MONDAY, APRIL 17, 2023
NEWS FOR BUSINESS LEADERS
BUSINESS24.COM.GH
Telecoms chamber to comply with NCA’s directive regarding SIM registration exercise
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NPA to regulate bitumen supply chain to ensure quality and efficiency
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Ofori-Atta concerned about “systemic bias” of credit rating agencies
By Eugene Davis
What will it take to prevent future pandemics? By William A. Haseltine
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| NEWS
MONDAY,APRIL 17, 2023
Telecoms chamber to comply with NCA’s directive regarding SIM registration exercise
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The Ghana Chamber of Telecommunications says it will comply with the recent directive from the National Communications Authority (NCA) regarding the ongoing SIM registration exercise. The Chamber said its members have been blocking services for subscribers since November 2022, who have not completed both stages of the SIM registration process, as directed by the Ministry of Communications and Digitalisation. The directive issued on April 13, 2023, by the NCA indicated that all disconnected SIMs are to be delinked from all databases by tomorrow April 17, 2023. For the avoidance of doubt, this included SIMs that were blocked in November 2022 for not having completed both stages of the SIM registration. Again, all SIM cards registered after the limit of 10 per individual are to be
delinked, deactivated and removed from all databases by Monday, April 17, 2023. The Chamber of Telecommunication, therefore, encouraged all subscribers who have acquired Ghana cards but are yet to complete registration to do so before April 17, 2023. It added, “All subscribers with more than 10 SIMs registered to themselves should also visit their nearest mobile network operator’s service centres to urgently verify their SIMs on record.” Furthermore, the Chamber said, “Our members are obliged by the directive to completely deactivate all impacted subscriber SIMs which have not completed the registration by the said date without any further notice or extension of time for subscribers.” It noted, “It is important that the cherished customers of the networks are not barred from using voice, data, USSD,
mobile money services and continue to have access to emergency and other important services.” It added that subscribers with Ghana cards can avoid this inconvenience by completing stage 2 (the biometric capture) of the registration process. Continuing, it said since the start of the SIM Registration Exercise, the members of the Chamber have invested heavily in arrangements to ensure that subscribers who have their Ghana cards and are ready to register, get registered at any of our several touchpoints across the country. “For those that require some special assistance to carry out the registration exercise, kindly contact your service provider. “Our members remain committed to supporting the efforts of all stakeholders to ensure that every customer in every part of the country is able to register their SIM card(s) with the Ghana card”.
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MONDAY,APRIL 17, 2023
NPA to regulate bitumen supply chain to ensure quality and efficiency
The National Petroleum Authority (NPA) is developing a framework to regulate the importation, storage, processing and marketing of bitumen in the country. The framework, which will have inputs from the Ghana Standards Authority (GSA), the Ghana Highways Authority (GHA), and the Customs Division of the Ghana Revenue Authority (GRA), is to streamline the bitumen supply chain and ensure compliance with quality standards specifications. The NPA Chief Executive, Dr. Mustapha Abdul-Hamid, and Management members of the Authority made this known on Wednesday during an inspection tour of a bitumen storage and production plant at Tema jointly owned by Goil Good Energy and Societe’ Multinationale de Bitimumes (SMB) of Cote d’Ivoire.
