samchain/econo-pairs-v1 huggingface dataset:
Everyday Economics Speech given by  Andrew G Haldane Chief Economist Bank of England  Nishkam High School, Birmingham 27 November 2017  The views expressed here are not necessarily those of the Bank of England or the Monetary Policy Committee. I would like to thank Guy Brett-Robertson, Shiv Chowla, Raakhi Odedra, Jasmine Stenning, Philippa Wall and Ann Whittaker for their help in preparing the text. I would like to thank Ben Broadbent, Claire Crawford, Neil M. Davies, Jonathan Fullwood, Richard Harrison, Ian McCafferty, Sandra Newton, Alice Pugh, Michael Saunders, Emma Sinclair, Sarah Smith and Arthur Turrell for their comments and contributions. 1  All speeches are available online at www.bankofengland.co.uk/speeches  Terrible title, right? Not the “everyday” bit – that’s fine. It is the word “economics”. For most people, this is an instant turn-off. “Economics” just sounds too conceptual, too academic, too impersonal, too dismal. 1  Stephen Hawking was once told that every equation he included in a book would halve its readership. The word “economics” probably has a similar effect. If I’d taken media studies rather than economics, I’d have gone about things differently. I’d have drawn you in with a “hook”, such as people or children or dogs. Had my title been “Economics for the People”, I’d have doubled my readership. Had it been “Economics for the Kids”, I’d have quadrupled it. And if I’d opted for “A Fluffy Labrador Puppy Explains the Economy”, the Bank’s website would have crashed. 2  It is too late now.

It is the Bank of England, through its operations in financial markets, purchasing government securities of a given duration, typically from non-bank financial institutions such as life insurance and pension funds, whose accounts are credited with the proceeds such that the asset purchases are financed through the creation of central bank reserves held on the accounts of commercial banks at the Bank of England”. And that explanation, it was hoped, would provide the general public with the confidence needed to encourage them to spend. You can be the jury in deciding how well this might have been achieved. There was a different explanation, and conversation, with the public that could have been had. It might have gone something like this: Q: “Andy, is QE money-printing?” Andy: “Yes. And when you get some, make sure you spend it.”  10  All speeches are available online at www.bankofengland.co.uk/speeches  10  I fully accept that this would be the wrong side of the over-simplifying line for some people. But if doing so delivers the desired policy outcome – building public confidence to support spending – that may be the better side of the line on which to err. Just saying. (b) Conversation At the Bank’s first Open Forum in 2015, Gillian Guy, Chief Executive of Citizens Advice, said something that has stuck with me. In a panel discussion on the role of finance in society, all panellists agreed on the need for improved public understanding of finance.
In the post war economy with closed capital and current accounts the banking system was tightly controlled by government. It was an instrument of macroeconomic management and of financial repression in order to repay the national debt. As the Chairman of Lloyds Bank at the time described it, “It was like driving a powerful car at twenty miles an hour. The banks were anaesthetised – it was a kind of dream life”. But, from the beginning of the 1970s, as the financial sector was increasingly liberalised and globalised, the old risks returned. It became apparent by 1979 that the Governor’s eyebrows needed to be bolstered with statutory regulation and supervision of banks. As capital accounts were increasingly opened up and cross border competition grew, the need for a more level playing field between internationally active banks became more apparent. Liberalisation led to a shift towards more explicit prudential standards starting with the 1975 Basel Concordat – the forerunner of today’s Basel standards. The focus was very much on promoting the safety and soundness of individual firms. Much less attention was given to the fact that the risks in the financial system are greater than the sum of the risks in its parts. Central banks were no strangers to such systemic risks. Indeed, they were recognised at the time – the forerunner of today’s Basel Committee identified them and even coined the term “macro-prudential” risks to distinguish and separate them from “micro-prudential” or firm specific risks that were the subject of the Basel Accords.

