samchain/econo-pairs-v1 huggingface dataset:
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?

Gallatin also kept Hamilton’s system for keeping the public debt more or less intact. Other parts of Hamilton’s financial system were modified to serve Republican causes. Gallatin’s early  10  See, for example, Chernov’s description of Hamilton’s achievements while Secretary of the Treasury (Chernov, op.cit., ch. 17-20). 11  Using the Bank of the United States for the maintenance of financial stability was done both through lendingof-last-resort type operations and through the restriction and extension of credit in response to market conditions. Robert E Wright and David J. Cowen, Financial Founding Fathers: The Men Who Made America Rich (Univ. of Chicago Press, Chicago IL, 2006), ch. 1, provide a thorough exposition of Hamilton’s ideology, achievements, and financial system, as well as his skilled use of the Bank of the United States for the purposes of maintaining financial stability. 12  At the end of 1793, Gallatin won the election to the United States Senate, but was removed shortly thereafter from the Senate on the grounds that he did not have the minimum nine years of United States citizenship. 13  Alexander Balinky, Albert Gallatin: Fiscal Theories and Policies (Rudgers Univ. Press, New Jersey NJ, 1958) gives a very thorough introduction to the fiscal ideology of the Republican Party and how Gallatin’s fiscal theories and policies were shaped by this. Wright and Cowen, op.cit., p. 103, point out how Gallatin had more of a problem with the Federalist domination of Hamilton’s bank than with the bank itself. 14  Quoted in Chernov, op.cit., p. 469.
Housing policy and monetary policy In closing, the housing policy agenda I describe would address one factor that has impeded the economic recovery. Implementing such policies would improve the economic outlook and make monetary accommodation more effective. However, because the outlook for unemployment is unacceptably high relative to our dual mandate and the outlook for inflation is moderate, I believe it is also appropriate to continue to evaluate whether we could provide additional accommodation in a manner that produces more benefits than costs, regardless of whether action in housing is undertaken or not. Monetary policy and housing policy are much more complements than substitutes. As I hope I have convinced you today, while the Fed has will do all it can to achieve our dual mandate of maximum sustainable employment in the context of price stability, we have to recognize that there is more to economic policy than just monetary policy. Low interest rates help housing, but cannot resolve the problems in that sector that are pressing on wider economic activity. With additional housing policy interventions, we could achieve a better set of economic outcomes than with just monetary policy alone. Thank you for your kind attention. I would be happy to take a few questions. 10  BIS central bankers’ speeches

Il Sole 24 Ore: We are at the very heart of democracy: no taxation without representation. Trichet: I repeat: peer surveillance on government and parliament as regards fiscal policy is a bold political endeavour. I do believe that by going back with great determination to the letter and the spirit of the Stability and Growth Pact we will make a jump in terms of governance of the 16 members of the euro area, and that jump is overdue. Moreover, the 2020 Agenda is also extremely important to reinforce economic governance in the EU as a whole, at the level of the 27. Il Sole 24 Ore: A last word: are you optimistic that EMU will survive the current crisis? Trichet: Absolutely. Sometimes, we don’t realize how much Europe has achieved in the last half a century. The founding fathers could not even imagine the creation of a Parliament elected by universal polling, of a European Court of Justice determining jurisprudence for Europe as a whole, of a fully integrated single market and of a single currency, today for 330 million fellow citizens and 16 countries. Europe has also proved in the past two years that it was able to cope with the worst global crisis since World War I. This has been in particular true for the central banks, the ECB as well as the National Central Banks, in Italy Banca d’Italia.
They had the vision to put in place international institutions that might help prevent the disintegration of the open trading system that they saw as necessary to a revival of economic prosperity. We have not had to go through a time of economic disaster. We have had the opportunity to experience an extraordinary flowering of the international trading system, and the entry into that of the world’s two largest populations. The expansion of trade, the rise in the number of qualified people entering the world’s labour force, and the growing realisation that we can all benefit from trade has raised living standards and provided us with opportunities to reduce poverty around the world. That should make it easier, not more difficult, to design international institutions to sustain those developments. We will have only ourselves to blame if we fail to live up to that challenge and simply allow the IMF to evolve through a series of ever more bland communiqués and meaningless statements. Today, I have tried to challenge the thinking behind the slow progress in reforming the IMF. But that should not be interpreted as any criticism of the extraordinarily talented and committed people who work for the Fund. On the contrary, the responsibility for reform lies fairly and squarely with the shareholders – the member countries. Nor are the issues an arcane exercise in international finance. As Governor Deshmukh said in his speech in Savannah, agreements on the international monetary system and on trade go hand in hand.

