The illegitimate central bank

A standard proposition in the literature on delegating public powers to unelected (agents or) agencies in a free and democratic society is that such agencies should operate in a way that leaves no basis for any reasonable person to suspect that those running the agencies are using their platform, and the associated public resources and powers, for any purpose other than the very specific ones Parliament has provided those powers/resources for.   Abuses and departures from this norm need not –  and fortunately in New Zealand rarely do –  involve officeholders seeking to personally enrich themselves or their families.  Here it is more likely to take the form of using the platform/powers provided for specific narrow purposes to advance the personal ideological and policy preferences of top managers/Board in quite unrelated areas.

The fact that those individuals, in abusing their powers, do so believing –  probably quite sincerely –  that they are doing so in some conception of the “public interest” is wholly beside the point.    We have elections, and a wider of contest of ideas in the public square, to advance causes.   The fact that those individuals might be advancing the views of the government of the day is not just beside the point, but getting towards the heart of it.   The whole case – the only real case –  for delegating substantive policymaking powers (as distinct from narrow implementation/operations) rests with the notions that (a) the policy in question is separable from the rest of policy, and (b) those charged with it won’t be pursuing partisan or ideological agendas.  If not, we might as well have elected ministers make decisions (we can kick them out) and keep the agencies quietly in the backroom as advisers and implementers.

Central banks –  or rather central bankers – have long been at risk of falling into this trap, particularly as more of them were granted operational autonomy around monetary policy.   Rightly or wrongly, people tend to pay quite a bit of attention to central banks (probably rightly given how much difference their monetary policy actions can make to economic outcomes over, say, a 1 to 3 year horizon).   When they speak, the idea has been their words on monetary policy should influence expectations and behaviour –  on the presumption that the speaker has no agenda other than the narrow one s/he is charged with.      Central banks are also often supposed to be a repository of expertise and wisdom.   Sadly, even in the narrow specialist areas central banks have formal responsibility for that, too often neither has really been true (that isn’t just a comment about New Zealand).  But central banks do tend to have lots of resources, and provide cheap copy for media (literally, presumably, in the case of op-eds like the Governor’s one that I wrote about earlier this week).

But if your central bankers are using their position to advance personal ideological or partisan agendas –  or are perceived to be doing so, even if that is not their conscious intent – the legitimacy and authority of the institution itself will be damaged.  And if you believe that gubernatorial words can usefully shape expectations, it is likely that the effectiveness of the institution will be eroded as well.   A Labour voter will be less inclined to give serious heed to a Governor suspected of serving National interests or ideological preferences than if they think that person is only interested in doing his/her specific job.  And vice versa if the roles are reversed.    And if a Governor is perceived to be advancing partisan interests, the effectiveness of that Governor when operating under a government of a different political stripe is also likely to be impeded.

Wise people who have been “inside the temple” recognise the issue and risks.   Academic and former Bank of England MPC member Willem Buiter has written about it, as has former Fed vice-chair Alan Blinder.  More recently, former Bank of England Deputy Governor Paul Tucker devoted an entire book to the issues around Unelected Power.   It has also been a theme of mine.

Don Brash was Governor of the Reserve Bank for a long time.  Before coming to the Bank he’d been an unsuccessful National Party candidate.   After he left the Bank he went straight into Parliament as a National Party MP and later was briefly the ACT leader.    His interests always seemed more in ideas/policies than in specific parties, but there wasn’t much doubt about where on the spectrum of policy preferences he stood.   In some quarters, even if he never said anything much on topics outside his remit, that left a residue of mistrust.  I doubt Jim Anderton, or perhaps even Winston Peters, even really saw him as a neutral technocratic figure.  But probably where Don really stepped over the mark was quite late in his time at the Reserve Bank, with his speech to the 2001 Knowledge Wave conference. (I wrote about it here.)  The details don’t matter now, but it saw the unelected Governor use his position to champion policies that bore no relation to matters he was responsible for.  As it happens, in many/most cases they were quite at odds with the views of the government of the day, but it should have been just as unacceptable had he been championing preferences of that particular government.    Senior staff, including me, advised him against it –  and the version delivered was materially less out of line than the draft –  in many cases, including mine, even if we happened to personally agree with the substance of what the Governor was saying.   Fortunately Don welcomed challenge/dissent/debate.

