A Canadian Model?

In Saturday’s Ardfheis speech, the Taoiseach announced:

I will create a new central banking commission. This will incorporate both the responsibilities of the Central Bank and the supervision and regulatory functions of the Financial Regulator. This will build on best international practice similar to the Canadian model. And it will provide a seamless powerful organization with independent responsibility.  It will have new powers for ensuring the financial health, stability and supervision of the banking and financial sector.

I interpreted this statement as implying that Canada has something called “a central banking commission” which incorporates both central banking and financial supervision.  It turns out, however, that Canada does not have such a structure.  

Politics for beginners

Ireland is a small country with a very odd political system, and so we don’t necessarily expect our politicians to be economic experts.

We do however expect them to get the politics right.

The title of this post comes from a piece by Brendan Keenan in yesterday’s Sunday Independent, in which he adds his voice to the growing calls for a broad-based and front-loaded approach to solving the state’s financial crisis. I fully understand the initial reluctance by the government to take too much demand out of the economy too early, but as Philip, Patrick and others have pointed out, growing levels of uncertainty may be doing more damage to consumer spending at this stage than would be associated with the increase in taxes that everyone knows is going to have to take place sooner or later. And clearly demonstrating that the government is in control of the state’s finances is important, not just in its own right, but because of the implications for the credibility of the bank guarantee.

To these economic arguments can be added a political one that is to my mind equally compelling: trying to solve the fiscal crisis in a piecemeal manner will be politically extremely difficult, if not impossible. As Jeff Sachs used to say in a very different context long ago, you can’t cross a chasm in a series of short steps.

The US Dollar Shortage in Global Banking

The March 2009 BIS Quarterly Review provides much fascinating reading. This article by Patrick McGuire and Goetz von Peter provides some fascinating empirical analysis of the funding issues in global banking.