Odd Lots - Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank

Episode Date: October 29, 2020

The COVID-19 crisis has pushed central banks around the world into uncharted territory. Typically when we talk about this, it's from the perspective of the Fed or the ECB. But this has also been an extraordinary period for emerging market central banks. On this episode, we speak with Ruth Krivoy who ran the Venezuelan central bank in the early 1990s. She discusses the lessons she learned during that period and how they apply now.See omnystudio.com/listener for privacy information.

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway. Tracy, obviously one of the big themes that we've been discussing for months or maybe years is that we really are in a era of policy experimentation, particularly with respect to monetary policy.

I've been thinking about this. Maybe we should change the name of Odd Lots to Odd Monetary Policy. unconventional monetary policy. It does feel like we've been talking about this over and over and over and over. Let's revisit that name. That's fair enough. I don't know if it quite rolls off the tongue. But yes, I mean, absolutely true. Just like an extraordinary amount of sort of rethinking, thinking going on about the conventional wisdom that we've talked about. I mean, we do episode after episode on just sort of like what people are learning. And it really does feel like this moment is, you know, the intersection of two things.

There's the long-term trends and already there was this sort of rethinking about the shape of policy and then this sort of acute need for immediate innovation and experimentation and aggressive action on the fly. Yeah, I think it's that thing that people have been saying, which is that the coronavirus crisis has basically accelerated a lot of the trends that we were seeing before this year. So with central banking and with monetary policy, we had seen a lot of criticism about monetary policy's ability to generate inflation, its ability to generate reasonable levels of growth. People were already talking about the need for fiscal stimulus and the sort of handoff to governments from central banks. And all of that has crystallized this year,

thanks to the economic crisis. Now, the one thing I should sort of caveat this with is it's almost always in the context of developed markets that we talk about this. So as you mentioned, the inability of central banks to generate inflation, you know, as they say, that's a first world problem of the highest order. Like most of the world historically for most countries, the inability to generate inflation has not been the issue and arguably still isn't at all. Very much a first world problem and a lot of emerging markets, they obviously would have the

opposite problem. I would say, though, we have seen one of the really interesting things about this year is we are seeing emerging markets start to do things a little bit differently when it comes to monetary policy. So for instance, the Bank of Indonesia is doing debt monetization and I think it's really one of the first ones, certainly in EM, to to do that. And that's been interesting to watch to see emerging market economies take on unconventional monetary policies that we associate more closely with developed markets. Totally. I think that actually is something we need to explore a lot more in the future episodes, which is whether this crisis actually revealed maybe in a good way that EMs have more policy space than previously anticipated,

things like Huey, maybe they have more ability to do that. But I want to, you know, today's conversation, I'm very excited about our guest because she's someone with a very distinct background that's very different from most of the people we speak to. Our guest today is Ruth Prevoy. She is the founder and CEO of Synthesis Finanaciera, which is a Caracas-based consulting firm, focusing in large part on Venezuela and country risk there, but also she was the president of the Central Bank of Venezuela from 1992 to 1994, the first woman in that position. And just someone who,

by dint of that perspective, Venezuela, of course, we all currently associate with both a sort of massive economic collapse and hyperinflation, someone with a sort of sort of, very interesting perch and perspective on the state of the world. It could be plenty of interesting things to discuss. So, Ruth, thank you very much for joining us. Thanks for having me. Ruth, just sort of give us your story. You know, I mentioned your title and your background,

but obviously you have an extraordinary past. And so for people who aren't familiar with the work that you've done and your experience over time, Give us the short book jacket bio, so to speak. My professional career was shaped by the Central Bank of Venezuela. I started working there when I was a student at the university. My mentor was a German economist who came to Venezuela in 1939, fleeing from Germany.

His wife was Jewish, and he sought refuge in Venezuela. at a time when Latin America was establishing central banks all over, under the influence of the German economist called Herman Max, who went to Chile and other countries and helped establish a central bank. And our central bank was created in 1940. Mr. Peltzer, my mentor, was my professor at the university, invited me to work at the central bank, and the central bank became sort of my guiding star.