When ‘imbalances’ arose and countries were depleting or building their official reserves, a key feature of this system was supposed to be that both the creditor and debtor countries were obliged to adjust their imbalances. In practice, the obligations on creditor and debtor countries were asymmetric, and in part that explains why the system proved unsustainable. One drawback of the system was that it did not allow countries to smooth their expenditure in the face of fluctuations in their income. The role of the IMF was to facilitate some smoothing, by lending pooled reserves. Alternatively, changes in exchange rates would be sanctioned by the IMF for those countries judged to be in "fundamental disequilibrium". In doing this, the IMF fulfilled its purpose to help achieve orderly world growth. The history of the United Kingdom illustrates these features of the Bretton Woods system. Britain faced repeated challenges in achieving external balance during the Bretton Woods era. Sterling was devalued twice and four IMF lending programmes were necessary. Yet in 11 of the 17 years between 1955 and 1971, the UK ran a current account surplus, and its current account deficit peaked at around a mere 1% of GDP in 1964. Over time countries realised that restricting their ability to save and invest overseas was a significant limitation on their wellbeing. Opening up capital accounts broke the link between current income and current expenditure, and enabled countries both to smooth consumption and to diversify risk.
In my Bank’s and the Basle Supervisors’ work with the industry to meet the Year 2000 challenge, a number of issues have arisen that are worth calling to your attention. Probably the most significant issue is the relationship that banks have with third-party vendors and service providers. Not infrequently, we have found that banks have assumed either that vendors will make their products and services Year 2000-compliant, or have sought only general assurances from the vendors, which have been accepted at face value. Either approach puts a bank at significant risk. In addition, we uncovered instances when products represented by vendors as compliant simply were not. More significantly, we found that even if a vendor has made appropriate modifications and tested a product, there can be no guarantee that it will work properly in a bank’s unique operating environment or in concert with related applications. It is now quite clear that every product must be tested and certified as compliant by the user, and testing must be repeated upon the release of new compliant applications, environmental software, and hardware. Remote operations and foreign activities pose special challenges for Year 2000 programs. Efforts to develop or use off-the-shelf applications or to put in place a general plan of action can fail to take into account activities that are unique to a particular business or location. Making certain that inventories are complete for complex organizational structures and geographically dispersed banks is proving to be a very difficult task.

The lawyers may get rich, but will you be in business? • Testing is not a problem -- our organization has good testing and acceptance procedures and we test all the time. Previous internal testing standards probably won’t do the job this time. • Obtaining adequate resources will not be an issue -- our organization has a great technical staff and we can always hire additional resources if it becomes necessary. Good luck. As a bank supervisor, the Federal Reserve Bank of New York will do whatever it can to encourage banks to set up and adhere to programs that deal with Year 2000 problems. Our examiners will focus on how well individual banks are doing and will highlight for senior management and directors those instances when progress may be lagging. This oversight will include not only U.S. banks, but also the U.S. branches and agencies of foreign banks. However, the motivation and determination to cope with the Year 2000 problem must come from within banking organizations rather than from supervisory oversight. Getting the Year 2000 issue right is critical for every organization. Failure to get it right will affect the integrity of the payments system and the performance of the domestic, and maybe even the global, economy. The Federal Reserve is working hard to make certain that our systems will be ready and fully tested. And I am pleased by the high level of central bank coordination on this issue, as the recent release of the Basle Supervisors’ technical paper demonstrates.
Broad money growth, adjusted for transactions between financial intermediaries, is now rising at around 4½% a year, a rate that should, if maintained, show up in a recovery during 2013. Credit conditions have improved, and should improve further as the impact of the Funding for Lending Scheme kicks in. Mortgage rates have fallen, especially for high loan to value mortgages. Big companies have large holdings of cash and ready access to capital markets. Equity prices are nearly 10% higher than last January. If the policy prescriptions I mentioned earlier were adopted, then confidence that we were moving in the right direction should translate into higher business and housing investment, and underpin the recovery. Recent actions by central banks and governments in a number of industrialised countries have raised questions about the frameworks within which monetary policy is being conducted. In the UK, the inflation target was introduced almost 21 years ago, and it has now come of age. It would be sensible to review the arrangements for setting monetary policy. 4  BIS central bankers’ speeches  Last October I reviewed the first two decades of experience with the inflation target. In that speech, I argued that there were times when a concern for financial stability might justify deviating from the inflation target, but that policies aimed directly at preventing too rapid an expansion of financial balance sheets, of the kind now available to the Bank’s Financial Policy Committee, might be a less costly way, in terms of lost output and employment, of achieving overall stability.

