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What’s the G30 doing?

Carney’s appointment is another scalp for my old firm, the G30.


It follows the appointment of G30 member  Mario Draghi to be  president of the European Central Bank (which raised eyebrows in some circles, see here) . Last year also member Mervyn King became chair of the Group of Governors and Heads of Supervision (GHOS), the Global Economy Meeting (GEM) and the Economic Consultative Committee (ECC) for the BIS. The group has also attracted Jean-Caude Trichet, retiring president of the ECB, to be its new chairman. Glad to see the old firm is still hacking it..

Does the G30’s network trump that of Goldman Sachs? Apart from Carney, Goldmans can boast such central banking trophy appointments as Willliam Dudley at the New York Fed (plus one of his predecessors in that role, Gerald Corrigan) and Mario Draghi – though guys like Michael Cohrs at the Bank’s financial policy committee and Ben Broadbent an external member of the MPC help to make up the numbers. And that’s ignoring people like Mario Monti…while Jim O’Neill, chair of the firm’s asset management arm, waits for his cue…see roundups in Business Insider and Financial Times.

But of course the best of all for the serious networking central banker is to be an alumni of BOTH G30 and GS networks…like Carney, Corrigan, Draghi, Dudley and ….who’s next?

The question is… 

But if I were still sitting round the G30 table, the question I would ask you gentlemen (there are currently no women) is this: what are we doing to get the global financial system out of The Money Trap?

Talking to each other is one thing – the problem there is that this may merely cement unhelpful prejudices and generate a consensus on the wrong policies. If you want to know what the trap is (and it’s not the same as the debt trap), read the book.

But can we point to any new ideas that have come out of our talks? Anything that has changed the world for the better?

The risk is that such a small tightly-knit group will form a consensus on what might well be seen later as profoundly mistaken policies.

PS Since this was posted, an article in the Wall Street Journal has shown how long-lasting many of these relatinships have been and how they continue into the present:

“Three of the world’s most powerful central bankers launched their careers in a building known as “E52,” home to the MIT economics department. Fed ChairmanBen Bernanke and ECB President Mario Draghi earned their Ph.D.s there in the late 1970s. Bank of England Governor Mervyn King taught briefly there in the 1980s, sharing an office with Mr. Bernanke.”

The article, by Jon Hilsenrath and Brian Blackstone (December 12), and originally entitled Inside the Risky Bets of Central Banks, said that many economists emerged from MIT with a belief that government could help to smooth out economic downturns:

“While at MIT, the central bankers dreamed up mathematical models and discussed their ideas in seminar rooms and at cheap food joints in a rundown Boston-area neighborhood on the Charles River.”

The same people, with others, now form a “central banking clique” that keeps in close touch through regular Basel meetings and on the phone:

“This summer, the central banking clique kept in close touch as they readied for a new round of monetary activism. On June 8, Mr. Bernanke and Mr. King spoke by phone for a half-hour before policy meetings at their central banks, according to Mr. Bernanke’s phone records, obtained in a public records request. A few days later, Mr. Bernanke spoke by phone with Mark Carney, head of the Bank of Canada—and last month named as Mr. King’s successor. Shortly after, Mr. Bernanke called Stanley Fischer, head of the Bank of Israel, and a former MIT professor who was Mr. Bernanke’s dissertation adviser.”

The Journal reported that on June 18,  Bernanke had an early morning call from his home on Capitol Hill with  Draghi and King, according to his phone records, as the men assessed the impact of the Greek election on Europe’s financial system.

They then launched what the Journal calls their new monetary “onslaught” of  QE and other  bond-buying policies in the face of strong scepticism by their own in-house economists and warnings by such authorities as William White (former chief economist at the BIS) of risks of causing yet more credit bubbles.