Mr Stals gives a summary of his views on central banking
Remarks by Dr Chris Stals, retiring Governor at a Gala Dinner of the South African Reserve Bank, on
7 August 1999.
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1. Introduction
I have listened to many speeches about central banking over the past forty years. Some of my
international colleagues present here this evening will recognise titles such as
"The Agony of Central Banking"
"The Triumph of Central Banking" or
"The Art of Central Banking"
I can obviously make long speeches about each one of these subjects, or many others on central
banking. Out of respect for this occasion and taking account of the late hour of night, I am going to be
brief and give you, at the end of my long career in this wonderful profession, in summary form my
views on what I would regard as:
2. The Twelve Commandments of Central Banking
2.1 A true central banker will always be against inflation.
2.2 The need for independence of the central bank must be recognised and appreciated by the
public and by governments but, after all is said and done, a central bank can only be as independent as
the government of the day wants it to be. From my experience I have learned that, without regular
contact and close co-operation with the Minister of Finance the life of a central banker can become
very lonely.
2.3 In many countries of the world the powers of the central bank should be reduced in order to
increase the effectiveness of monetary policy. Joined with the potent power to create money, the
power also to make loans and spend money has the potential to create a malignant superpower whose
actions can easily lead to financial destruction.
2.4 Wealth cannot be created by the creation of more money; poverty cannot be relieved by
increasing the money supply. If this would have been possible there would have been no poverty in the
world any more.
2.5 By successfully restricting growth in the total domestic assets of the central bank, monetary
policy will bring about positive growth in the total foreign assets of the country.
2.6 A central banker is often very unpopular in his own country. As a matter of fact, if the
governor does become popular in his own country, it may be time for him to retire. Monetary policy is
about financial discipline, about restricting expenditure, about forcing the country to live within its
means. Measures to achieve these objectives can never be popular. You cannot ask the turkeys of the
world to vote for Christmas. You also cannot ask the borrowers of money what the level of interest
rates should be.
2.7 Where anybody stands on monetary policy is determined by where he sits. When I was
criticised for the policies of the Bank, I always asked who the critic was and where he worked. The
answer invariably made me apathetic to the criticism.
2.8 A country may be able to keep politicians out of interest rates, but you can never take
interest rates out of politics. When politicians therefore make statements about interest rates, tolerable
central bankers should accept that politicians talk to their voters, and not to central bankers.
2.9 There is no such thing as central banking by rules. Discretion remains indispensable in the
daily implementation of monetary policy. Economics, after all, is not an exact science. In the world of
macroeconomic policy two plus two may sometimes add up to five. The central banker must, however,
never try to stretch it to six.
2.10 A central banker must learn to ignore any praise bestowed on him, particularly through or by
the public media. This will justify his right also to brush aside the unfair criticism that will be
launched at him next time from the same source.
2.11 In our present world of a rapidly changing global financial environment, a central banker
must be a student for ever. Always remember the old Chinese saying that a man must study as if he
will live forever, but live as if he will die tomorrow.
2.12 I have left the most important commandment for the last - a good central banker is always
against inflation.
These twelve commandments represent for me a final conclusion of my experience as a central banker
over many years.
3. The people in central banking
I cannot let this occasion go by without saying a few words about the people I worked with over many
years as a central banker.
Firstly, there are the people in government. I wish to thank the Presidents of our country who
appointed me in 1975 as Deputy Governor, in 1980 as Senior Deputy Governor and then on two
occasions in 1989 and again in 1994 as Governor of the South African Reserve Bank. It was a great
privilege for me to serve our country and all of its people for more than twenty years in these senior
positions in the Bank.
I thank the five Ministers of Finance with whom I worked very closely over this extended period of
time. And I add to their names the Directors General and the staff of the Government Departments
such as Finance, State Expenditure, the S.A. Revenue Services and Trade and Industries for their
co-operation. It is still true as Walter Bagehot observed in the previous century that monetary policy
begins at the Treasury. Without co-operation between the central bank and the ministry of finance both
monetary and fiscal policies will be weaker.
I enjoyed the loyal support of all the people who served with me on the Board of Directors of the
Reserve Bank. In particular, I would like to thank those Board members who supported me with
dedication and devotion over the past ten years when I was also Chairman of the Board.