One can debate the strengths and weaknesses and records of the two subsequent Governors. I imagine that both were fairly sympathetic to the governments of the day when they were first appointed, but there was never much ground to suppose that either was using his office to openly advance his personal ideological or political agendas.

With the current Governor, now almost halfway through his five year term,  almost from the first he has consistently used his office to openly champion causes for which he has no responsibility, even as his actual conduct in the things he is responsible for leaves a great deal to be desired.     If the Governor presided over consistently excellent, ahead of the game, monetary policy, if his radical policy initiatives around banking regulation had been well-grounded and authoritative, perhaps the wider abuse of office would be a little less worrying –  a worrying foible perhaps, but  arguably incidental to the success of the stewardship of the things he was responsible for.  It would still be worrying –  as it would if, for example, the Chief Justice or the Police Commissioner were openly using their offices to advance their personal political agendas –  but underlying  excellence tends to buy some grudging respect.

Sadly, that isn’t the Orr Reserve Bank.  It is as if the Governor really isn’t very interested in his core functions or even in building strong core capability beneath him.   Transparency and accountability around core responsibilities also seem to be alien concepts. Openness to debate and challenge –  whether inside or outside the Bank –  on core responsibilities also seem alien to him.  And, on the other hand, is very interested in using his powerful position to champion all sorts of issues dear to his own heart, and that of his ideological allies.  I don’t suppose the Governor necessarily sees himself as championing Labour’s interests or that of the Green Party (the two he would seem to have most in common with) but that is the effect when he weighs in on one topic after another, never in much depth, but consistently advancing those personal agendas in a quite undisciplined way.

There has been example after example of this sort of thing going back to when he first took office in 2018, whether it was views on agriculture, on infrastructure, on climate change, on fiscal policy, on Maori economic development, alleged short-termism or whatever.  It remains notable just how few, and unserious, have been the Governor’s speeches on core responsibilities, and how many his speeches and commentaries on these other issues.  It flows down the organisation.  We had another example yesterday.

The Bank from time to time sends out newsletters to those signed up to its email list.  Yesterday’s one was from one of Orr’s deputy chief executives, the Assistant Governor Simone Robbers (she of the 17 person communications department, among other bits of her domain).

RB corporate 2

The full text of the email is here.  It was sent out under the heading “Our priorities and key progress on our mahi” (“mahi” apparently means work, but whether in Maori it carries a sense of responsibilities or of self-chosen agendas isn’t clear to me).   Among the Bank’s self-chosen roles appears to be the campaign to change the name of the country, given the repeated use of “Aotearoa” for New Zealand.

The newsletter isn’t long but it is quite telling.

It begins with this bumpf

While a new ‘normal’ is emerging in New Zealand after the initial response to the COVID-19 pandemic, the pandemic continues to have significant and ongoing consequences across the globe. We are actively engaging with our Central Banking colleagues around the world to share policy advice and insights. As explained in this recent op-ed from Governor Adrian Orr, it is clear from our discussions that the COVID-19 health shock is impacting nations in similar ways, however, the economic and policy impacts differ greatly.

I wrote about that content-lite zone on Monday.

Here in Aotearoa, although we have successfully contained the virus, and many parts of the economy are back up and running, households and businesses face uncertain times and potential further disruption as the full economic impacts of the pandemic become evident.

Name of the country aside, I guess it is unexceptional, but also rather empty.  She goes on

We at the Reserve Bank, Te Pūtea Matua, need to keep working together with all of Government and industry, just like we did at the start of the pandemic, to respond to the challenges. We need to be prepared to manage our economic recovery well, while not losing sight of delivering for the long-term interests of all those in Aotearoa.

