SARB: Lost, confident and toying around

So there I sat at the Reserve Bank last week, listening to central bankers celebrating the 90 years anniversary of the South African Reserve Bank. Big names all around: Gill Marcus, Pravin Gordhan and many more in similarly destructive positions.

The day passed not as slowly as I had feared. On the contrary, I found three things highly entertaining: their toys, their self-confidence, and just how lost they are.

Their toys

The word of the day was “macroprudential.” And the idea of calling “macroprudential” a toy wasn’t mine, it was Ben Smit’s (a director of the SARB), who gave a speech outlining its uses. Everybody seemed very excited about it – and why wouldn’t they: it is a big word, it is difficult to define so it can mean whatever a proponent wants it to mean, and it is likely to result in more responsibilities and influence for the Central Banking industry.

The word “macroprudential” has been increasingly popular since 2007 and was used at the seminar to mean: more in-detail regulation by central bankers aimed increasingly at the individual organisations perceived to promote system-wide build-up of “financial imbalances”. However, I am sure that I can be corrected on this definition by anyone who also listened to the speeches.

Which is precisely my point: its ambiguity makes it perfect for central bankers.

Their self-confidence

In total agreement they were about one thing above all: central bankers know best. Lesetja Kganyago, a deputy director of the SARB, even said that “there is certainly no doubt” [is Kganyago from this planet?] that the Federal Reserve did an excellent job at managing the financial crisis.

Since they know best – and there was clearly wide agreement on this – they need central bank independence. Each time “central bank independence” was mentioned, there was some feverish nodding somewhere – as if the only other choice was a SARB run direclty by Zuma himself - but a deafening silence on why there should be a central bank in the first place. Which brings me to how lost they are.

Lost

The final presentation of the day was a fairly interesting review of monetary highlights of the passed 90 years, taking it for granted that a South African central bank had necessarily to be created in 1921 (of course, it was created to protect the banks). The presentation ended with some optimistic speculation and well wishing for the next 90 years of central banking.

In response to this, someone at the back of the audience asked the speaker a question he clearly didn’t comprehend: “Since this seminar can also be described as a celebration of 90 years of nationalised money, what does the speaker think of the impact of electronic currencies like Bitcoin – and the possibility of the denationalisation of money – on the next 90 years of the SARB?”

Before referring the question, interjected Daniel Mnimele, a deputy governor of the SARB: “Fairly simple question there.”

And the speaker answered something about the use of coins and notes as opposed to transferring deposits electronically – missing the point that the coins, notes and deposits under a nationalised currency are all still the same fiat currency. It seemed like he neither understood “denationalisation of money,” nor heard of Bitcoin.

Boy, are they in for a surprise over the next few years – not to mention the next 90.