I had a career there. I then went to work in the private sector, and in 1992, in the midst of political turbulence, I was invited to become the governor of the central bank. I got to the central bank hoping I could help establish the central bank's independence and stabilize inflation at the time. because I strongly believe that central bank independence adds value to a country, to its prosperity, to its stability.

I got to the central bank that was in itself an ambitious goal because of fiscal dominance. If you have a country that is running a heavy fiscal deficit, there's little room for monetary policy. And in a country that is oil-based, where the money is created, by the extraction of oil and spent by the government and largely allocated by politicians on a very short-termist perspective, monetary stability is challenging. In 1989, the country undertook a massive structural reform aimed at deregulating, rebuilding institutions, getting rid of controls and establishing stability. But we also had a strong political backlash, and in February

of 92, we had the first military coup by Hugo Chavez, who then became the president of the country. In April 92, when I got to the central bank, we were in the midst of political turbulence, which lasted for over two years, and then got worse and worse. And so the banking crisis, was brewing and exploded in 1993. So I lived through the banking crisis from the central bank. Can I, I know you're bringing us up to speed here, but can I step back for one second? I think when a lot of people think about Venezuela now,

they think of sort of a basket case economy, very high inflation, despite having all that oil wealth. Can you talk about how Venezuela, like got into that position because my understanding of Latin American economics is that a lot of countries were pursuing import substitution and those types of development policies, but something happened in Venezuela that sort of made everything go off the rails. What was that? Venezuela never tackled its vulnerability to oil and has therefore always been a very unstable, volatile economy. It didn't create the stabilizing mechanisms such as a sovereign

wealth fund where you save for the future generations. Diversification was not an issue. It was lip service. You talk about diversification, but you never really tackle it because oil is producing whatever you need to survive. had a short-term horizon. So they just wandered from one five-year election to the next. The economy continued being highly dependent on oil. Yet, there was a private sector. The private sector, the non-oil private sector,

was in charge of generating the jobs and producing the goods that fill the shelves in the markets. The oil economy was generating the revenues that made the government rich and made politicians powerful. In 1999, when Chavez got to power, he started undermining the rule of law, the trust in the economy,

the confidence in the currency, aggrandizing the government, and shrinking the private sector. Then companies were expropriated, taken over by the government, and essentially ruined. Along the way, the government became more and more authoritarian. Oil prices remained volatile,

so we had ups and downs and ups and downs, and when Chavez died and Mr. Maduro took over the presidency, he was hit by a sharp decline in oil prices, and instead of moving in the right direction of an economic policy that promotes, private investment that builds confidence and reestablishes growth, the path was towards lawlessness, destroying institutions, destroying the rule of law, undermining the confidence in the currency, and expanding the fiscal deficit to the point that led to hyperinflation.

So while the world moved towards stability, Venezuela moved towards instability. and authoritarianism. There used to be a saying that God is Venezuelan, because for decades, when Venezuela was in trouble, oil prices came up. There was something in Saudi Arabia or Iraq invaded Kuwait. Oil prices rose, and the need for sound economic policies was wiped out.

But as you weaken the economy and also allow for the oil industry to be destroyed, then you kill the hen of the golden eggs and the emperor is naked. So that's a short explanation of why Venezuela, which used to produce 3 million barrels of oil a day, is now producing 200,000 and has lost about 70% of GDP in the last five years.

Inflation got up to 2 million per year in 2018. It's now in the thousands per year, which may sound as much lower than 2 million, but it's still extremely painful if you think of inflation being 2% or 3% or 8% at the most. I'm June Grasso, inviting you to join me for the Bloomberg Law podcast. Every weekday, we help you make sense of the legal stories that shape the nation and the world. Listen for complete analysis of the biggest court cases, the latest actions from Congress and regulators, and the legal moves driving the markets.

