The primary purpose of investment is to create opportunities for people to earn a living.
The focus is on local people. There are two perspectives: (a) who exactly are the people and how they can be incentivised to make themselves useful; and (b) what is the shape and structure of the economy and society that we want to see in future so that we can work towards it.
To start this process, the education and re-education system must be primed for flexibility so that people can train and retrain themselves in areas of technical know-how, thinking skills, and the ability to express themselves and to communicate. Excellence through discipline and effort. Originality of ideas, no matter how seemingly weird; this creates self-confidence and tolerance for others.
Investing in the workforce and education is I think one of the greatest investments a nation can undertake. Create graduates who can be employed anywhere in the world.
In an educated society, an educated entrepreneur can scan the globe and seek opportunities anywhere in the world, write a project paper and a business plan, and propose it to an educated banker who knows what he or she is talking about, assess the risks objectively and make an educated decision on lending. The educated entrepreneur can work together with a few educated friends and as a team go out and make waves in the world.
With this, we may hope to move away from the self-defeating policy of being stuck in low-level technology that relies on the exploitation of imported cheap labour (which drives out expensive labour), with fortunes being amassed by the uneducated.
The restrictions we impose on our own economic opportunities through our own narrow-mindedness create a tightening screw on our society in which everybody suffers. We do it to ourselves, thinking that others are to blame.
We resort to easy money policy to let go of the steam. The easy profit from speculation in the stock market and the property market is an opium for the uban class. Property inflation misleads ordinary men and women into thinking that tying up their entire life savings in brick and mortar is a good investment. Stock market speculation is a game played by decadents. In the end, all fall down. These are not investments.
The problem with financial speculation is that it tends to run ahead of the capacity of the real economy to deliver. The collapse of financial markets is nothing but reality giving speculators a hard knock.
At the end of the day, the best investment is in human capital. To facilitate this, we have also to invest in ICT. The funding system may not be banks, but private equity and venture capital. If we can mechanise plantations and have smaller but capital-intensive industrial companies, we may be able to get ourselves out of the developing-country trap.
Tuesday, November 4, 2008
Monday, November 3, 2008
Nurturing Home-Grown Investments
Our market is right in front of us - China - for the next hundred years.
How do we go about seizing this opportunity, as a nation?
Malaysia is no more just a commodity exporter - and luckily we still are. The agriculture sector was at risk of being detroyed by the housing boom (which has only recently died down).
Malaysia now has an industrial base - after IMP1, IMP2 and IMP3 - a fairly decent industrial base, industries and industrial parks of all sorts. It is arguably whether we have managed to develop industrial clusters - although we can say the palm oil cluster is well-developed, but the motor cluster is in shambles. We have a few SME clusters around the MNCs, as suppliers of components - but we do not have enough of value-added downstream industries where technical knowledge is needed to allow higher salaries to be paid to employees.
Malaysia has an assortment of service industries - from transportation and logistics to ICT and the arts and culture and entertainment - although these need critical mass to support it.
SMEs have difficulties in getting adequate funding from the formal banking system. There are several factors. (a) The structural lopsided nature of the economy has made funding of the creation of collateral assets by the banking system a self-sustaining virtuous cycle, and thereby resulting in the unbridled expansion of the building industry. Hard-working manufacturers appear to be relatively slow and unattractive, for lender. (b) There does not to be any barrier to entry into the SME industry, so competition will drive down the rate of return for the entrepreneurs - who must therefore resort to all kinds of tricks to make that extra buck - and the demise of small provincial banks has made relationship banking with the small entrepreneurs a thing of the past - banks seems to be happier dealing with big corporate boys in order to grow their loan books. (c) The crude and unsupervised method of implementing sensitive government policies has caused grave uncertainty in the minds of small businessmen who survive through blood, sweat and tears - and wits. It is unlikely that they will willingly make all those sacrifices for naught. Hence, they are unlikely to put in their capital for reckless expansion and if at they are more ready to cash out when the opportunity presents itself. The loss of confidence is a drain on the investment spirit.
I imagine far-sighted broadly planned programmes for investments in the nation by Malaysians for the purposes of exporting to new growth centres such as China. These programmes will provide technical and financial as well as networking assistance to young entrepreneurs and businessmen to grow and expand their businesses. There would be a general national awareness programme of inculcate the spirit of adventure within the discipline of prudence, to grow on the basis of savings and investments and where possible with the added impetus from bank loans - and all with a proviso that loans must be repaid so that banks can repay their depositors. It is this broad spirit of adventure and hard work and reaping the reward from one's own sweat that this nation needs to promote.