The facility with 7,500 metric tonnes installed capacity takes delivery of bitumen from Cote d’Ivoire. One component of the facility produces polymer-modified bitumen and bitumen emulsions, which are combinations of bitumen and some chemicals. Operations started in September 2022, and arrangements are underway for the official commissioning of the plant, possibly by President Nana Addo Dankwa Akufo-Addo and his Ivorian counterpart Mr. Alassane Ouattara this year. Per the law establishing the NPA, it has the mandate to regulate all petroleum products, including bitumen, which is mainly used for road construction. Dr. Abdul-Hamid affirmed the commitment of the NPA to streamline the bitumen supply chain to ensure compliance with industry standards. Giving details of the NPA’s
actions, the Head of Planning of NPA, Mr. Dominic Aboagye indicated that the NPA constituted a committee a couple of years ago to look at the entire bitumen supply chain to see how to streamline the sector. Consequently, he said, the Authority engaged players in the bitumen value chain to understand their operations, and it turned out that much of the supply was from Cote d’Ivoire. With that information, a team from the NPA led by Dr. Abdul-Hamid visited Cote d’Ivoire in 2021 to study the operations of Societe’ Multinationale de Bitimumes (SMB), the main exporter of bitumen to Ghana. Mr. Aboagye said the NPA committee had since been developing the framework, and indicated that the Authority would engage the GHA, the GSA, the Customs Division of GRA, and players in the bitumen supply
chain to finalize the framework to regulate the sector. He said all players in the bitumen supply chain would be licensed by the NPA to streamline their operations. In their presentations, the Group CEO of Goil Company Limited, Mr. Kwame Osei Prempeh said the plant had been selling the bitumen, polymer-modified bitumen, and bitumen emulsions on demand for road construction. He welcomed the move by the NPA to regulate the bitumen supply value chain as it would ensure the supply of quality products in the country. The NPA team that participated in the tour included the Director of Economic Regulation and Planning, Mrs. Alpha Welbeck, and the Director of Policy Coordination, Dr. Sheila Addo, the Head of Quality, Control, Mr. Ubeidalah Kutia Saeed, and the Executive Assistant to the CE, Mr. Faisal Ibrahim Cisse.
Ofori-Atta concerned about “systemic bias” of credit rating agencies By Eugene Davis
Finance Minister Ken Ofori-Atta says a key challenge with Credit Rating Agencies (CRAs) is the “systemic bias” in their rating methodologies, procedures, practices, and processes towards Africa. Speaking as a panelist on ‘The impact of credit ratings on the costs of development finance in Africa’, Ghana’s finance minister said “There is a consistently unfavourable credit ratings, neg-
ative outlook potentially to impede growth and it negatively undermines the ability that we have. So today with this poorly crisis the pertinent question remains is how will Africa mobilise our resources required when we are essentially written off as markets that are riskier.” he said this on the margins of the 2023 World Bank/IMF Annual
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Spring Meetings in Washington DC. Mr. Ofori-Atta said the unfair ratings affected developing countries' access to credit. He also adds that the “whole system is geared towards making the use of our resources difficult to justify.” Mr. Ofori-Atta had said since 2003 to date, Ghana had three upgrades and nine downgrades and though between 2017 and 2019, the country had successive rating upgrades, with a
"track-record" of safeguarding macroeconomic stability, it was questionable that the country was downgraded during a pandemic "Unless we prioritise reform now, the divergence between developed and developing nations will become a toxic recipe for instability, crisis, and forced migration," For him, the continent remains poor due to factors such as illicit financial flows, surcharges being paid to multilaterals and
reckons the African Union can do more to support African economies to stand on its feet with policies.
ton DC, featured findings from a new UNDP report that analyzes credit ratings methodologies in Africa, discusses financial and development ramifications, and proposes alternative approaches for countries where relevant data is scarce.
UNDP report notes that the combined cost of credit ratings issues cost Africa around $75b, money that could have been used for 80% of Africa’s annual infrastruc- The role of credit rating ture investment needs. agencies is critical in determining sovereign creditworThe event, which took place thiness and, consequently, on the margins of the 2023 the cost of debt for both World Bank/IMF Annual sovereign and corporate borSpring Meetings in Washingrowers.
