The information on this server is subject to change without notice and does not represent a commitment on the part of Central Banking Publications in the future.
 Centennial Precious Metals Gold coins & bullion since 1973 Denver, Colorado 80246-0009 We educate first-time investors! |
for quotes and purchase information.
|