It is immaterial the colour of the entrepreneur so long as he or she successfully undertake investments - the making of goods and services for the benefit of consumers.
The Minister of Finance must sit down with the Central Bank and the Securities Commission to discuss the direction of funding of the economy and the instruments and systems by which this can be accomplished. There is a need to straight the whole financial system, away from the inclination towards speculative activities.
The central bank must pursue a long-term policy of maintaining the strength of the ringgit in order to protect the savings and investments of the nation from erosion by systematic depreciation as we have seen in the last twenty-odd years. (The last financial crisis of 1998 when the ringgit depreciated is an indictment of the central bank for not performing its statutory function of protection the value of the local currency.)
The tariff system should be reviewed. Malaysia is not more just a commodity exporter. Malaysia in future will have to start importing raw materials to feed its industries which value-add (rather than just assembling) and there should be as little distortion as possible (through customs) of the market prices of the inputs for industries.
Lastly, strenghten the educational system. We may to dump the useless professors and put in the real ones who can do research and add and disseminate knowledge - so that the nation can move up the value chain, rather than be stuck at the bottom of the food chain.
In this way, investments will be nurtured at home over the long run.
How do we go about seizing this opportunity, as a nation?
Malaysia is no more just a commodity exporter - and luckily we still are. The agriculture sector was at risk of being detroyed by the housing boom (which has only recently died down).
Malaysia now has an industrial base - after IMP1, IMP2 and IMP3 - a fairly decent industrial base, industries and industrial parks of all sorts. It is arguably whether we have managed to develop industrial clusters - although we can say the palm oil cluster is well-developed, but the motor cluster is in shambles. We have a few SME clusters around the MNCs, as suppliers of components - but we do not have enough of value-added downstream industries where technical knowledge is needed to allow higher salaries to be paid to employees.
Malaysia has an assortment of service industries - from transportation and logistics to ICT and the arts and culture and entertainment - although these need critical mass to support it.
SMEs have difficulties in getting adequate funding from the formal banking system. There are several factors. (a) The structural lopsided nature of the economy has made funding of the creation of collateral assets by the banking system a self-sustaining virtuous cycle, and thereby resulting in the unbridled expansion of the building industry. Hard-working manufacturers appear to be relatively slow and unattractive, for lender. (b) There does not to be any barrier to entry into the SME industry, so competition will drive down the rate of return for the entrepreneurs - who must therefore resort to all kinds of tricks to make that extra buck - and the demise of small provincial banks has made relationship banking with the small entrepreneurs a thing of the past - banks seems to be happier dealing with big corporate boys in order to grow their loan books. (c) The crude and unsupervised method of implementing sensitive government policies has caused grave uncertainty in the minds of small businessmen who survive through blood, sweat and tears - and wits. It is unlikely that they will willingly make all those sacrifices for naught. Hence, they are unlikely to put in their capital for reckless expansion and if at they are more ready to cash out when the opportunity presents itself. The loss of confidence is a drain on the investment spirit.
I imagine far-sighted broadly planned programmes for investments in the nation by Malaysians for the purposes of exporting to new growth centres such as China. These programmes will provide technical and financial as well as networking assistance to young entrepreneurs and businessmen to grow and expand their businesses. There would be a general national awareness programme of inculcate the spirit of adventure within the discipline of prudence, to grow on the basis of savings and investments and where possible with the added impetus from bank loans - and all with a proviso that loans must be repaid so that banks can repay their depositors. It is this broad spirit of adventure and hard work and reaping the reward from one's own sweat that this nation needs to promote.
It is immaterial the colour of the entrepreneur so long as he or she successfully undertake investments - the making of goods and services for the benefit of consumers.
The Minister of Finance must sit down with the Central Bank and the Securities Commission to discuss the direction of funding of the economy and the instruments and systems by which this can be accomplished. There is a need to straight the whole financial system, away from the inclination towards speculative activities.
The central bank must pursue a long-term policy of maintaining the strength of the ringgit in order to protect the savings and investments of the nation from erosion by systematic depreciation as we have seen in the last twenty-odd years. (The last financial crisis of 1998 when the ringgit depreciated is an indictment of the central bank for not performing its statutory function of protection the value of the local currency.)