And it is interesting to note that within the past year both the Federal Reserve  BIS central bankers’ speeches  5  and the Bank of Japan have adopted a target for annual inflation of 2%. The anchoring of inflation expectations has been the most successful aspect of the inflation targeting regime and it has allowed the Bank to avoid an unnecessarily damaging tightening of policy in response to short-run movements in inflation. It would be irresponsible to lose that. Second, the inflation target is not an impediment to achieving recovery today. It has not prevented the MPC from taking measures to combat the downward momentum in the economy following the shock of 2008. It is precisely because inflation expectations have so far remained firmly anchored that the MPC has been able to respond flexibly to weak demand. So the challenge we face is not the inadequacy of the framework, but the fact that there is no easy route to recovery after a major banking crisis. Recovery is inevitably slow and protracted. The healing process will take time, and patience is not a quality associated with our political debate. Patience and a sense of realism are sometimes mistaken for fatalism. Our economy is recovering, more slowly than we might wish, but we are moving in the right direction. The Bank has not been, and will not be, inactive. Low interest rates will not be withdrawn prematurely, but we should not rely solely on general stimulus to aggregate demand.
5  See Financial Integration in Europe, European Central Bank, April 2008. 6  For a detailed exposition of this argument see Rajan, R. and L. Zingales (2002), “Banks and markets: the changing character of European finance”, in V. Gaspar (ed. ), The Transformation of the European Financial System, October 2002. 7  See for example Havik et al (2008), “The EU-US total factor productivity gap: An industry perspective”, DG ECFIN Economic Papers 339, September 2008. BIS central bankers’ speeches  3  or at least not markedly worse than others. For example, the European Commission’s EMU@10 Report stated that “three of the four cohesion countries (Spain, Ireland and Greece) have shown a satisfactory development overall, while only the fourth (Portugal) has disappointed.”8 This leads me to my second question: if this convergence was in fact cyclical rather than structural, why was it not identified earlier? My tentative answer would be that observers’ assessments were influenced by the financial cycle, a theme that has echoed in Hyman Minsky’s work.9 In retrospect, it seems now that the early years of the euro were the peak of a much longer financial upswing. This led observers to overestimate the sustainability of consumption and investment, and to underestimate the risks of rising private debt levels – and this was true on both sides of the Atlantic.

