A nice speech with some philosophical nuggets by Masaki Shirakawa, Governor of BoJ.
He touches on several central banking issues:
- Central bank policies in the current crisis
- How crisis changed the mandate of central banks
- What central banks can do? (Price Stability and Lender of Last Report)
- What central banks cannot do? Resolve structural issues)
- Full potential of central banks (realised when public finances are sustainable, credibility of central bank, support for market economy
A good read.
Here is some nice history from the speech:
One reminder that prosperity is quite fragile can be found in The Economic Consequences of the Peace, by John Maynard Keynes.1 I believe it is rather fitting to quote his writing today, considering that FPA was founded to promote the “Just Peace,” advocated by President Wilson, who led the U.S. delegation to Versailles, and that the collective failure of the international community to achieve that goal at Versailles prompted Lord Keynes to write the book. Lord Keynes describes the world before the First World War as “economic Eldorado” or “economic Utopia,” where a middle-class Londoner could easily “order by telephone…the various product of the whole earth,” “adventure his wealth…in any quarter of the world,” and “secure…cheap and comfortable means of transit to any country.”
Furthermore, this state of affairs was regarded “as normal, certain and permanent, except in the direction of further improvement.” Whenever I read this passage, I am always struck by the power of globalization in bringing about economic prosperity, the ephemeral quality of such achievement in the light of the two World Wars, and the parallel with our experiences leading to the Great Financial Crisis.
We were in a similar comfort mode before the crisis…