These “long-term interests” –  whatever they are –  are simply not something the Reserve Bank has responsibility for.  It seems to be cover dreamed up by the Governor to weigh in on anything he chooses.

And that is it on anything even close to the core responsibilities of the Bank.   Inflation –  let alone inflation expectations – doesn’t get a mention at all.  Nor does (un)employment, that the Bank was so keen on talking about last year.  Nor, perhaps to no one’s surprise, does the utter failure to have had the banking system positioned for negative interest rates –  supposed now to be work in progress, in a highly core area, but no mention here whatever.  Instead, we learn what the Bank has been devoting its energies to

Alongside supporting the economy and all New Zealanders by providing liquidity to banks and coordinating monetary and fiscal policy settings, we have also continued to deliver on our commitments including:

  • Jointly working with The Treasury to see the new Reserve Bank of New Zealand Bill introduced to Parliament
  • Publishing the Statement of Intent (SOI) for 2020-2023 and further embedding our Tāne Mahuta narrative
  • Agreeing to a new five-year Funding Agreement to ensure our long term commitments are met
  • Progressing our Te Ao Māori strategy through our economic research and proactive outreach to regulated entities, Government and Māori partners
  • Working closely with our fellow Council of Financial Regulators (CoFR) members to manage and co-ordinate regulatory work to enable the financial sector to focus on their customers.

During this time, some of our initiatives have received sharper focus as we look to respond to COVID-19 challenges. For example, the financial inclusion issues that are being faced by everyday New Zealanders. We congratulate the banking sector for their leadership in recently becoming the first living wage accredited industry in New Zealand.  It is also a good time to deepen our collective understanding of climate change risk in the financial sector, and ensuring we are all taking a long term and sustainable approach to economic recovery and future resilience.

We are using this period to consider what is ahead and what steps we need to take so we can live up to our vision of being ‘A Great Team and Best Central Bank’ and deliver as kaitiaki (caretaker) against the commitments we made in our SOI.

Actually, the Bank doesn’t “coordinate monetary and fiscal settings”: the Minister of Finance sets the Bank a target, and the government sets fiscal policy, and then the Bank (MPC) is just charged with getting on and doing its monetary policy job, given all of that.

But even set that to one side, what do we see prioritised?    Well, there is the tree god nonsense that the Governor seems so fond of.   Perhaps it does little harm –  although as I’ve unpicked it in the past it is often actively misleading –  but right up there at number two on the list?    Then, of course, we get the Bank’s Maori strategy –  something that is not clear is necessary at all (in a wholesale-focused organisation) –  or which has generated anything of substance (and no research, despite the claims here) in support of the Bank’s actual statutory responsibilities.  But it advances the Governor’s personal whims and preferences I guess.

Then we move off the bullet point list and on to the next paragraph, and even more highly questionable stuff.  There is that line about “financial inclusion” which, whatever it means, clearly has nothing whatever to do with the Bank’s twin responsibilities for financial stability and macroeconomic stabilisation.   There might be some worthy issues there, at least on some reckonings, but they are nothing to do with the Bank.

Then –  and this was the one that caught my eye –  there is the weird reference to the banking sector and the so-called “living wage”.    I’m sure the Green Party must love that settlement, and whatever deals banks want to sign up to for their staff is really their affair, but what has it to do with a prudential regulator, the Reserve Bank –  which is not, repeat, some general regulator of all banking sector activities?    I suppose we should be grateful not to see the Bank praising the Kiwibank decision to refuse banking facilities to lawful and creditworthy businesses doing business that the Governor profoundly disapproves of.

But perhaps that is encompassed by the next sentence.

“It is also a good time to deepen our collective understanding of climate change risk in the financial sector”

Not clear why it is a “good time” (one might have supposed a higher priority now might be, for example, understanding the risks to the financial sector from a prolonged downturn and limited monetary policy response, or to have understood better the issues and options around macro-stabilisation and the (current) effective lower bound on nominal interest rates).  But, for what it is worth, I think we can pretty easily conclude that the risks of climate change to the New Zealand financial sector are vanishingly small.  But acknowledging that might make the Governor’s position – endlessly weighing in on these personal causes –  seem more obviously inappropriate.

