samchain/econo-pairs-v1 huggingface dataset:
2 Albert Gallatin’s efforts to solidify the Hamiltonian structure and to establish fiscal discipline in the early years of the United States are less well known. 3 As you will see, they clearly merit attention. The story of Albert Gallatin provides a wonderful example of how Swiss and American politics and economics have nourished each other for centuries through the exchange of ideas and people. Moreover, Albert Gallatin’s legacy arguably provides some valuable lessons which remain relevant in the present time. Today, I would like to focus on a crucial part of Gallatin’s legacy – his strong adherence to fiscal discipline. But first, let me take you on a brief tour of Gallatin’s fascinating life story. 2. The life and achievements of Albert Gallatin  For the sake of clarity, allow me to divide Albert Gallatin’s life into four distinct periods. 1761-1788: Youth The first period covers Gallatin’s life prior to becoming politically active in the United States. Gallatin was born into a wealthy merchant family in Calvinist Geneva in 1761. He became an  1  Gallatin served 13 years – longer than any other serving Secretary of the Treasury before or since. 2  Ron Chernov, Alexander Hamilton (The Penguin Press, New York NY, 2004), provides the most recent and complete Hamilton biography.

One possible answer, of course, is that when Thomas Jefferson became President in 1801, he quickly realized that the economic consequences of dismantling Hamilton’s financial structure would be dramatic for his presidency, his party and the country. Moreover, there is evidence that Jefferson may have indirectly given a commitment to the Federalists to preserve at least part of the Hamiltonian financial system in order to break the political deadlock during the Presidential election. What is perhaps most remarkable, however, is that Gallatin seems to have come to appreciate the genius of Hamilton’s system and advised Jefferson accordingly. In an attempt to firmly discredit Hamilton, Jefferson – shortly after becoming President – asked Gallatin to examine the archives and uncover the “blunders and frauds of Hamilton”. After searching “with a very good appetite”, Gallatin went back to Jefferson with the following remarkable assessment: “I have found the most perfect system ever formed. Any change that should be made in it would injure it. Hamilton made no blunders, committed no frauds. He did nothing wrong.” Indeed Gallatin went on to say that Hamilton had done such an outstanding job as the first Secretary of the Treasury that he had turned the post into a sinecure for all future occupants. As for the Bank of the United States, Gallatin proclaimed that “it had been wisely and skillfully managed”. 28 4. What can we learn from Gallatin’s financial achievements today? What lessons can we draw today from Gallatin’s economic policies?
The MPC slashed Bank Rate as low as it has ever been in the Bank’s 320-year history. To bolster demand further, we then injected new money worth around a quarter of annual GDP through asset purchases. But despite the dosage, output is only now approaching its previous peak. This evening, I will reflect on some of the innovations in monetary policy that took place as a result of the crisis. Then I will look at some of the broader changes in the framework it prompted. Dealing with the crisis led central banks to innovate in several ways. In the first instance, this involved lending at longer tenors, against a wider range of collateral, and to a wider range of counterparties in order to keep financial markets functioning. For our part, as well as offering longer-term funding through our repo operations, we also introduced the Special Liquidity Scheme (SLS) enabling banks to borrow liquid Treasury Bills against their illiquid mortgagebacked securities. Later we introduced the Funding for Lending Scheme (FLS), providing banks with cheaper funding and a financial incentive to expand lending. Some of these facilities have since been made a permanent feature of our Sterling Monetary Framework. Others, such as the SLS and FLS, are by their nature temporary. More noteworthy from a monetary policy perspective, though, was the use of unconventional tools to inject further stimulus when policy rates approached their zero lower bound.

The third imbalance is the one that results from globalisation and from the escape from poverty of hundreds of millions of people, notably in China, India and elsewhere in Asia as well as in Africa, a change which is putting pressure on energy and agricultural commodity prices. The imbalance between growth in global demand and rigidity of supply points to scarcities that are reflected in prices. The uncertainties of the financial markets have in the end contributed to price tensions. Also in this instance, the alarm was raised some time ago, although little notice was taken. The price of oil, for example, was around USD 20 a barrel in 1999 and in the eight years thereafter it rose fivefold (tripled when priced in euro). Fortunately, European countries have resisted the temptation to reduce energy taxes, which would have led to an increase in demand and therefore ultimately raise the rich countries’ oil bill. On the other hand, other industrial countries have continued to keep energy taxation at very low levels, in order to support consumption. In some cases production of “bio-fuels” has been encouraged, which has led to further distortions in energy and food prices. The main oil and energy companies until two years ago have continued to price oil at USD 40 a barrel in their industrial plans, thus underestimating the need – and the opportunity – for investment in order to increase supply.
2018  Exports  Oil and gas1) Fish Other goods  Imports  0  200  400  600  800  1000  1) Includes refined oil products. Sources: Statistics Norway and Norges Bank  Access to capital and technology abroad has enabled us to develop new industries based on domestic natural resources. Hydropower and the oil industry are prime examples. We now invest our petroleum wealth in capital markets. The Government Pension Fund Global (GPFG) allows Norway to take a share in global value added. It gives us a cushion and helps trim the Norwegian state’s dependence on domestic economic developments. We need other countries – more than they need us. The foundation for today’s global trade cooperation was laid in the years following the Second World War. Institutions such as the IMF and the World Bank fostered closer economic cooperation between countries. The ratification of the General Agreement on Tariffs and Trade (GATT) marked the beginning of a gradual reduction of tariff barriers, which culminated in a rule-based, multinational trade system under the aegis of the World Trade Organization (WTO). History has shown that the trend towards a more open and liberal world order can reverse, as seen in the interwar period. This may now be happening again. Brexit, the UK’s exit from the EU, may take place a few weeks from now, and is the first major setback for European integration in several decades. The scaling back of tariffs has stopped, and new tariff barriers are being erected.

