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. * 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 borrow

##ers 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