And who knows what lurks beneath that

ensuring we are all taking a long term and sustainable approach to economic recovery and future resilience

It isn’t even clear whether the “we” is supposed to refer to the Reserve Bank or the rest of us.  What is clear is that none of it has anything much to do with the monetary policy responsibilities of the Bank –  the bits actually to be able recovery.  Full employment, conditioned on price stability, should be what matters, but none of that gets a mention at all.

And then Robbers ends with this

We are using this period to consider what is ahead and what steps we need to take so we can live up to our vision of being ‘A Great Team and Best Central Bank’ and deliver as kaitiaki (caretaker) against the commitments we made in our SOI.

As I noted earlier in the week there was a speech on this topic a month ago.  It was startlingly empty, devoid of any real sense of (a) why this goal made sense, (b) how the Bank, and those it works for, might know if it was achieving the goal, or (c) what steps management was taking to deliver on the goal.  When he delivered the speech, I noted down a strange comment from the Governor about how it is “therapeutic” to be able to think about these issues.  Even at the time it struck me as a luxury most private businesses wouldn’t have, and one one might not expect a central bank grappling with a deep economic downturn, falling inflation expectations, rising unemployment etc  to have either, at least if it were doing its job.  Then again, the Bank has a big budget and no real accountability so I guess the Governor can simply pursue his whims.

And that is about it.

In a way none of it was that surprising.  This is the Reserve Bank that Orr has been creating in his own image: one that simply isn’t doing its job well, doesn’t have its eye on the ball, shows no sign of thinking deeply about the core challenges it should be addressing….all while pursuing the personal ideological agendas of the Governor (and his handpicked senior management –  most probably you don’t get or keep a job on the top team –  or perhaps further down the organisation either- unless you are all-in with his alternative, non-statutory agenda).  We deserve a lot better, the economy needs more, but there is no sign that the Bank’s Board –  paid to hold the Governor to account –  or the Minister of Finance care.  It is just another marker on the journey of the degrading of the capability of our economic institutions, and of the legitimacy and authority of our autonomous central bank.

There was one final thing I noticed deep down the email (which had various links to other bits and pieces).  As I’ve noted regularly, the new Monetary Policy Committee has now been in place since 1 April last year.  In that entire time, including through some of the bigger macro challenges in modern times, we’ve heard not a word from any of the three external members of the Committee, the ones carefully selected to not be awkward for the Governor, to meet the government’s gender quota, and to exclude –  consciously and deliberately – anyone with current monetary policy or macro expertise.  But now we have.  There is a couple of minute Youtube clip where we see and hear from the externals.   Not, of course, that they say anything of substance, anything about actual monetary policy, inflation, employment or anything.  But they wax lyrical about a wonderful collegial process, and what a learning opportunity has been –  and about how they don’t pay much attention to things for six weeks and then get together, with no undue influence from anyone.  No doubt they are all deeply sincere, but it did have a bit of sense of a hostage video, produced to show that the Committee really exists. It should assuage no concerns at all about the structure, the people, the lack of transparency, and the lack of accountability.

27 thoughts on “The illegitimate central bank

  1. The really frightening thing is how much worse things might get under a new left-wing – Green-Red – government. Higher taxes, more intrusive regulation of business and our lives, more sanctimonious virtue signalling…

    As said before, I’m working on Plan B; and that won’t be in NZ.

    This country has no place for hard workers, who save, who don’t rock the boat and just get on with things.

    Liked by 2 people

    • Depressing isn’t it. At this juncture, I almost think the least-bad plausible election outcome is Labour with an absolute majority, not needing the Greens or the latter slipping below 5% and being out of Parliament altogether.