Norwegian businesses are part of global value chains. This means that protectionist measures can spill over into the Norwegian economy even if Norway is not targeted. The international framework and trade agreements we have with other countries are essential to the Norwegian economy. The EEA agreement is of particular importance. Thanks to the free flow of goods, services, labour and capital within the EEA area, Norway’s domestic market is about 100 times bigger than it would have been otherwise. A good half of our trade with other countries is with EU countries (Chart 5). Common regulations and product standardisation facilitate market access for Norwegian firms. 1 Based on GDP at market rates. 6  NORGES BANK  Chart 5 We trade mostly with the EU. Goods and services. In billions of NOK. 2017 EU  US  China  ECONOMIC PERSPECTIVES 14 FEBRUARY 2019  Other countries  Exports  Imports  0  200  400  600  800  1000  1200  Sources: Statistics Norway and Norges Bank  Norwegian business and industry may soon feel the consequences of Brexit. The UK is an important trading partner. The UK’s exit from the EU means it will also exit the EEA agreement, creating uncertainty for many firms. At the same time, international economic cooperation is creaking. In the years ahead, the multilateral trade system is at risk of being undermined, which may leave us with a more fragmented system. This may adversely affect small countries in particular.
This has helped countries to better implement proportionate regulation worldwide. To end my discussion today, let me summarise that macroprudential regulation and financial inclusion – could indeed go a long way in enhancing the financial wellbeing of a country and the people, and promoting sustainable growth through complementary factors. Differences across jurisdictions are inevitable, particularly in comparing the various regulatory systems  BIS central bankers’ speeches  5  and socioeconomic structures amongst all OIC Members. This is where collaboration can help us achieve a greater level of understanding. I believe this meeting is the appropriate channel for enhanced cooperation amongst financial regulators of OIC Members – be it together, or through other platforms such as AFI – to ensure our respective financial systems are well regulated and inclusive. 6  BIS central bankers’ speeches

As to the second phenomenon, it seems that while outside a monetary union deep current account deficits worry investors and can, in extreme situations, lead to currency crises, for countries that have already joined the common currency they do not matter much. An example of the three Baltic States (Estonia, Latvia and Lithuania), whose currency board arrangements are close equivalents of a monetary union, shows that enormous current account deficits (9-16% of GDP in 2006) have no apparent negative consequences for the economy. The case is, however, different with inflation pressure. In theory the margin for local demand-driven price increases in small member states of monetary unions is very narrow. This is guaranteed by the so called law of one price – the expectation that the same product should have the same price in various countries of a monetary union. In practice, however, there are several obstacles for this law to hold perfectly – some goods cannot be traded, most goods do not have perfect substitutes, there are transportation costs and tax differentials – so local demand pressures can play a role in driving prices in monetary union member states. As a consequence, products manufactured in these countries become more expensive and such countries loose competitiveness (e.g. Estrada, Lopez-Salido 2001). It is relatively difficult to foresee how the Polish economy will react to demand pressures once in the euro area. However, as in the case of asymmetric shocks, labor market flexibility is probably the best answer to the described phenomena.
Among the major global banks in the world, levels of leverage were on average more than 50 times equity at the peak of the boom (Chart 25). For a given return on assets (RoA), higher leverage mechanically boosts a banks’ ROE. The decision by many banks to increase leverage appears to have been driven, at least in part, by a desire to maintain ROE relative to competitors, even as RoA fell. For example, as Chart 26 illustrates, virtually all of the increase in the ROE of the major UK banks during this century appears to have been the result of higher leverage. Banks’ return on assets – a more precise measure of their productivity – was flat or even falling over this period. Between 1997 and 2008, as UK banks increased leverage, they managed to maintain broadly constant capital ratios by, on average, seeking out assets with lower risk weights (Chart 27). A similar pattern was evident among a number of the Continental European major global banks (Chart 28).