The tariff system should be reviewed. Malaysia is not more just a commodity exporter. Malaysia in future will have to start importing raw materials to feed its industries which value-add (rather than just assembling) and there should be as little distortion as possible (through customs) of the market prices of the inputs for industries.
Lastly, strenghten the educational system. We may to dump the useless professors and put in the real ones who can do research and add and disseminate knowledge - so that the nation can move up the value chain, rather than be stuck at the bottom of the food chain.
In this way, investments will be nurtured at home over the long run.
Thursday, October 30, 2008
Expanding the Aggregate Demand Curve
In the past 18 years since 1990, ever since the success of opening up the economy to foreign direct investments hit infrastructure bottlenecks, the Malaysian economy has been undertaking mega projects to expand the infrastructure capacity of the local economy - that is, expanding its aggregate supply curve.
This expansion of the aggregate supply curve had proved so lucrative to the policy makers that even as a solution to the problem created by it in 1997-98, the solution remained additional expenditure on infrastructure. This "counter-cyclical fiscal stimulus" has proven itself so easy to propose and implement that many politicians and poorly-schooled economists may be tempted to imagine themselves to be brilliant economists.
Infrastructure projects are probably one of the easiest projects to implement (so long as one has the money) because there is no accountability to their economic or commercial viability.
So, since 1990, Malaysia's aggregate supply curve has been pushed further and further out to the right.
The idea of building more infrastructure facilities is to expand the productive capacity of the local economy so that there is more room for private-sector business investments to increase and in the process generate growth in the economy.
If private investments are unchanged and the aggregate demand curve stays the same, the sustained expansion of the aggregate supply curve means that operators of infrastructure facilities will lose money due to insufficient demand - and the only way to ensure profitability is to raise the prices high enough, and this is easy to do for monopolies. (Note Khazanah's strategy to turn around GLCs, as an example.)
In the meantime, having expanded the supply side, Malaysia undertook no extra effort to expand the aggregate damand for infrastructure. When the Japanese and others looked to China after the 1997-98 crisis, the local operating environment hardened further for domestic direct investment. The clamour for lucrative government contracts (on the supply side) led inadvertently to a government machinery that has become hostile to homegrown investments.
Easy money policy therefore led not to an increase in local direct investments in factories and plants for exports or businesses of entrepreneurs, but to an increase in the collateral assets for banks - namely, real estate and even financial assets. With this came the consumption boom - of cars and credit cards - which thought great for the local retail trade but is no good for the secondary sector of the economy - the real economy of producing things they can be sold to the world.
Malaysia needs to expand its aggregate demand curve, by encouraging direct investments, not only from foreigners but also from Malaysians themselves. Opportunnities must be created for investors to take risk and keep the fruit of their efforts rather than have rules and regulations that strangle confidence and the animal spirits and the long-term faith in the economy. To invest is to keep faith with the country.
The monetary policy is easy enough - interest rates are low enough and banks are very keen to lend. The fiscal policy has become so elongated that we may have to raise debt to finance it. But there is a need for policy and the government process and machinery to take an enlightened view of the workings of reality.
The current global financial meltdown shows that wealth as most people perceived it is a figment of their own personal imagination, while the richness lies in the openness of society out there - of the money that is yet to be made. Assets are nothing but relics of dead people that the living merely sit on.
The expansion of the aggregate demand curve by consumption is a drive in the wrond direction as the current financial meltdown also shows. There is a need to invest by putting resources to productive use, productive in the sense that we are continually extracting more and more out of the available resources for the benefit of society, rather than to feed the greed of individuals or the fancy of a group.
Let Malaysians BE ALLOWED TO invest in Malaysia and stake a claim in the future of their own homeland - rather than be over-run by billionaires and foreigners!
This expansion of the aggregate supply curve had proved so lucrative to the policy makers that even as a solution to the problem created by it in 1997-98, the solution remained additional expenditure on infrastructure. This "counter-cyclical fiscal stimulus" has proven itself so easy to propose and implement that many politicians and poorly-schooled economists may be tempted to imagine themselves to be brilliant economists.
Infrastructure projects are probably one of the easiest projects to implement (so long as one has the money) because there is no accountability to their economic or commercial viability.