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That's the Bloomberg Law podcast with me, June Grosso. Subscribe today wherever you get your podcasts. So I want to get back to the sort of the hyperinflation and the lessons from Maduro era and also oil. But before that, I mean, you mentioned your tenure as the head of the central bank and particularly mentioned the banking crisis that you experienced. What was the sort of what were the underlying factors that even before things really started going downhill in the country, there was a banking crisis? And obviously banking crises are a recurring phenomenon all over the world, but also particularly in the developed world. What do you see as the sort of commonalities and lessons from that period?

The Venezuelan banking crisis came as a result of bad policies, bad banking, and bad luck. bad policies, both macroeconomic policies, which were not promoting stability, as I said, but also banking regulation and supervision. Banking regulation and supervision was a weak spot. It was largely dominated by politics. There was a cozy relationship between bankers and politicians over the years, So there was little concern for having banks being well capitalized, lending prudently, being concerned about the long-term health of the banking system and the securities industry.

And this led to bad banking because many bankers saw this as the path to, riches, to wealth, and that made the banks weak. And we had some very important bank failures in the 70s and 80s. Those were all large banks and went under because of bad lending, connected loans, loans to shareholders, to friends and family and so forth. And they were bailed out by the guys. government. So neither the bankers nor the depositors ever had a loss. The depositors were bailed out and the bankers were bailed out. So we ended up having a moral hazard problem where everybody was

trusting that the government would come in and bail everybody out and it doesn't really matter if a bank goes under, because in the end, you don't lose access to your deposits and you can continue your day-to-day life. And then bad luck. Why bad luck? Because the lead-up to the crisis really began in 1989 when the reforms program were initiated, and it meant increasing prices, increasing the price of gasoline. deregulating interest rates, interest rates went up, people felt scared.

And that was in 1990. And in 1990, Iraq invaded Kuwait. And oil prices shut up again. And the reform program lost political support. So even Accion Democratica, which was the president, Party distanced itself from the program and the reforms got stuck and it was really a very bad spot because after going up in 1990, 91, oil prices fell in 92, 93. And when oil prices fall, an oil-based economy suffers loss of confidence, capital flight, and so

forth. And in 1992 is when the military coups that were brewing came into the open. So the country goes from a relatively long-term stability with prudent fiscal and monetary policies inherited from the post-war years to a short-term shock-prone situation. And the military coup in 1992 shattered the country's confidence in its democracy. And we had a first coup in February and we had a second coup attempt in November. And then the president was impeached. And in 1993, we had four governments until we had elections in December. I, as a president of the central bank, had to deal with four presidents and four ministers of finance

until we had elections in December, and the winner was an anti-reform candidate. So it was clear to everybody that the reforms will get derailed, and furthermore, he didn't want to get involved in the banking crisis that was around the corner. So that was bad luck, because we had a combination. of oil price spikes in the wrong moment, that influenced our political support for reforms, and after the coups, everything went downhill. So essentially, when you have all these combinations, it's a disaster waiting to happen.

Can you talk about the impact that the banking crisis had on monetary policy at the time. Because I think nowadays, in most parts of the world, if you think about a banking crisis and the central bank response, you would probably be thinking of a central bank immediately dropping interest rates to stimulate growth. But I think in the case of Venezuela, when you were heading the central bank, you did something very different. Could you talk about your policy response? In a banking crisis, the central bank's initial fundamental concern is the stability of the payment system, which means you cannot allow payments not to be settled efficiently and securely because that really puts sand in the gears

of the economy and stops the economy. So when we had the banking crisis, my first concern was to keep the payment system running. That is why you see central banks being concerned about the money market and trying to sustain the flow of transactions all over. My concern at the central bank was the payment system because when I was faced with the banking crisis, 40% of our banks were about to be closed or taken over.