  Second, because banks are in the risk business it should be no surprise that the run-up to crisis was hallmarked by imaginative ways of manufacturing this commodity, with a view to boosting returns to labour and capital. Risk illusion is no accident; it is there by design. It is in bank managers’ interest to make mirages seem like miracles. Regulatory measures are being put in place to block off last time’s risk strategies, including through re-calibrated leverage and capital ratios. But risk migrates to where regulation is weakest, so there are natural limits to what regulatory strategies can reasonably achieve. At the height of a boom, both regulators and the regulated are prone to believe in miracles. That is why the debate about potential structural reform of finance is important – to lessen the burden on regulation and reverse its descent into ever-greater intrusiveness and complexity. At the same time, regulators need also to be mindful of risk migrating outside the perimeter of regulation, where it will almost certainly not be measured.   Third, finance is anything but monolithic. But understanding of these different business lines is complicated by the absence of reliable data on many of these activities. There are several open questions about the some of these activities, not least those for which returns appear to be high. This includes questions about the risks they embody and about the competitive structure of the markets in which they are traded.
For all these reasons, although the response to the health crisis should be accompanied in the short term by decisive fiscal measures to reduce its impact, an overall growth strategy with a medium-term horizon needs to be implemented. This should include the design of a fiscal consolidation programme, to be applied as and when the worst effects of the crisis are over and the recovery has firmed. Conclusions The COVID-19 pandemic is having an unprecedented negative macroeconomic impact which has, in turn, led to an increase in financial stability risks. The actions of the national and supranational economic authorities (fiscal, monetary and supervisory) have reduced these risks, but they have not been completely eliminated. We are currently experiencing a gradual recovery that is, however, subject to a high degree of uncertainty and remains incomplete and uneven. The economic policy response needs to be adapted to the specific requirements of this new phase. Specifically, on the ECB’s Governing Council we have made it clear that a high degree of monetary accommodation is needed to support the recovery, avoid financial fragmentation 16  and safeguard our price stability objective. In this respect, if necessary, we are prepared to adjust all our instruments. In the banking sphere, the crisis will have a significant impact on the quality of loan portfolios, the magnitude of which will depend on how serious it ultimately proves to be, as the recently published ECB vulnerability exercise has shown.

Income per capita is only half of the highest GNI in the group, or only 33% of the average GDP per capita (PPP terms) of the 27 EU countries. We have a strong need of funds and permanent technical assistance in order to continue with and accelerate our structural reforms. The Greek example is a newest lesson. European and other funds, without all the painful and grave structural reforms, could not protect the country from facing the present crisis. However, it seems that, without structural reforms, they just boost the illusion. The recent crisis has highlighted the need for the international financial institutions to have adequate level of resources and flexible, innovative and swift technical infrastructure. It is a prerequisite for a well targeted, timely, coordinated and efficient response to global shocks. The strong increase of IBRD disbursements, policy based lending and advisory services in 2009, the dominance of social protections programs, on the background of the social implications of the crisis, pinpoint the rapid and well targeted adjustments in the lending policy and expertise provided by the World Bank. The share of the World Bank financial support to the region in the total WB financing in 2009 rose to 20% (compared to the average of 16% for the previous three years). Significant weight was put on the enhanced social protection, regulation adjustment for the purpose of trade promotion, financial sector reforms and improved governance. Dear guests, Let me once more repeat that looking forward, the role of the World Bank becomes even more pronounced.
Inflation and wage increase Annual percentage change 3  3  2.5  2.5 2018  Inflation  2  2  2011 2007  1.5  1.5  1  1  0.5  0.5  0  2.0  2.5  3.0 3.5 Wage increase  4.0  4.5  0  Note. Moving averages over 12 months. Sources: National Mediation Office, Statistics Sweden and the Riksbank  But what about the causal relationships? There sometimes appears to be a tendency to see wage increases as the source of all inflation. The perceived chain of events is that an increase in inflation is always preceded by a tighter labour market pushing up wage increases and companies then passing on the increased costs in the form of higher prices. Can we therefore expect modest wage increases to push down inflation going forward? No, such an unshakeable causal relationship between wage increases and inflation does not exist. It can just as easily be the case that stronger demand can allow companies to increase their prices. This increases their profits and margins, which in turn provides scope for them to raise wages. The interplay between prices, wages and activity in the economy – and of course a number of other variables, not least productivity – is complex. There are quite a few studies that have examined the links between wage increases and future inflation and whether wage increases tend to precede or lag behind inflation.