So, since 1990, Malaysia's aggregate supply curve has been pushed further and further out to the right.
The idea of building more infrastructure facilities is to expand the productive capacity of the local economy so that there is more room for private-sector business investments to increase and in the process generate growth in the economy.
If private investments are unchanged and the aggregate demand curve stays the same, the sustained expansion of the aggregate supply curve means that operators of infrastructure facilities will lose money due to insufficient demand - and the only way to ensure profitability is to raise the prices high enough, and this is easy to do for monopolies. (Note Khazanah's strategy to turn around GLCs, as an example.)
In the meantime, having expanded the supply side, Malaysia undertook no extra effort to expand the aggregate damand for infrastructure. When the Japanese and others looked to China after the 1997-98 crisis, the local operating environment hardened further for domestic direct investment. The clamour for lucrative government contracts (on the supply side) led inadvertently to a government machinery that has become hostile to homegrown investments.
Easy money policy therefore led not to an increase in local direct investments in factories and plants for exports or businesses of entrepreneurs, but to an increase in the collateral assets for banks - namely, real estate and even financial assets. With this came the consumption boom - of cars and credit cards - which thought great for the local retail trade but is no good for the secondary sector of the economy - the real economy of producing things they can be sold to the world.
Malaysia needs to expand its aggregate demand curve, by encouraging direct investments, not only from foreigners but also from Malaysians themselves. Opportunnities must be created for investors to take risk and keep the fruit of their efforts rather than have rules and regulations that strangle confidence and the animal spirits and the long-term faith in the economy. To invest is to keep faith with the country.
The monetary policy is easy enough - interest rates are low enough and banks are very keen to lend. The fiscal policy has become so elongated that we may have to raise debt to finance it. But there is a need for policy and the government process and machinery to take an enlightened view of the workings of reality.
The current global financial meltdown shows that wealth as most people perceived it is a figment of their own personal imagination, while the richness lies in the openness of society out there - of the money that is yet to be made. Assets are nothing but relics of dead people that the living merely sit on.
The expansion of the aggregate demand curve by consumption is a drive in the wrond direction as the current financial meltdown also shows. There is a need to invest by putting resources to productive use, productive in the sense that we are continually extracting more and more out of the available resources for the benefit of society, rather than to feed the greed of individuals or the fancy of a group.
Let Malaysians BE ALLOWED TO invest in Malaysia and stake a claim in the future of their own homeland - rather than be over-run by billionaires and foreigners!
Tuesday, October 28, 2008
How To Repair the Malaysian Economy
When the dust settles, what would we see?
An OECD paralysed, with a financial system staying barely afloat.
China may use the opportunity to refocus growth from foreign-owned export industries to local-owned domestic-oriented firms especially in major inland cities. There will be oppportunities for investors outside China to produce quality inputs for Chinese industries.
What will happen in the Malaysia economy? What must be done to repair the Malaysian economy?
The traditional Malaysian society and economy that we all have grown up in have been drastically changed - some would say destroyed.
We are no more Malays, Chinese, Indians and native Sarawakians and Sabahans.
Malaysia is now a mixture of billionaires, foreign workers, a whole bunch of speculators in shares and real estate, and consultants to government departments and GLCs.
We are all in for the quick gain. As opportunities for windfall gains evaporates as the oil money run out, we are all assassinating politicians for being empty handed.
First, beef up internal security to prepare for a spate of recession-induced crimes in the street.
Second, repartriate low-wage foreign workers. They are the ones that keep wages low and inhibit the use of technology in the economy - including construction.
Third, focus on investments - for exports to China. Malaysians should try to hire local professionals of all races. It is far better than attracting foreign investors to hire local professionals of all races.
Fourth, Malaysians should close ranks to work on putting together the fragmented economy (and the fragmented institutions). The divisive politics has destroyed the economy, and we do not need any 80-year olds to paddle us old-fashioned ideologies. For goodness' sake, we are in a globalised world - and what race are we talking about or are we really talking about power, monopoly, disgraceful wealth and opulence on the backs of those who toil.
Fifth, create a Third Force - the Liberals who care for the creation and spreading of economic opportunities throughout the whole society regardless of race or religion. We should take all key issues in Malaysia including the NEP-type and work out effective and transparent ways of balancing out wealth distribution, instead of the very crude old-fashioned quotas and licenses. There should be price-incentives to induce productivity gains and market-based wealth creation.
