Former governor of the Bank of England Mervyn King had an informal interview with fellow ex-central banker and former colleague Ben Bernanke on the BBC, and while the interview covers a lot of the same ground we’ve already heard (eg his commitment to improving transparency at the Fed), it also underscores just how well central bankers all seem to know each other – for better or worse.
‘A little bit of risk of groupthink’
As they discuss in the interview, King and Bernanke have known each other for decades, having had offices next to each other as visiting professors at MIT thirty years ago. Bernanke also points out that current vice chair of the Federal Reserve Stan Fischer was both his and ECB president Mario Draghi’s thesis advisor. So even before these men took the helm of the respective central banks they were moving in the same intellectual circles.
“Many people that I knew and you [King] knew from academic life ended up in central banking,” said Bernanke. “There is very much a community of people interested in these issues. You might say the downside of that is a little bit of risk of groupthink.”
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He says that making decisions by committee instead of leaving it to a single person mitigates the risk by pulling in different perspectives, but if the same fairly narrow group of academics are dominating Western central banks, it’s no wonder they all agree that crises should be met with near zero rates and QE.
Dealing with the financial crisis was ‘fun,’ says King
Bernanke says that it was useful to already have that working relationship with King in place when the crisis hit, but the academic collegiality does seem out of place when talking about something this serious.
“It was great fun and fascinating to work with you during the crisis, despite the fact that we were dealing with really serious problems. I hope the experience was also fun for you,” says King, in what’s got to be the most tone deaf comment of the interview (though certainly not the only one).
“Well, fun wouldn’t be quite the right word,” says Bernanke, who describes the experience as exciting, stimulating, and ultimately satisfying to put his academic training to use. Bernanke says that he dealt with the stress by occasionally getting out to a ball game or a show, and by focusing as much as possible on small tasks instead of contemplating the weight of what he was doing.
“By focusing so much on each individual task we tried not to be thinking all the time about the consequences for the world of these decisions, and that seemed to help somewhat,” said Bernanke.