13 Article 173 of the French Energy transition Act of 17 August 2015. 14 Joint statement by the Founding Members of the Central Banks and Supervisors Network for Greening the  Financial System, 12 December 2017. 15 New Climate Economy (2016): The sustainable infrastructure imperative Financing for Better Growth and  Development. newclimateeconomy.report/2016/wp-content/uploads/sites/4/2014/08/NCE_2016Report.pdf 16 www.climatebonds.net/files/reports/cbi-green-bonds-highlights-2017.pdf  4/4  BIS central bankers' speeches
Andrew Bailey: Prudential regulation – challenges for the future Speech by Mr Andrew Bailey, Executive Director of the Bank of England, at the University of Edinburgh Business School, Edinburgh, 4 October 2012. *  *  *  It is a great pleasure to be in Edinburgh again and to have the opportunity to set out progress on the reform of financial regulation as we approach the formal introduction of the new arrangements. Scotland is home to a very important financial services industry for the UK and Europe and although it may at times seem like the changes taking place in regulation appear through London and Whitehall bubbles, they are clearly as relevant to you as they are to your counterparts in the City of London and Canary Wharf. All of us witnessed the costs associated with the failures of banks. We have learnt the lessons of that experience and that is why the reforms we are making to the way we regulate will affect us all and will create a system that is safer and stronger for every part of the UK. One thing I should emphasise is that this is a reform of the whole of financial regulation. I say that because it is easy to conclude from observation of the issues we face as regulators, and the public debate, that we are just dealing with reforming the regulation of banks.

As a result, some people began to orient more towards the MKD. Traditionally our country, like most former Yugoslavian countries are highly Euro-rized, which means people save and use credits in Euros, with a 65% Euro to 35% MKD ratio. During the crisis and continuing today, the ratio of households and their propensity to save in MKD has elevated to 50%. BIS central bankers’ speeches  1  You have been in your post for 2 years with 5 more remaining. How do you view the future development of the economy based on the government’s FDI promotional campaigns that are taking place currently across the globe? We have witnessed in the past 4–5 years several very important foreign direct investments. Some of them are so large that they already equate to roughly 17% of our exports, with the majority of the companies focused on component manufacturing for the automotive industry. There are also several large firms that are in the pipeline which have shortlisted Macedonia for their capacities. Importantly, these incoming large-scale investments are also bringing diversification to our exports, which are traditionally based in textiles, agriculture and metals. It is worth noting that several of these firms not only made the decision to enter Macedonia but are currently in expansion mode based off their operational successes here, to the degree that I predict in 3 years the current and pending FDIs can equate to 30% of our exports.
This could mean that the central bank chooses a repo rate path that, while it does not give the lowest squared deviations over the three-year forecast period, is nevertheless judged preferable from a longer-term perspective. For instance, the bank may hold the policy rate higher to try to prevent a credit boom that is feared would cause problems – with large squared deviations – beyond the forecast horizon. A closely-related reason is that the central bank under certain circumstances gives consideration to specific risks when setting interest rates. This is something I personally find to be one of the most important factors missing in the simple analytical framework. This could also be expressed as the central bank holding the policy rate at a higher level to reduce the risk – within or beyond the forecast horizon – that, for instance, a credit boom would continue too long and cause problems. The central bank might also wish to hold the policy rate at a higher level to reduce the risk of inflation expectations rising too high, which could also be problematic. The higher policy rate could give larger deviations during the forecast period, but may nevertheless be preferable as it reduces the risk of a really poor outcome. Framework more difficult to apply with an Executive Board Another circumstance that I perceive as complicating matters with regard to putting the theoretical approach into practice is the fact that there are six of us making the monetary policy decisions.

The loss function can be written as  , is the forecast where π is the forecast for inflation, π* is the inflation target and deviation between actual resource utilisation in the economy and the long-run sustainable, or  BIS central bankers’ speeches  1  “normal” level of resource utilisation.1 The first term represents the central bank’s target of stabilising inflation and the second its ambition to stabilise the real economy. The parameter λ represents the importance the central bank gives to stabilising the economy in relation to stabilising inflation. If λ were zero, this would mean that the central bank does not care at all about developments in the real economy, but merely tries to bring inflation as close to the target as possible. If λ is large, this means that the central bank places great emphasis on stabilising the real economy in relation to stabilising inflation. The term loss function comes from the fact that the larger the deviation, or “gap”, the further away we are from where we want to be, and thereby the greater the “loss”. In this theoretical description the central bank’s task is described in slightly more detail than the general wording of “finding a suitable balance between stabilising inflation and stabilising the real economy”.
Markets participants that call for the ECB to play this role may care only about the nominal value of their assets and the need to avoid losses. Whether or not the underlying asset – our currency as store of value – has been depreciated seems unimportant to them. But survey after survey shows that the people, the citizens of the euro area, want price stability. They care deeply about their purchasing power and the value of their savings. The ECB has been established with a clear mandate to meet these expectations. Moreover, what these calls for more activism overlook is the positive effects of the ECB’s stance over the medium term. There are some in the academic world that argue that one way out of the sovereign crisis would be for the central bank to act as a lender of last resort to the sovereign. These voices suggest that euro area countries are more vulnerable to liquidity stresses relative to the situation in economies where the central bank is supposedly prepared to backstop the government bond market. Certainly the ECB, as the central bank of all EMU countries jointly, cannot act as the central bank of specific countries. But is this in fact a disadvantage for Europe? In a sense, euro area countries have given up sovereignty over their national currency. This implies that maintaining their public debts at reasonable levels requires commensurately more convincing fiscal and economic policies.