And I would like to clarify that in my case, the central bank did not have supervisory responsibilities and could only lend to solvent banks. And we had an insolvent deposit insurance institution. So all I could do from the central bank was lend money to banks. I did it through the deposit insurance and in fact, we kept the payment system,

running. Of course, as you mentioned initially, when you have this unorthodox monetary policy in a way, there's a parallelism between monetary policy in a banking crisis and monetary policy in a pandemic, in the sense that you have to help the economy keep moving. That means you're pumping money into the system. If there's confidence in the currency and confidence in the long-term stability, of the country, there is no major damage because the demand for money that is there means that people keep the local currency and use it legitimately for transactions. When you don't have confidence in the currency or in the country or in the government, this increase in money supply translates into capital flight.

and when there's capital flight, the country loses its international reserves. And that means it may not be able to import what it needs to feed its people. So in Venezuela, that was a big challenge. And that is why one of the things that was important to me at the time was that the government should tackle the insolvency of the banking system. while the central bank was tackling the illiquidity. So you may have illiquid banks. You lend to them, but if you are at the same time trying to make them solvent and keep the confidence of the people in the banking system,

then you can muddle through and after an interim period of instability, you get the economy back on track and you clean up the banking system and you move out of the crisis. So in a way, this is something that you can connect to the current challenges of monetary policy. When monetary policy experimentation and the move to unconventional monetary policy or to heterodox monetary policy

is nowadays more acceptable than it was 10 or 15 years ago. And new instruments are being developed. The key for success is to keep the trust in the central bank and the currency, otherwise these policies get derailed. I'm glad you said that because that is exactly sort of what I was going to go next with this question. Because people tell this story and it's like, okay, there's a bunch of money printing, whether it's at the central bank or maybe for the treasury, whatever. and they say, okay, that leads historically to inflation or hyperinflation. It sounds like what you're identifying here is that you can do a lot of different things. It's really the sort of trust in the institutions of government that really sort of precede that

and that the flexibility works so long as have this trust. And as such, in the Venezuelan context, what you describe under the Chavez press, and then Maduro, perhaps it's not so much about the money printing or the deficits per se, but the destruction of the rule of law and civil society, which catalyzed the confidence collapse. Yes. Is that sort of how we should think about what really catalyzed the Venezuelan hyperinflation more so than the money printing per se?

Money printing has been one of the ingredients of Venezuela's hyperinflation, but it's not the total explanation. The fiscal deficit, the lack of fiscal rules and transparency has been very, very damaging. And when you think of a country that loses its anchors because it doesn't have sound fiscal policy, it doesn't know where the government is going. The government runs a deficit and the central bank funds the deficit by printing money. And even if the law says that the central bank cannot lend to the government, it says it can lend to government-owned entities. So what the central bank is doing is lending to Pedevesa, the oil company, and Pedevesa transfers the money to the government, which is simply is one step along the way. So you do have monetary expansion and you

have a fiscal deficit that creates the so-called fiscal dominance of monetary policy. And that's the worst of both evils. A lot of short daily news podcasts focus on just one story. But right now, you probably need more. On Up First from NPR, we bring you three of the world's top headlines every day in under 15 minutes because no one's story can capture all that's happening in this big, crazy world of ours on any given morning. Listen now to the Up First podcast from NPR. So how can central banks avoid that intertwining of government and independent monetary policy? Because, you know, especially in the current climate, there is a lot of talk about the need for unconventional monetary policy to be augmented with government spending. As I mentioned, we've seen

some new ways of doing this. For instance, the debt monetization program in Indonesia, where the central bank is effectively directly financing the government deficit. How do central banks maintain independence while still working together with governments to augment fiscal spending? Part of the answer to your question is on the word independence. What do we really mean by central bank independence? What we mean is the central bank's ability to say no to a government that wants to derail the basics of economic stability. So there may be times at which the central bank agrees to fund in an unorthodox way the needs of the economy for a while. But it has to have a clear stance on what it means and how you will exit from this policy and why the economy needs it.