If the government spends 4 per cent of the Fund annually – the expected real return – this  6  Median income is the income level at the middle point of the income distribution. BIS Review 18/2008  7  will finance close to 20 per cent of public expenditure ten years ahead. The return on the Fund will by then have become such an important source of funding that it is difficult to imagine that the government authorities would find any sound arguments for drawing on the accumulated capital. It is also a flow of revenues that does not have an adverse effect on private sector production capacity, unlike taxes. Irrespective, only a share of future pension payments will be matched by revenues from the Government Pension Fund. Government old-age pension obligations are estimated to increase from around 250 per cent of mainland GDP today to approximately 350 per cent in the course of a few decades. As a result of the pension reform, the increase will be somewhat smaller. As a major shareowner and bondholder, Norway has received increasing international attention. Many countries have established funds similar to the Government Pension Fund – Global, with substantial assets under management. We are open about the Fund’s objectives, organisation and investments. This is necessary in Norway because the funds are public funds and because transparency enhances management. Moreover, the transparency of the Fund is also viewed in a favourable light by those countries in which we invest.
A case in point is that in Portugal, where non-financial companies have a sort of single window to report the data required by the main Portuguese authorities (Tax Agency, National Statistical Institute, Mercantile Register, Central Bank). In particular, our neighbour has been able to build a single data platform to which every authority can subsequently resort to obtain the information they are entitled to access. I have seen that in the Spanish National Statistical Plan (PEN) for next year there is a reference to a project setting up a “Sistema Integrado de Información de las Empresas”, which I think is along the same lines. It could then contribute to significantly reducing firms’ reporting burden in the future. As concerns financial information, we should also be open to more efficient financial reporting and statistical production at the Banco de España and the ESCB level. The Banco de España is very much committed to this goal. In fact, we already have a strategy to simplify and rationalise regulatory reporting that is starting to bear results. The main aim is to alleviate the reporting burden and to improve data management by institutions and by the Banco de España itself. 7  On top of that, various initiatives have been taken as part of the Banco de España’s Strategic Plan (which runs to 2024) dealing with data management and transparency.

It had been clear for a relatively long time that if the share of human labour in output was only one-third, Solow’s model would provide a very good picture of reality in international comparison. To overcome this inconsistency, however, it was necessary to come up with the idea of introducing a new variable in the model that would represent human capital. Although this may seem obvious today – as such things always seem to be as soon as someone else thinks of them – it was a novelty in the late 1980s. It was another Nobel Prize Laureate in economics Robert Lucas who divided human labour into a part reflecting people’s general capacity for work, and the contribution of human capital that was a result of previous investment in education. What Lucas did was very simple from today’s point of view. Using the extensive structure of US economic data, he chose the average wage of people with basic education as a basic remuneration of people’s capacity for work. Then he gradually added the average wage of  BIS Review 81/2008  1  other people after each finished year of education. The results showed that every additional year of education up to the level of a bachelor’s degree increases the wage by 8% on average.
Nevertheless, phases of low or negative interest rates also present monetary policy challenges and have economic side-effects, which must not be ignored and which I would like to address in the third part of my speech. I will stress that expansionary monetary policy is no panacea for growth in advanced economies. Only structural reforms and adjustments in the real economy can create the conditions for a sustained recovery – and thus for a normalisation of monetary policy. Expansionary monetary policy can make these necessary adjustments easier, but it cannot replace them and must not delay them. Before talking about the mechanism of negative interest rates in Switzerland, I would first like to examine the international environment and explain why global interest rates today are so low. Page 2/16  Low rates as a global phenomenon The current very low interest rate level is the result of a global secular trend. Interest rates have not just been declining since the outbreak of the financial crisis, they have been falling steadily in recent decades. Chart 1 shows that nominal yields on government bonds with a remaining maturity of ten years in Switzerland, Germany and the US are more than 6 percentage points lower today than they were back in 1990. Nominal interest rates are currently at a record low worldwide. But it is important to distinguish between nominal interest rates and real interest rates, which are ultimately relevant for most economic decisions.

The interest rate differential reflects not only lower average inflation in Switzerland compared to other countries, but also the country’s political stability and credible monetary policy. Investors are prepared to hold Swiss franc investments at lower yields. Chart 4 plots policy rates in Switzerland and in the euro area. Since the outbreak of the financial crisis, the interest rate differential has become ever narrower. When the negative interest rate was introduced in the euro area in June 2014, the interest rate differential even turned negative. Every subsequent monetary easing measure by the ECB added to the pressure on the Swiss franc, which at the time was subject to the minimum interest rate against the euro. Chart 5 shows the exchange rate of the euro against the Swiss franc (blue curve) and against the US dollar (red curve). In the second half of 2014, the value of the euro fell sharply against all major currencies. This meant that the minimum exchange rate was no longer sustainable. The volume of interventions that would have been required to defend the minimum exchange rate, even just temporarily, threatened to spiral out of control. This is why we adjusted our monetary policy in January 2015. The discontinuation of the minimum exchange rate caused the Swiss franc to appreciate, by an amount roughly equal to the gain in value that most other currencies had experienced against the euro in the preceding months.