And we uphold the integrity of the banking system. 12. 160-plus incumbent banks and new virtual banks — including banks built by tech giants — operate in our ecosystem. They may have different fintech strategies. They may try and grow their digital banking businesses in different ways. But it’s precisely this diversity that 1/4  BIS central bankers' speeches  makes the Hong Kong banking market so dynamic and well-positioned to drive innovation. This diversity is crucial to our vision of shaping Hong Kong into a global fintech hub. 13. So Hong Kong has embraced a new era for smart banking. But what will thenext era look like? How will we bring our vision to life? I think we’re all here today with those questions in mind. 14. At the HKMA, we know data will be vital to the future of banking. Data analytics is pivotal in customer authentication, credit assessment, and compliance monitoring. Indeed, data is key to almost every banking function. It is perhaps the most powerful tool for delivering the timeless banking principles I mentioned. As we head into the next era, data will enable better service, greater trust, and more efficient capital management. 15. Going back to my dining analogy, you could say data is banking’s “secret sauce”. It makes every meal better — no matter how you serve it. And that is why the HKMA is adopting a data-centric strategy to support the future of banking in Hong Kong. 16.
But I would make three points in response: First, I would contrast the time taken to agree Basel III and much of the rest of the framework – around 3 years between the start and finish of negotiations – with the best part of 10 years it took to agree its badly flawed predecessor, Basel II. Second, in the light of the transition to the new standards banks in many jurisdictions have already strengthened their capital positions – often it has to be said with some prodding from the supervisors. In the UK, banks are holding £ more capital than prior to the crisis. Globally, there is around $ more capital in the world’s largest banks. Holdings of liquid assets for the major UK banks have trebled and leverage has almost halved. Third, the lengthy transition is designed to ensure that the new standard does not have a procyclical effect, driving banks to deleverage further, to shrink their balance sheets to help meet the new, tougher standards. I should make clear here that I do not buy the argument that if we require banks to hold more capital and liquidity then, inevitably, they will lend less. Indeed, the opposite can be true. As we saw in Japan and see elsewhere, weak banks desperate to do what they can to improve their capital positions – but unwilling to bite the bullet and issue fresh equity – can become zombies of little use to the real economy.

There is a strong case to place them to a higher level of responsibility. This is understandable. Banking, or credit in particular, is deemed to be the lifeblood of the economy. Through provision of credit to businesses and consumers, the banking system spurs productive economic activities. Lack of trust and confidence in the banking system might lead to disintermediation and cause slower economic growth, rise in unemployment and decline in wealth generation, just to name a few. The consequences are dire, and the stakes are high. Since the financial crisis, more than $ billion have been levied on banks for various cases of misconduct and breach of trust. As recent as three weeks ago, a major bank was fined $ billion. Both of these are astronomical amounts. In Malaysia, over the past three years, Bank Negara Malaysia has imposed close to RM110 million in penalties. To strengthen the system against these abuses and breaches of rules and regulations, a Code of Conduct and Principles was issued last year by Bank Negara Malaysia. In a more positive light, there is evidence that public trust in banks around the world is improving. This is something we can build upon. The right place of finance is to be the catalyst for the economy. As guardians of public trust, bankers must protect the system against any threats. This means protecting against abuse, misconduct and exploitation. No banker should tolerate misselling of products to customers which are not suited to their needs.
Despite the increasing role of the non-oil sector in the national economy, particularly the role of the private sector, the oil sector is still the main driver of the national economy, where most of the country’s revenues and receipts of the balance of payments are coming  2  BIS central bankers’ speeches  from. Therefore, it is necessary to continue to work hard in order to diversify sources of income to ensure the sustainability of economic development in the long run and reduce the risks associated with relying on a single source of income. Third: Reduction of high domestic consumption of oil and gas, as figures indicate an annual average increase in domestic consumption of 7.3 percent over the past five years, which is high by any measure and not commensurate with the rate of growth in population and GDP. There is no doubt that the increase in domestic consumption of oil, in addition to being a drainage of resources that God has bestowed upon us, it limits the quantities available for export in the future. Thus, it is necessary to consider the reasons of the increase in domestic consumption of oil and gas to rationalize their consumption. Custodian of the Two Holy Mosques: As we are on the threshold of a new gracious budget, I pray for the Almighty Allah to preserve you as the leader of the march of this blessed and generous country. May Almighty Allah lead your steps to success. BIS central bankers’ speeches  3