      Liked by 4 people

      • But of course that means we’ll get a ‘hate speech’ law that lets officials decide what you can and cannot say. For its multiple faults, NZ 1st kept that death knell for freedom of speech at bay.

        Liked by 4 people

      • I suppose I see the only realistic outcomes now are Labour alone or Labour dependent on the Greens, who these days are prob worse than Little on speech.

        But across the entire spectrum the choice is so poor that for the first time in my life I’m probably going to choose actively not to cast a party vote at all.

        Liked by 1 person

      • Not voting is just so very wrong when our democracy and our right to vote so very fragile. And even though not all parties reflect 100% of my way of thinking, I will still vote. ACT seems to be the closest even though I disagree completely and wholeheartedly with David Seymour on Euthanasia.

        Liked by 1 person

      • Yes, it is an argument I used to make myself (and which one of my teenagers forcefully makes to me now). Perhaps in the end I will weaken and pick some group or other, but turnout (or lack of it) is also a signal to our political parties.

        Like

    • Towering Political Genius

      Last year …..
      Winston Peters wasted his time blocking the CGT. Nobody is thanking him for it

      This week …..
      James Shaw of the Greens blocked Labour and NZFirst from charging international arrivals $3000 for MIQ isolation and quarantining, arguing that it was unfair on the “few” who might thank him. What he overlooks is the “many” who “paid” a personal cost in lockdown and will pay for the $500 million costs of compulsory isolation of the arrivals probably wont thank him

      Liked by 1 person

      • With potentially 1 million votes outside of NZ, it is not a great idea for Judith Collins and National to rile them up to vote with the Greens on this issue. Personally I do not think it is a great idea to charge Kiwis on something that is forced onto them. $500 million or even a billion to keep our borders safe is cheaper than the $100 billion that was lost during Jacinda Ardern’s communist style emergency lockdown.

        Liked by 1 person

      • In 2017 election there were 61,524 overseas votes
        They don’t vote, they don’t care
        If they suddenly vote in large numbers this election it will confirm the label that has been applied that those scuttling back are cockroaches

        Liked by 1 person

      • Back then no one overseas cared to vote. But now we are seeing overseas websites with titles of Team 6 million as an in your face to Jacinda Ardern’s team of 5 million. Kiwis want to come home, they do not to pay, you can be sure they will vote.

        Like

      • Twootherguys, also it is not a great analysis to use pre covid 19 statistics as future performance. Don’t forget Air NZ in 2017 had a operating revenue of $5.1 billion. Current revenue 2020, they would be lucky to get to $100 million.

        Like

  2. “(…)But they wax lyrical about a wonderful collegial process, and what a learning opportunity has been – and about how they don’t pay much attention to things for six weeks and then get together, with no undue influence from anyone(…)
    ——————–

    A mutual admiration society, more concerned about further progressing the cause of a Maori-English pidgin than fulfilling their statutory obligations, or am I just seeing things…?

    Liked by 4 people

  3. My recollection of Don Brash not sticking to his legislated knitting to control CPI inflation as RBNZ governor is somewhat different from yours, Michael.

    I recall, in early 1990, after he took on the Governorship and before the 1991 Employment Contracts Act, Brash arguing strongly for labour market deregulation, both outside the Bank and within (in the brief period he and I – as a very junior and inconsequential RBNZ staffer – overlapped).

    I thought at the time, quite strongly – and while memory is frail thing, both memory and belief have stuck with me for three decades – this was a blatant excursion into what then, as many readers of this blog will recall, was a white hot left-right political issue prior to the 1990 election. The excursion also incorporated Brash’s deep lack of knowledge of the sub-discipline of labour economics. And it had nothing to do with the Bank’s legislated mandate.

    Brash was no neutral technocrat; his Knowledge Wave contribution no aberration.

