Archive for January 4th, 2018

When State rewards government officers despite underperformance: New Zealand edition..

January 4, 2018

Michael Reddell in this post tears into the NZ state rewarding system.

As an Anglophile traditional conservative, the idea of the twice-yearly honours lists appeals to me.   It has deepish roots in our past  –  although not that deep (the Order of the British Empire, initial source of most of the awards to ordinary people who do good dates back only to 1917.)   Many societies have such awards in one form or another –  although the United States doesn’t.    All societies honour success –  however defined – and/or sacrifice in some way or another, and formalised state awards can be a part of such a system.  Perhaps the best forms of recognition emerge from below –  whether subsequently encapsulated in formal awards or not.

But if the idea of the honours lists has a certain appeal, the practice is much less satisfactory.   That is especially so in the higher reaches of the lists, where there seem to be too many awards in total, and far too many given to people who, at best, have done competently in highly-paid (or otherwise rewarded) roles.   In our most recent honours list seven knighthoods were awarded –  about a quarter as many as in the UK, for a country with less than one twelfth of the population of the UK.   Are there really 14 people each year of such exceptional merit in New Zealand?     (I’m not bothered about the Sir/Dame title –  hardly anyone knows who has been awarded the premier award in our system, the Order of New Zealand, and there seems to be some merit –  as well as historical continuity –  in the use of a title for the handful of people of exceptional merit.)


This time the outgoing RBNZ chief has also been honoured. This obviously irked Reddell even more who has criticised Wheeler’s tenure quite often:

If rewarding people with honours simply for doing competently a job they were well paid for sticks in the craw a little, rewarding people with high honours for doing a well-paid job rather badly simply shouldn’t happen.

I’ve written quite a lot about Graeme Wheeler, former Governor of the Reserve Bank.  After he left the Bank in September, I didn’t really expect to write about him again.  But then his name popped up in the New Year’s Honours List, as recipient of a CNZM.

In his single five year term –  so it wasn’t even a long-service award –  Graeme Wheeler exercised a great deal of power (the Governor is the most powerful unelected person in New Zealand), but generally neither wisely nor well.   Whether in stories when he left office, or in stories around the appointment of his successor last month, few seemed to much lament his passing from the scene.   So just a quick reminder of some features of Wheeler’s stewardship:

  • as sole monetary policy decisionmaker he materially misread inflation pressures, enthusiastically commencing a monetary policy tightening cycle which was soon widely recognised to have been unnecessary. The tightenings were fully reversed, but slowly and, generally, grudgingly,
  • as sole prudential policy decisionmaker he rushed into imposing LVR restrictions without any serious supporting analysis of the housing market or the nature of the risks to the financial system.  And then added greatly to regulatory uncertainty through repeated changes to the rules,
  • his public communications were poor.  Speeches were generally not very enlightening –  and at times at odds with policy moves shortly thereafter –  and he rarely if ever opened himself to critical scrutiny in the media (refusing all requests for interviews that might involve searching questions).
  • he adopted a consistently obstructive approach to the Official Information Act, all the while continuing to assert that he ran one of the most transparent central banks anywhere,
  • he oversaw systems that allowed an OCR decision to leak prior to the official release, and when reluctantly he finally had to acknowledge the leak he chose to praise the helpfulness of the media outlet responsible for the leak, and attempt to attack the person who brought the possibility of the leak to his attention (and that of the public),
  • his thin-skinned approach to debate and critical scrutiny reached a low point earlier this year when a leading bank economist got under the Governor’s skin to such an extent that Wheeler had his entire team of senior managers trying to censor or silence the economist.  The Governor himself –  regulator of the economist’s employer, the BNZ –  put in writing his attempt to have Stephen Toplis censored.

No wonder even the official citation lists no particular achievements, just offices held –  each and every one well-remunerated.    It is as if even Bill English and Steven Joyce knew there just wasn’t much there.  But they went ahead and tossed him a bauble anyway – comfirmed by the new Prime Minister and her deputy.   It is an award that reflects poorly on the system, on the recipient, and on those bestowing (or acquiescing in) the award.  It should be one more strand in the case for an overhaul of the system, perhaps even for disbanding all but, say, the QSM.  But no doubt Graeme Wheeler will enjoy his day out at Government House.

And thus I agree with much of the editorial in the Dominion-Post on honours lists that seems to have appeared a few days ago.

One does not really understand central bankers continuing to be honored after their retirement. It is quite an honorary and a well-paid job with many perks etc. These honors should go to people who achieved things without much support from State and other places.

But it is hardly the case.

Central Bank of Pakistan permits use of Chinese Yuan for denominating foreign currency transactions…

January 4, 2018

The press release is here.

This will allow Pakistan to replace US Dollar with Yuan in its transactions with China:


Bank of England to launch e-pound?

January 4, 2018

Just as the new year set in, the news came that Bank of England is planning to launch its own cryptocurrency.

Bill Buchanan of Edinburgh Napier University chips into the matter:


In 1918 British issued a strange denomination of Rs 2.5 currency notes in India….

January 4, 2018

The Re 1 note completed its 100 years in 2017. In Jan- 198, the British Government launched a strange denomination of Rs 2.5 notes. The currency was withdrawn in 1926 and thus remains a collector’s item.

Interesting piece by Nandini Rathi on the history of the Rs 2.5 notes:


Rise of non-bank finance in India..

January 4, 2018

Researchers at RBI- R. Ayyappan Nair, M V Moghe and Yaswant Bitra- point to this interesting ongoing development in Indian financial markets.

They show that non-bank sources of finance have risen significantly over the years. The share of banks as a source of finance has declined from 56.3% in 2010-11 to 38.4% in 2016-17 and share of non-bank sources has increased from 43.7% to 61.6%. This rise of non-bank finance is mainly via rise in inflows towards debt mutual funds which in turn have invested in corporate bonds:

The significant increase in inflows into mutual funds and their subsequent deployment is altering the scope of disintermediation in India. We look at this evolving milieu and its implications for bank intermediation in general and credit portfolio of banks in particular. We find that there is, (i) a gradual shift in corporate borrowings from banks to mutual funds as reflected in the contraction in corporate spreads for near-investment grades; and (ii) a significant differential between the risk-free rate and the benchmark lending rate for banks, viz., Marginal Cost of funds based Lending Rate (MCLR), which has given rise to disintermediation of bank credit for quality corporates.



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