So, if the economy needs the monetary stimulus to prevent a strong recession, and at some point, the central bank expects or demands, like Mr. Powell has done in recent days, that the government and fiscal policy take its role in the stimulus and money supply can then take a backstage, that's fine, as long as people trust what the central bank is doing and is willing to accept this increase in money supply. Independence for a central bank doesn't mean that the central bank is a state within a state and won't listen to anybody. Monetary policy is part of the economic policy mix, and by definition, it has to be consistent. with the country's growth and inflation goals.

The other thing is that you need anchors to anchor expectations of the people. And here you have inflation targeting, for example, where people know that if inflation goes beyond a certain limit or falls below a certain limit, the central bank will step in and will keep things on track. The same thing happens with a fiscal deficit. target. People know that if the fiscal deficit goes beyond a certain percentage of GDP, the government

will cut expenditures or will raise revenues in order to not put on due pressure on the central bank. And there's also a foreign exchange anchor when countries have a clearly stated exchange rate policy. In the case of Venezuela, we lost all anchors. We have no anchors. There's no fiscal anchor, there's no monetary anchor, there's no foreign exchange anchor. So what do people do? They look for dollars. And any additional Bolivar that comes into the money supply goes to the foreign exchange market and ends up triggering the need for exchange controls. And exchange controls are the representation of the lack of confidence. You can't keep the money in the country unless you fence it in.

And that is a sign per se that things are not going well. When a government, like the Indonesian example, undertakes debt monetization and establishes a stimulus to the economy, the basis for the Central Bank of Indonesia is to retain the people's trust. And that is a subtle combination of science and art that goes through the central bank's law, what it can do, what it should not do, how it communicates with the people. And in fact, central bank communications are a very important tool to build confidence and are especially important also in times of crisis when you need a single voice to read.

established confidence of the people. So at the beginning in our introduction, I joke that, you know, in the developed market context, that inability to generate inflation is kind of the ultimate first world problem. And, you know, obviously inflation in the U.S. and Europe, UK hasn't really been an issue for a while, but persistently high unemployment has been. And for almost, you know, for several decades now, the unemployment rate in the U.S. has been above what economists perceived to be full employment. So this is a consistent issue. Do the lessons that you identify apply? And so when we think about questions like confidence in the currency, the exchange rate, and so forth, do the issues that sort of face a developing market central banks such as Venezuela or. or others, should these lessons apply to, say, the Fed, or should they be thinking about solving other problems?

And as such, perhaps notions about central bank independence aren't as important. Central bank independence is an important issue everywhere. And there's a lot of studies and discussions and measurements on how you measure central bank independence and how you make it work. preserving the value, the institutional value of an independent central bank is important everywhere. The United States have less restrictions because they issue the currency that the world uses. So you don't have the connection that you may find in the rest of the world, and especially in emerging markets,

where the countries depend on their foreign exchange revenues through imports or capital inflows in order to keep the country running. And that is why countries need healthy foreign reserves to build long-term stability. And that is why you are so much more vulnerable to the confidence problem in, emerging markets. And confidence in the currency is built by confidence in the government,

the government's policies, and the central bank's ability to rein in excesses, not to hinder growth, but to avoid excesses. So there's a simple way of putting things. When you have a strong banking system and you have a strong economy, you have a strong economy, you you tend to have stability because your system can withstand shocks. When you have a weak banking system and you have a strong economy, you can solve the banking system's problems with less disruption on the economy. But when you have weak banks, a weak economy, and a weak institutional framework, that is a recipe for disaster.