    Liked by 1 person

    • Hi Simon

      I’m not sure how much we are disagreeing – as I note he wasn’t universally seen as a neutral technocrat, and in addition to the Knowledge Wave speech there was the “NZ’s Remarkable Reforms” speech in London. I introduced Don not to exonerate him, but really to try to be clear that the concerns I’m expressing now apply even to someone whose non mon pol views I mostly happen to agree with (and who these days I count as a friend) – it isn’t just about bagging Adrian.

      That said, I’m less sure about the specific case you raise. The Bank – under Spencer Russell and under Don – did have a standard mantra about easing the adjustment costs of disinflation (I used to write it, as almost a ritual) in the monthly papers we did for MOF: liberalise the labour market, lower trade protection, and lower the fiscal deficit, explictly as a way of easing transitional pressure on real interest rates and the real exchange rate. One can argue the merits of the case (for example, the budget was already at primary balance) but it was (a) reasonably std stuff at the time, and (b) explicitly tied back to the transition to price stability.

      As it happens, you may recall Sept 1990 when Don became party (of sorts) to the so-called Growth Agreement between the govt and the CTU, under which it was understood that lower wage settlements would lead to looser monetary policy. There was some unease at the Bank about the Governor’s imprimatur going on that (<2 mths out from an election), altho Don argued reasonably that all had done was what he had said all along – lower wage pressures would mean looser mon pol. Again, one can question the story, incl the then-dominant cost-plus inflation forecasting model, but it was tied to the core job.

      The Growth Agreeement and the RB is touched on on pages 5 and 6 here

      Click to access memo-to-mpc-fiscal-policy-monetary-policy-and-monetary-conditions-part-1.pdf

      Like

      • Both you and I agree RBNZ Governors should basically stick to their knitting and not engage in anything looking remotely like politics.We have some disagreement about exactly what that knitting was or is.

        Like

  4. Hi Micheal

    I know that you make the point regularly, but can I just say that your first two paras – the thesis that agencies should operate in a way that leaves no doubt that they act for any purpose other than the very specific statutory ones – are particularly well put.

    I follow the Department of Conservation quite closely. At a high level, DOC’s actions are more or less squarely characterised by action that cannot clearly be sheeted back to its statutory mandate. It is essentially a tourism, economic development and Treaty settlement agency. Which is neither good nor bad, nor un-debatable as far as those policy objectives go, but just not what’s in the statute. Shame, because as you say, the legitimacy of the institution, which administers 1/3 of the country’s area, is badly undermined. Which is just another example of the exact opposite of what “we” – as a country(!) – need to be aiming for if we are to have a positive common future. Wonder if part of it weak high-officials who are too afraid to make political issues for their Ministerial masters? Even if technically employed by SSC, clearly that’s going to be a bad idea.

    Wonder if you’d care to expand really briefly on/clarify your point about “the only real case for delegating substantive policymaking powers”? I think some time ago you referred to literature on this point / institutional comity or something too? Bank of England stuff?

    I could use a hand with the best language to bring to this kind of point.

    Also – un-relatedly – interested to hear your views on whether we are starting to see the ships of all parties starting to bear away on issues of NZ-China relations. So much action so fast. Ruses, new phase, or bit of both? Co-incidence of simultaneous Huo and Yang retirements; co-incidence of NZDF websites going down immediately following HK extradition treaty suspension; Bridges sounding stronger than Winston on suspension; Goodfellow not responding to JLR donor-list-stuff by scoffing; JLR giving potential outlet to outer-fringes of China-skeptical (+anti-vaxx etc) vote; etc.

    Thanks and keep up some of NZ’s finest journalism.

    Like

    • Thanks

      Re the framework for thinking about delegated power and accountability, I’ve found Paul Tucker’s book v useful (link in the post). He has a very nice list of bullet points summarising the circumstances under which, and terms on which, it makes sense to delegate substantive powers.

      On your final para, yes it is an interesting question. Anne-Marie Brady has a new piece out – behind a paywall – which apparently argues that there has been quite a shift in the govt’s stance.