No words can express my appreciation to the staff of the Bank, all my colleagues past and present who
worked with me with great commitment to achieve our objective of protecting the value of the rand in
the interest of all the people of South Africa. Many times I said to you, and to the many people in
South Africa and abroad who praised me for the achievements of the Bank, that we must always
remind ourselves that the world is run by people second in charge. You made the South African
Reserve Bank the outstanding institution of excellence that it is known to be today. You shall also
protect this laudable reputation of our proud institution in the future.
I am grateful for this opportunity to direct a few words of appreciation also to the many foreign
visitors we have with us this evening, firstly, to the Governors and representatives of central banks, the
International Monetary Fund and the Bank for International Settlements. What a wonderful experience
it was for me to have been a member of the exclusive club of central bankers in an expanding global
financial environment. I have learned more from you in conferences, in meetings and in numerous
discussions than from all the textbooks I struggled with to obtain my university degrees.
It is a great privilege for us to have the governors of more than ten central banks from Africa here this
evening, and also senior staff members to represent others. I wish I could spend another ten years
working with you in meeting the great challenges we face together to develop the financial structures
of our continent, and to establish in Southern Africa an intimate forum for effective central bank
co-operation.
We have a number of private foreign bankers present here, representing institutions that battled with
me in the days of South Africa's isolation and debt rescheduling arrangements, but also lend great
support to me and the Reserve Bank, particularly over the past five years when we had to reintegrate
our country in a rapidly changing global financial market environment.
I pay tribute to the South African bankers who do not always agree with the Reserve Bank's hard line
approach on financial disciplines, but who always remain loyal to their central bank. It did not go
unnoticed in the world financial markets over this past year, with major global financial market
disruption, that the South African banking sector remained stable and sound. I give the credit for this
to you, the managers of sound and well-disciplined private sector institutions.
Finally, talking about the people of central banking, I must thank my wife, my four children together
with their spouses for their support over many years. I like to refer to the husband and wives of my
children as my children who became my children because of the decisions of my children. My wife
seldom had a normal husband, my children must on many an occasion have missed a normal father in
the house because they had to contend with a husband and a father addicted to central banking. My
peers as central bank governors will know what these words mean.
4. The future of central banking
Looking ahead, I can only express my regrets that I were not as of today ten years younger. Exciting
times lie ahead for the central bankers of the world as the process of the integration of financial
markets around the globe will continue. However, I leave the South African Reserve Bank in great
peace of mind because I am confident that Mr Tito Mboweni and the team with him in the Bank have
the ability, the determination and the will to steer South Africa successfully into this brave new world.
Tito, I admire the way in which you approached the past year of induction with us in the Reserve
Bank. You succeeded in getting the staff of the Bank on your side. You grasped very quickly what
many outsiders will always regard as the mystique of central banking. You have truly become one of
the members of the exclusive club of central bankers of the world. I leave the Bank with great
confidence that you will be the Governor that will finally destroy the African jackal of inflation in our
country. I wish you well.
5. Conclusion
One day, shortly after lunch, as I was sitting in the Governor's office on the 32nd floor of the Reserve
Bank Head Quarters building in Pretoria, the sliding door to the balcony in front of the office was
standing open. I heard a noise and there came a bird almost falling out of the air as if it was shot. I
walked out and found a beautiful homing pigeon lying on the floor of the balcony as if it was dead. I
carried on with my duties behind my desk.
After about half-an-hour, I noticed the pigeon was recovering. On weak legs and with watery red eyes
it started observing the environment. And then, to my surprise, with unexpected dignity and
confidence, it walked straight into the Governor's office. The pigeon settled itself down on the carpet
against the couch. I realised this bird must have come from somewhere far and it must be thirsty and
hungry. In an ashtray, I gave it some water. My secretary produced a few breadcrumbs from
somewhere. The pigeon drank and ate with a grateful look in its beautiful yellow-ringed red eyes, and
then nestled down for a good sleep-in.
I asked my Secretary not to let anybody into the office and to walk on tip-toe as long as the special
guest stayed with me. After about two hours with the sun already setting in the west, my visitor woke
up, looked around and then, with even greater dignity and self-composure, walked out of the office.
On the balcony, it stretched its legs, shook its wings and looked around to determine direction. And
then it took off and flew away. The bird obviously came a long way and was now destined for the
comforts of its home, and for a good rest after a long journey.
I could not help but to think of this homing pigeon when I left the office of the Governor on the
32nd floor of the Reserve Bank building for the last time this morning.