And that's why you have to try to fix the three legs of this stool, the health of the banking system, the health of the economy, and a good policy mix. I'm curious, as you survey the impact of the pandemic on monetary policy and on economies, is there one major lesson that you think we've sort of seen demonstrated over the past few months or one big takeaway in terms of the way economies work and the way they interact with monetary policy that you've seen recently? As I see the consequences emerging from the effects of the pandemic, it becomes clear that the basic principles,

To prevent the recessionary impact of pandemics and lockdowns and so forth is again the basic combination of confidence, trust, and consistent policies. The central banks are called to provide support. Companies, big and small, need loans. And unless you relax the monetary policy stance, you can't. provide this increase in lending that the economy needs. And the room for this expansionary policy is the fiscal space that the countries need to have in order to produce this stimulus. And fiscal space is a term for the help of the public finances. And how much deficit can you run? before derailing the economy.

So the central banks have to step in, they have to provide the stimulus. And again, going back to an example where there's little room for this stimulus is again Venezuela. Venezuela needs the fiscal stimulus and the monetary stimulus to prevent the recession from getting worse.

But there's no room for it because every Bolivar that gets into the system goes to the foreign exchange market, pushes the price of the dollar up, the currency loses value, and inflation goes up. So there's no room for any kind of mitigating policy to avoid the pains of the pandemic compounding with more economic pain.

And instead of moving towards reforms, the government moves towards more authoritarianism, which makes things worse. I would want to share with you some aspects of what we learned from our banking crisis, which are overarching lessons for the world, both in emerging markets and developed markets, and they are relevant in times of a pandemic. because a pandemic may raise systemic risks when banks are not strong, when governments don't have more sufficient fiscal space, and when there's a crisis that may be brewing.

And in fact, there's a lot of work being done now on how to better equip banking supervisors with the tools, the knowledge and the wisdom to deal with the financial instability risks that come with COVID. And the lessons are essentially the same that we face in our banking crisis for years ago. First, get politics out of banking regulation and supervision. That is a mantra. and that is true everywhere. Because when you have politics and politicians fiddling with banking, regulation, and supervision,

you end up having a weak financial system that is not able to withstand the shocks. The second is not to underestimate systemic risks. And that means that you need to be proactive and have. have early actions before things get worse. And that means having well-defined roles for each government agency involved, be it the central bank, the supervisors, the deposit insurance, managing a crisis, having contingency planning as an essential tool, and in the central bank's independence and the independence of bank supervisors.

And there are two things that are normally overseen because in some countries, especially in developed countries, they don't seem to be a big problem. One is legal protection for regulators. Being a regulator and supervisor is a lonely job. And being a supervisor in an emerging market is also a dangerous job because supervisors don't have the necessary legal protection that makes them comfortable in making decisions with incomplete information,

which is what you have to do when you face a crisis. So they risk being sued by depositors, by shareholders of banks or companies, and even by the government. And when supervisors feel insecure, they tend not to act. and not to make decisions and hope that things will get sold. So legal protection for regulators and supervisors is, in my view, a key element of stability in the financial sector. And the fourth is international rules.

International rules became important in the 1990s. And for banks in emerging markets, international rules, compliance with international rules is a way to ensure their ability to do business in the global markets. If the country doesn't comply with international rules, be it in banking, securities or insurance, the domestic players are restricted. And in an increasingly interconnected world, that means you're condemned to poverty and you can't do anything. We lived a very interesting experience in Venezuela when we were trying to implement the Basel rules in a country that never had it. The bankers that initially opposed reforms, when they understood that unless the people, the people, country moved towards compliance with Basel regulations, they would not be able to continue doing business in the United States. They switched gears and they became more accepting. And

they finally agreed to have the reforms in the banking law and to comply with the Basel rules in exchange for being able to continue to have their business in the major markets of the world. And that is why the international rule-setting bodies play an important rule in overall stability in the financial system. And those four lessons, I think, apply everywhere and should be forefront in our menu for financial stability. And in times of a pandemic, when you're trying to prevent the collapse of a financial system, you have to think of these things. And let me add one more idea I would like to share with you. Banking crisis are very harmful to the poor. And whenever an emerging market or a low income countries suffers a banking crisis, it is the poor that are more strongly hurt.

