Reserve Bank retains good staff
South Africa’s central bank has reappointed its excellent governor, Lesetja Kganyago, for a third term. Its deputy governors will be in place for another five years, giving the country some sorely needed stability
Are there more jokes about lawyers than there are about economists? I don’t think so, but they are meaner. What’s the difference between a lawyer and a jellyfish? One is a spineless, poisonous blob; the other is a form of sea life.
Economist jokes are more … well, vacillating, arguably like the profession! What happens when you put 10 economists in a room? You’ll get 11 opinions. And so on. But then again, Mick Jagger and Arnold Schwarzenegger both studied economics so the “science” can’t all be bad.
One of the problems for central bank economists is being surrounded by people and groups with agendas. Traders want the rand to go either up or down, depending on their books. The same applies to borrowers and lenders. And the politicians … they are the worst. If the economy is going well, they claim the credit, but if it’s going badly, then it’s the fault of the central bank.
The result is that central bank economists are sometimes the most cryptic people in the world. The banker who took this to the extreme was Alan Greenspan, who is famous for saying, “I know you think you understand what you thought I said but I’m not sure you realise that what you heard is not what I meant.” On another occasion, he told a US Senate Committee, no less, “If I seem unduly clear to you, you must have misunderstood what I said.”
He was just replete with these explanatory comments designed to make you doubt you understood anything. “If I say something which you understand fully in this regard, I probably made a mistake.” Because, you know, if you understand what he is saying, it is his fault for not making sure you don’t.
And yet you have to say on balance, since the financial crisis in 2008, central bankers have managed – in most countries, in most cases – to do their primary job (keeping interest rates under control), pretty well. There has been huge criticism of central banks for one reason or another. But we haven’t seen a major banking crisis for one-anda-half decades and although inflation did shoot up last year, it’s now pretty benign after central banks chased it down with a vengeance.
The broad criticism of central banks over the past few decades is that they have been too lax and that there is too much capital in the world chasing too little growth. And that call seemed particularly acute during the Covid-19 pandemic when interest rates were slashed and compounded by fiscal measures aimed at avoiding a global economic catastrophe.
In SA, I find the Reserve Bank still commands enormous respect except from fringe groups. When politicians start calling for the Reserve Bank to be nationalised, it’s actually a useful indicator that they (the politicians) are just not serious people.
Anyway, I am one among many people who were really delighted to see that Lesetja Kganyago has now been appointed for a third term, which, importantly, will take him through two election cycles. What’s more, Treasury deputy director-general Mampho Modise will take up Kuben Naidoo’s vacant post, returning to the institution where she built her reputation. If nothing else, the appointments will remove any tiny element of doubt that was creeping into the financial system.
The market now knows where it stands and this is particularly true considering deputy governors Rashad Cassim and Fundi Tshazibana have been reappointed for five years from September. So the team remains intact, which almost all banking bodies noted with appreciation.
In contrast to Greenspan, I find Kganyago actually pretty easy to understand, which seems to be a trend internationally. In some ways, Greenspan’s devotion to the idea that his communication should be complex since the situation, the markets and the global economy were so complex has eroded.
Modern central bankers have gone in a different direction: they now tend to focus very determinedly on the job at hand, controlling inflation, and don’t get too involved in the more complicated global economic issues which are often impossible to predict anyway. Maybe that’s my imagination, but my guess is that it’s broadly true. Central bankers also tend to act more in unison these days, reflecting the essential unifying dynamic of the global economy.
In fact, if central banks don’t follow the global consensus, the outcomes can be undesirable and it’s now just assumed that the central bank didn’t make the decision; the politicians did. Hello, Turkey. Anyway, for a country in desperate need of good news, this is one thing to celebrate.