Much reflection has also been carried out on the matter within the Swiss National Bank in order to better understand this difficult period in our own history. The postwar period was characterised by a fierce determination to start afresh, to avoid the reappearance of the misleading thinking that had led to pre-war protectionism, and to reconstruct the economies that lay in ruins. A phase of intensive work began, with the aim of reorganising the international monetary order. Still isolated, both economically and politically, Switzerland participated in the efforts without becoming a member of the Bretton Woods Institutions. The gradual liberalisation  BIS Review 40/2007  3  of payments and trade rapidly led to a period of prosperity but also to a situation of disequilibrium in the operation of the international monetary system. Inflation and speculative movements of funds became common features during the 1960s and the monetary arena was disturbed by multiple devaluations, particularly in Europe. Suspension of gold convertibility for the dollar, in 1971, hailed the collapse of the system of fixed exchange rates that had been put into place after the war. Faced with a massive flow of speculative funds, the SNB was forced to abandon stabilisation of the Swiss franc in 1973. The transition to sustained floating for the Swiss franc was definitely the most important change of direction in the monetary policy strategy pursued by our bank in its hundred years of existence.
We have seen that the links to the central banks work best when the staff at the Swedish embassies in the respective countries are actively involved and regularly follow up what is happening in the respective banks. At the beginning of this year, Sida commissioned an evaluation of the Riksbank’s cooperation so far with Sri Lanka and Vietnam. The evaluation showed that the Riksbank’s efforts in these central banks had been both successful and appreciated by the recipients. The very fact that we are colleagues, that we do the same things, have the same responsibility, was one of the key factors. There are many  BIS Review 123/2006  1  consultants; colleagues are harder to find. The long-term thinking behind the cooperation is also an important factor. We do not merely make an analysis, write a report and disappear. We are still here and can continue the discussion whenever necessary. The problems that were indicated in the evaluation were more of an administrative nature. For instance, it is difficult to find a place in a foreign aid context for low-cost projects like this, as they do not really follow the set patterns for other aid efforts. Finally, I can mention that the Riksbank has allocated resources in our internal business plan for next year to extend our cooperation with some of the central banks in Sida’s cooperating countries.

It’s not clear whether the overall effect is positive. While nominal conditions are more accommodating in euro area than in the US, real indicators point to a more restrictive stance. We may see a perverse feedback loop develop, with low inflation, increasing real rates, capital inflows and exchange rate appreciation mutually fuelling each other. The financial economy may be heading towards a bad equilibrium that would threaten the real economic recovery. The situation called for an appropriate policy response and, as you know, the Governing Council has agreed last Thursday on a strong package of four significant measures: First the refinancing and deposit rates have both been reduced – bringing the deposit rate into negative territory for the first time. This should encourage financial intermediaries to actively put their cash balances at work both on credit and asset markets. Those cash balances themselves will be significantly boosted as:  2  BIS central bankers’ speeches  Second, the ordinary regime of unlimited liquidity provision has been extended to the end of 2016. Third, the Eurosystem will conduct a new set of targeted longer-term refinancing operations. This exceptional liquidity will be provided at long maturity (up to four years) and a guaranteed fixed rate, a clear sign that monetary accommodation should persist for a very long time. Finally, the Eurosystem is actively preparing to buy asset based securities that will help channel monetary accommodation and ease financial conditions to private non-financial borrowers, especially SMEs. BIS central bankers’ speeches  3