Sixth, sit down and do some proper political and economic analyses and publish them in peer-reviewed journals, even if of local origin. We have too much of foreign models using local data, and not enough original local thinking taking into account local conditions.
Seventh, we should take the Minister of Finance portfolio away from the PM and the DPM and give it back to the Minister of Finance. The PM should concentrate on national harmony and the DPM on internal security. The Minister of Finance on government spending and finance. The Central Bank on fighting inflation and financial speculation. Let the private sector a free hand to undertake investment. Remove politics from investment decisions.
Eighth, we have enough infrastructure to last another generation. We have expanded the aggregate supply curve. Let us work to use the infrastructure efficiently. Move the aggregate demand curve.
Ninth, reinstate the role of professionals in the economy. Remove politically-oreinted managers from public places.
Tenth, reinstate the role of markets in the economy with price movements doing the resource allocation. Let the people work, sweat, earn and keep.
An OECD paralysed, with a financial system staying barely afloat.
China may use the opportunity to refocus growth from foreign-owned export industries to local-owned domestic-oriented firms especially in major inland cities. There will be oppportunities for investors outside China to produce quality inputs for Chinese industries.
What will happen in the Malaysia economy? What must be done to repair the Malaysian economy?
The traditional Malaysian society and economy that we all have grown up in have been drastically changed - some would say destroyed.
We are no more Malays, Chinese, Indians and native Sarawakians and Sabahans.
Malaysia is now a mixture of billionaires, foreign workers, a whole bunch of speculators in shares and real estate, and consultants to government departments and GLCs.
We are all in for the quick gain. As opportunities for windfall gains evaporates as the oil money run out, we are all assassinating politicians for being empty handed.
First, beef up internal security to prepare for a spate of recession-induced crimes in the street.
Second, repartriate low-wage foreign workers. They are the ones that keep wages low and inhibit the use of technology in the economy - including construction.
Third, focus on investments - for exports to China. Malaysians should try to hire local professionals of all races. It is far better than attracting foreign investors to hire local professionals of all races.
Fourth, Malaysians should close ranks to work on putting together the fragmented economy (and the fragmented institutions). The divisive politics has destroyed the economy, and we do not need any 80-year olds to paddle us old-fashioned ideologies. For goodness' sake, we are in a globalised world - and what race are we talking about or are we really talking about power, monopoly, disgraceful wealth and opulence on the backs of those who toil.
Fifth, create a Third Force - the Liberals who care for the creation and spreading of economic opportunities throughout the whole society regardless of race or religion. We should take all key issues in Malaysia including the NEP-type and work out effective and transparent ways of balancing out wealth distribution, instead of the very crude old-fashioned quotas and licenses. There should be price-incentives to induce productivity gains and market-based wealth creation.
Sixth, sit down and do some proper political and economic analyses and publish them in peer-reviewed journals, even if of local origin. We have too much of foreign models using local data, and not enough original local thinking taking into account local conditions.
Seventh, we should take the Minister of Finance portfolio away from the PM and the DPM and give it back to the Minister of Finance. The PM should concentrate on national harmony and the DPM on internal security. The Minister of Finance on government spending and finance. The Central Bank on fighting inflation and financial speculation. Let the private sector a free hand to undertake investment. Remove politics from investment decisions.
Eighth, we have enough infrastructure to last another generation. We have expanded the aggregate supply curve. Let us work to use the infrastructure efficiently. Move the aggregate demand curve.
Ninth, reinstate the role of professionals in the economy. Remove politically-oreinted managers from public places.
Tenth, reinstate the role of markets in the economy with price movements doing the resource allocation. Let the people work, sweat, earn and keep.
Recession: Simple Analysis
Many people think that prices are symmetrical in their impact - when prices go up, people buy less; when prices fall, people buy more. So, if we raise prices and then lower them back to the same levels as before, things will be back to where they were before.
No quite right!
Say, when prices are doubled and people's nominal incomes are unchanged, they can only buy half the quantity of the things they used to buy.
When this happens, businesses will have only halve the usual sales and warehouses full of unsold goods. They may try to lower the prices but they will be making losses. Instead, they retrench staff to produce half the usual volume, if they were to simply write off their unsold goods.
By retrenching, they are creating the signs of a recession - the recession has already set when prices were raised.
