If we were talking about the weather and we were to speak of being responsible for weather stability, everyone would consider us lunatics. No one controls the weather. You can only do so much to try and predict and for the rest you must make sure you can respond quickly to changes in the weather.
Still, if you wear a suit and tie and throw in some abstract terms and inappropriate examples such as the domino-effect, bank runs, etc, you can cheat the public into believing that there are good reasons to spend tax money on an institution that is dealing with financial stability and systemic risk.
Now I am not against these institutions, but they could be a little more realistic and humble in their approach.
Maybe that's why the weather man wears a suit and tie.
I don't know if humility works. I seriously wonder whether truth, honesty, integrity to purpose, and openness has a place in Central Banking. It seems that if everyone knows the innermost thoughts of the central bankers, that just gives them an opportunity to take the CBs down in a play. They are, after all, by definition, smarter than the central bankers.
It seems the only defence against an aggressive speculative sector (an essential element of the market) is to shroud the CB affairs in mystery and the occult. So nobody can really be sure what's going on.
The problem occurs, it seems, when the central banker believes in his own myth.
Posted by Iang at June 7, 2004 07:07 AMFirst of all what does George Kaufman mean by the phrase "economically solvent"? In this day and age with sooooooooo many moral hazards *imposed* on banks, I haven't a clue.
An "economically solvent bank" may at this point in history be an urban myth.
Probably for most at the St. Louis Banking Conference it wouldn't be too good for their careers if they came up with an example assuming he defined his concept.
If the Asian dominos were not a big enough system for the word systemic to be used, wait till the $300 trillion or so notional value of derivatives in the world blows up. All fraud comes to an end. These over the counter derivatives are probably the biggest criminal activity in the history of man.