Financing Asian infrastructure development The second area is in infrastructure finance. Asia’s infrastructure financing needs are vast, far beyond what government and bank financing will be able to provide. The 10. Asian Development Bank estimates that developing Asian countries will need to invest USD 1.7 trillion annually in infrastructure till 2030 to fulfil its medium- to long-term growth potential. Private 2/4  BIS central bankers' speeches  sector debt financing can play a significant role here. Singapore’s bond market is drawing in private capital for infrastructure projects. About 60% of ASEAN infrastructure projects have benefitted from project finance or 1 1 . advisory services of Singapore-based banks. Let me highlight three examples: a. Belt and Road Initiative bonds or BRI bonds. Chinese banks in Singapore have issued bonds to finance BRI projects. China Construction Bank Singapore branch issued RMB 1 billion (USD 145 million) of BRI bonds last year. Bank of China Singapore branch recently issued RMB 4 billion (USD 600 million) of BRI bonds in May this year. b. Asian project bonds. This year, we witnessed the successful return of project bonds into Asia’s bond market after more than a decade of absence. Indonesia’s second largest independent power producer, PT Paiton Energy, received more than USD 9 billion in orders for its USD 2 billion issue; a demonstration of increasing sophistication and growing demand of investors. Debt capital market teams in Singapore including DBS and HSBC lead arranged the deal. c. Offshore rupee denominated bonds.
In the course of a decade unemployment has been virtually halved, from 12 to just over 6 per cent. Of course one cannot be certain that other countries’ solutions apply to Swedish conditions in every respect. But it is important to note that GDP growth in the Netherlands has been fairly close to the EU average even though employment has developed very differently. So it is not higher demand in the past decade that lies behind the creation of so many new jobs in the Netherlands. Most of the evidence suggests that traditional demand management is not capable of lowering unemployment appreciably. Instead it is the workings of the labour market and wage formation that are key factors for the possibility of turning the path of unemployment. That is where the efforts must be made. Such efforts might make it possible to combine low inflation with a better development of employment. They could then contribute to increased confidence in economic policy as a whole. At times there seems to be a tendency for the problem of unemployment to generate some uncertainty about economic policy’s long-term commitment. Reforms in the fields of wage formation and the labour market can mitigate the potential conflicts between economic policy’s goals. That would improve the conditions for a continued fall in the level of interest rates relative to the rest of the world, even in a situation where Sweden stays outside the euro area for the time being. BIS Review 68/1997  -7-  4.

In view of the importance of payments and settlements systems for the efficiency and security of the banking system, these have been developed by using state-of-the-art electronic technologies and highly sophisticated and technically advanced information systems that not only meet, but often exceed, international standards. The transformation started in 1986 when SAMA installed the Automatic Cheque Clearing System. In 1989, SAMA required all Saudi banks to join the Saudi Payments Network (SPAN) which is a national ATM system. This system was subsequently extended to a point-of-sale that links customers, merchants and banks. However, the backbone of the Saudi Payment and Settlement System is the Saudi Riyal Interbank Express (SARIE). This is an interbank system that operates on Real Time Gross Settlement basis. SARIE provides an electronic link between all other payments and clearing systems which had been installed earlier. A follower of the statistical data on the payments systems, issued by SAMA, would realize the huge growth achieved in the number of ATMs, POS and transactions executed through them in addition to the transactions carried out through SAREA' System. Of course, Saudi banks and their customers have benefited greatly from these advances in technology. Banks have been able to expand their businesses by offering a range of new products, control their costs and to enhance profitability. Consumers have benefited from access to a broader range of services and from reduction in costs.
After all, reputation and legal risks can be costly too. 20. The MAS expects boards and senior management to have ownership and oversight of ML/TF risk control issues. FIs therefore must put in place an effective reporting framework to keep board and senior management well apprised. In turn, Board and senior management must oversee proper resolution of ML/TF risk control concerns as flagged out internally by your staff, by auditors or regulators. 21. The next area relates to risk culture. Clearly, culture is not easy to prescribe as a practical matter. Every staff in the FI, not just its management, contributes to its culture. However, management usually has decisive influence on a firm’s overall culture by setting the right “tone from the top” which must be reinforced through supporting actions to secure the commensurate “echo from the bottom”. Those in the various lines of defences must be empowered and recognised for doing their jobs well. 22. My remarks so far have discussed the MAS’ approach to Regulations and Supervision. Let me now touch on the next element of our framework – Enforcement. No matter the amount of regulations and notwithstanding the heightened intensity of our risk-based AML supervision, those bent on breaking our ML/TF laws will always try to find ways to exploit any weaknesses in control systems or practices. This can happen especially if an FI’s governance and culture fall short and appropriate due diligence is overlooked in lieu of business motivations.

To be effective, we need to forge a strong collective effort with every stakeholder doing its part. In this regard, a good regulator-industry partnership is one essential thrust of our AML/CFT strategy. 36. On this note, I wish you a successful and fruitful conference. 5/5  BIS central bankers' speeches