      One could add to your list Simon O’Connor and Louisa Wall signing up to the international Interparliamentary Alliance on China. Neither is really a high flier, and I have heard suggestions that National frowned on O’Connor, but it is hard to believe it would be happening if either party really objected (esp as Wall needs a suitable list ranking). So I’m somewhat reluctantly beginning to think perhaps there has been a bit of a real shift, but (a) it must be only a bit (see the PM’s weak speech to the China Business Summit, which I had hoped to write about) or the contrast between the communique from the recent NZ/US consultations and the recent Aus/US one. And Labour have put Naisi Chen suitably high on the list. Only time will tell, but I suppose my provisional view at present is that the shift is small and reluctant, with the parties etc moving about as little as they can get away with (between public unease and pressure from allies), and that any shift is reluctant rather than full-throated. As an example, those Goodfellow comments were interesting, but it is not as if he or Bridges has fronted up with an honest treatment of their relations with people like Yikun Zhang.

      Like

      • Yes Ardern’s speech was disgraceful. Concentration camps for Uighurs it seems are merely a matter of “different perspectives”. So “kind” of her to remember them at all really.

        I think O’Connor is good value. He comments regularly and critically on the CCP on his Facebook page, and he has a logical brain.

        I think it is important to vote. Not voting only sends a signal of indifference. The prospect of a Far Left government bringing economic collapse and loss of civil liberties cannot be ignored.

        Liked by 1 person

  5. In reply to Getgreatstuff

    (…) Personally I do not think it is a great idea to charge Kiwis on something that is forced onto them.(…)
    —————————

    I agree. However, a case could be made for charging thus “interned” people for food they consume during their confinement. After all, one has to eat regardless of the circumstances.

    Like

    • But for many they made a choice to move overseas to work and set up a new life. Anyone that is not at least tax resident in NZ should pay. Anyone that has a passport or permanent residency in the country they are residing in should pay. Anyone that left after March should pay.

      Unfortunately the Green’s tend to do well out of the overseas vote so they will do everything they can to appease these potential voters. So we finish up with this Claytons piece of legislation.

      Like

  6. “But, for what it is worth, I think we can pretty easily conclude that the risks of climate change to the New Zealand financial sector are vanishingly small.”

    Vanishingly small? Really? As a board member of one of the largest insurers operating across Australia and New Zealand, that’s certainly not my view nor that of my colleagues. Nor our institutional shareholders. Did Carney have it wrong too?

    You don’t suppose that in your quest to attack the governor, against whom you obviously hold a grudge, that you might not have overstated your case a smidgen? It is a bit hard to take you seriously Mr Reddell.

    Liked by 1 person

    • Always hard to interpret motives in other people I suppose, but I can assure you I have no “grudge” against the Governor. As I document here time after time, however, I do not consider that the evidence supports a view that he is doing the job to anything like the level of excellence we should be able to expect.

      On climate change, the Reserve Bank is required by law to focus on financial systemic risks, and banks are the overwhelming core of our financial system, and of systemic risk. I’ve no doubt that for individual banks and insurers climate change is something to think account and take account of in pricing/coverage decisions, and they have every incentive to do so. As they do with all sort of other risks, which we do not hear the Governor going on about repeatedly. But financial system crises simply don’t develop out of those sorts of slowly evolving widely discussed risks.

      You will note that my comment was specific to NZ. Quite possibly there is something in Carney’s view in some other countries where – eg – banking systems have a different set of credit exposures. But Carney himself is a highly political actor., who somewhat damaged the BOE during his tenure (less so than Orr is doing here, with the acquiescene of the government).

      Liked by 1 person

  7. A very important post CC.
    It is a widespread failing of our government and systems that many unelected appointees have taken far more powers than are justified.
    Some other examples:
    MMP means half those running our lives have not faced the scrutiny of the ballot.

    The abuses of the RMA and impact on local government where powers are removed from those who own and use property.
    Bureaucratic bullying is the norm, apparently all for the good of the bullied.

    Respect for law Is essential in all our leaders for a strong democracy.Sadly this is not always the case.

    Like

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