After the Bell: The happy surprise that is Kganyago’s reappointment

Are there more jokes about lawyers than there are about economists? I don’t think so, but they are meaner. What do you say to 25 skydiving lawyers? … Pull! What’s the difference between a lawyer and a jellyfish? One is a spineless, poisonous blob; the other is a form of sea life, etc.

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 be all bad. 

One of the problems for central bank economists is being surrounded by people and groups with agendas. Traders either want the rand to go 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 obviously 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 replete with these explanatory comments designed to make you doubt you understood anything. One last one: “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) well. There has, however, been huge criticism of central banks for one reason or another. But we haven’t seen a major banking crisis for 2½ 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. 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, the Reserve Bank still commands enormous respect except from fringe groups. When politicians start calling for the SA Reserve Bank to be nationalised, it’s a useful indicator that they (the politicians) are not serious people. 

Anyway, I am one among many people who were delighted to see that SA Reserve Bank Governor Lesetja Kganyago has 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 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 was so complex has eroded. Modern central bankers have gone in a different direction: they focus 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. Central bankers also tend to act more in unison these days, reflecting the essential unifying dynamic of the global economy. 

If central banks don’t follow the global consensus, the outcomes can be undesirable and it’s 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 quietly celebrate. DM