And it's the women and girls among the poor who get more strongly hurt. And financial crisis have a regressive effect on income distribution and make societies more unequal. And we are seeing it with a pandemic. We're seeing how countries, including the United States, are seeing that the poor and the underserved communities are being hurt more strongly by the pandemic. Imagine what happens if the pandemic also adds up to a financial crisis and then you get a double whomey. And that is why this whole idea of working towards financial stability

and preserving the confidence in the currency is so important. Ruth, that was a fantastic discussion. I really appreciate your perspective. And thank you so much for coming out on the odd lot. Thank you for inviting me. It's been a pleasure. Thank you. Tracy, I loved Ruth's perspective.

That is not a sort of angle that a lot of our guests have had in the past. And I thought that was really enjoyable. Yeah, I think one thing, that comes out a lot in that discussion is the importance of strength of institutions when it comes to emerging markets. And I mean, Ruth made an excellent case of how that didn't necessarily happen in Venezuela. And we've seen the result of that, which was massive capital flight and lots of inflation. Yeah, I think, I mean, that was my big takeaway, too. And I think it shows the sort of the limits to mathematical approaches to understanding inflation

is sort of what I take away from that because, you know, you could always chart deficits or the central bank's monetary supply or the amount of foreign reserves that a central bank holds at any given point. But you can't really chart credibility of institutions, rule of law, things like that. And when that kind of thing is so important for confidence in the currency, confidence in the banking system, maintenance of the exchange rate, and thus the ability to import food and other things for a country, it kind of really speaks to how hard it is to model some of these things. Yeah, I think that's exactly right. And the other thing that really struck me was her definition of central bank independence, because I think it is true that there's a knee-jerk reaction.

out there that central bank independence means that the policymakers are sort of off doing their own thing and not necessarily paying attention to what the government is doing at the same time. And she put it really well that it's about the ability to say no, but not actually necessarily saying no every single time you might be asked to do something. Yeah, I mean, I really do think this is just going to increasingly, especially in the developed market context. This is just going to be an increasingly

contested question because it does feel like... It's such a fine line, isn't it? Yeah, and obviously we had these sort of series of I mean, one of the whole things, you know, going back to the Fed is these framework review because part of the problem was like they identified, it's like, wait, we keep hiking rates

too early, we keep tapping the brakes on the expansion. We never really hit our inflation. goals. What exactly does it serve? And, you know, something I was thinking about during this crisis is that our conception of central bank independence has changed maybe in a good way, and it's less about telling the government no and more about just sort of being an independent, competent actor when elected officials can't agree on anything, which is a slightly different framework, but arguably it was kind of nice to have this time run. I mean, I think that might be true of one economy in particular. I'm not sure that will always be the case, especially when it comes to emerging markets. But it is going to be a fascinating thing to watch because it is really hard to, I guess, disentangle a central bank that is trying to help the economy by augmenting whatever it is that the government is actually doing.

and amplifying fiscal stimulus when it can, and a central bank that is basically in the pockets of the government for whatever reason. I think that's going to be hard, but a fascinating thing to watch. You know, one other thing I just, before you go that, I thought was interesting was her description of the sort of resource curse of Venezuela. And you hear that a lot in a lot of different emerging markets that happen to have some big natural resources, typically, oil and how it ends up being a net negative. It's sort of funny the description. And, you know, there are multiple ways.

One is it allows governments to paper over other problems. It also raises the value of the currency, making other domestic manufacturer, perhaps less competitive, causing atrophy. But her description of every time Venezuela got into any sort of trouble historically, it would just happen to be some oil price spike. I've got to kick out of the idea. the god being Venezuelan with oil always coming to the rescue each time. Yeah, I hadn't heard that one before, but pretty amusing and kind of ironic in retrospect when we're talking about it now.

Okay, shall we leave it there? Yeah. All right. This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway. And I'm Jill Weizenthal. You can follow me on Twitter at the stalwart.

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