If prices were then reduced to the same old level, people will buy what they used to buy - which is the amount they earned - but without the income lost by those who were unemployed.
After the fuel and food price hike, there should be no doubt that the recession is already set for the world.
No quite right!
Say, when prices are doubled and people's nominal incomes are unchanged, they can only buy half the quantity of the things they used to buy.
When this happens, businesses will have only halve the usual sales and warehouses full of unsold goods. They may try to lower the prices but they will be making losses. Instead, they retrench staff to produce half the usual volume, if they were to simply write off their unsold goods.
By retrenching, they are creating the signs of a recession - the recession has already set when prices were raised.
If prices were then reduced to the same old level, people will buy what they used to buy - which is the amount they earned - but without the income lost by those who were unemployed.
After the fuel and food price hike, there should be no doubt that the recession is already set for the world.
Reinstate the Gold Standard
Keynes came in after the 1903s Depression to argue with the simple market economists in the Treasury that letting the market find its bottom would not help because many people were hungry and had no money to create the demand needed by the market. This is, in essence, the General Theory or GT.
Keynes also reinstated the gold standard and created the IMF to help maintain the gold standard by providing the necessary liquidity to stabilise currencies.
The failure of the US financial system - what it looks like to be the world financial system as practiced by the West and imitated by the East - is the destruction of the gold standard in 1973 when Nixon removed the US dollar from it - which led Greenspan to abuse it with its unbridled expansion in the name of free market and global innovation.
But the free marketeers had failed to define market rules under which everyone should operate. Banks are left to innovate to their hearts' content. The referees were sleeping.
The solution to the global financial system is to go back to the gold standard, regulate money supply, control inflation - so that the real economy and people who really work can proceed to go about with their ordinary lives - working and consuming and waiting to die.
Keynes also reinstated the gold standard and created the IMF to help maintain the gold standard by providing the necessary liquidity to stabilise currencies.
The failure of the US financial system - what it looks like to be the world financial system as practiced by the West and imitated by the East - is the destruction of the gold standard in 1973 when Nixon removed the US dollar from it - which led Greenspan to abuse it with its unbridled expansion in the name of free market and global innovation.
But the free marketeers had failed to define market rules under which everyone should operate. Banks are left to innovate to their hearts' content. The referees were sleeping.
The solution to the global financial system is to go back to the gold standard, regulate money supply, control inflation - so that the real economy and people who really work can proceed to go about with their ordinary lives - working and consuming and waiting to die.
Central Banks Have Failed!
Risk managment tries to minimise the risk associated with a given situation, structure or paradigm.
Uncertainty is associated with the changing of situation, structure or paradigm.
Risk management is a cope-out that marginalises the need to deal with uncertainty.
A bank works on the assumption that it is as good as its collateral value - which is largely mortgages or mortgage-backed papers. The collateral value increases with bank lending, which means that there is no limit to loan expansion - until the borrowers are exhausted and couldn't pay.
In risk management, you work to ensure that the collateral really does exist, and that its current value is indeed what the market says.
When the situation changes as a result of the exhaustion by banks of their customers, the whole bank lending system collapses - and out of it comes uncertainty - as to what the next model will be.
There is no uncertainty where the banking system is going - down!
There is uncertainty as to what to replace the banking system - that is, what banking policy - and nobody has a clue - because nobody is thinking about it.
While individual banks undertake risk management, it is responsibility of the central bank to manage systemic risks.
Central banks around the world have failed.
Uncertainty is associated with the changing of situation, structure or paradigm.
Risk management is a cope-out that marginalises the need to deal with uncertainty.
A bank works on the assumption that it is as good as its collateral value - which is largely mortgages or mortgage-backed papers. The collateral value increases with bank lending, which means that there is no limit to loan expansion - until the borrowers are exhausted and couldn't pay.
In risk management, you work to ensure that the collateral really does exist, and that its current value is indeed what the market says.
When the situation changes as a result of the exhaustion by banks of their customers, the whole bank lending system collapses - and out of it comes uncertainty - as to what the next model will be.
There is no uncertainty where the banking system is going - down!
There is uncertainty as to what to replace the banking system - that is, what banking policy - and nobody has a clue - because nobody is thinking about it.
While individual banks undertake risk management, it is responsibility of the central bank to manage systemic risks.
Central banks around the world have failed.
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