What will it take to prevent future pandemics? By William A. Haseltine
Although COVID-19 restrictions are rapidly fading around the world, we are still reeling from the impact of the past three years. More than 6.8 million deaths from COVID-19 have
been officially reported, but the true number may be closer to 15 million. There has been immense suffering and social and eco-
nomic turmoil, and the virus itself still poses a clear and present risk, with one in five Americans reporting ongoing “long COVID” symptoms. Worse, COVID-19 is far from the last zoonotic disease with the potential to devastate the global population. Innumerable other viruses – many of which remain understudied – have been discovered in animals. Any of them could serve as a source of new human viruses, which often originate from repeat-offender virus families such as coronaviruses, orthomyxoviruses, and filoviruses. When viruses from these families show up in mammals or birds, there is
always a risk that they could develop the potential to infect humans. And when that happens, the fact of globalization means that those viruses can spread faster than ever before. A key challenge, then, is to discover and identify which viruses pose the greatest risks to humans. If we can detect a new human virus in the earliest days of a disease outbreak, we will have a much better chance of implementing the measures needed to prevent another global pandemic. To that end, a recent article in Science proposes setting up an experimental pipeline whereby researchers Story continues on page 5
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MONDAY,APRIL 17, 2023
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can test animal viruses for four crucial properties consistent with human infection. By identifying the viruses that pose the highest risk for zoonosis (transmission across species), we can then rapidly roll out diagnostic panels to detect new human infections. Serologyand polymerase-chain-reaction-based diagnostics are currently the most practical solutions for health-care settings around the world. But they are pathogen-specific, so they are effective only when clinicians and scientists know which pathogens they should be testing for. An animal virus needs four essential biological properties in order to infect humans: it must use the human version of its cellular entry receptor to gain access to human cells; it must use human intracellular proteins to replicate and exit human cells; it must overcome humans’ innate immune responses; and it must evade pre-existing human adaptive immunity functions such as antibodies and T cells. Animal viruses that have most of these properties – such as primate arteriviruses – obviously warrant targeting by new diagnostic tools. Such tests can be grouped into regional panels
for use in diagnosing unusual or unattributable human illnesses, as well as to monitor healthy populations for virus-surveillance purposes. The first zoonotic property – an ability to enter human cells – is often the easiest to study, because we can test the surface protein of an animal virus by engineering it onto a reporter virus. (A reporter virus genome lacks genes essential for viral replication, making it safe for research and surveillance purposes.) This method has been shown to demonstrate that some poorly studied tibroviruses from the Rhabdoviridae family can enter human cells, though their multiplication within human cells is uncertain. The ability to multiply – the second biological property viruses need to infect humans – involves a complex process that requires interactions with several intracellular host proteins. Even a single incompatibility can prevent an animal virus from multiplying in human cells. There is scarce research on the third property: how animal viruses interact with human-innate immunity beyond the interferon response. This is a
first line of defense against virus infections. It functions by generating an intracellular environment that restricts virus replication and signals the presence of a viral pathogen to the adaptive arm of the immune response. Further study is needed to determine, for example, why some ebolaviruses can multiply in human cells, yet rarely infect humans in nature. In these cases, there seem to be powerful innate immune mechanisms protecting animals, including humans, from cross-species transmission. The final property is an ability to overcome pre-existing human adaptive immunity, such as neutralizing antibodies and cytotoxic T cells. While human responses raised against one virus can be tested for reactivity against a second virus, it is unknown how much cross-neutralization would be enough to protect humans from infection or severe disease if exposed to potentially zoonotic viruses. To detect outbreaks at their onset, clinicians and scientists must be able to track animal viruses in human populations. Yet our health-care systems currently struggle to provide
testing even for well-understood viruses. We urgently need greater investments in universal and accessible health care, which would have the added benefit of enhancing our virus-surveillance abilities. But in addition to more comprehensive surveillance protocols and stronger health systems, we also need to address underlying causes of zoonotic-disease emergence, such as deforestation, the wildlife trade, and climate change. While implementing a comprehensive pandemic-prevention framework will require significant investment, the cost of inaction is sure to be far higher. Population growth, expanding urbanization and encroachments on nature, and the resumption of regular air travel mean that infectious-disease outbreaks will continue to plague us. They already are. New cases of highly pathogenic avian influenza across the United States and in other parts of the world are a wake-up call. We should always assume that the next pandemic is closer than most people think.
Aker Energy submits Deepwater Tano/Cape plan of development to Energy Minister
Aker Energy, the operator of the Deepwater Tano/Cape Three Points (DWT/CTP) block offshore Ghana, has submitted a Plan of Development (PoD) to government. It did so on behalf of its partners,
a statement from the firm revealed. “The oil firm said “this is a major milestone for us. We are proud to say that together with our partners and the Ghanaian authorities, we have submitted a com-
prehensive plan of development that will form the basis for the sustainable and efficient development of the Pecan field,” said Kadijah Amoah, Chief Executive Officer of the operator. The PoD was presented to the Minister of Energy, Matthew Opoku Prempeh, at the Ministry of Energy in Accra. The PoD presents an overall plan for a phased development and production of the resources in the DWT/CTP contract area. The phased development plan will start with the development of the Pecan field as a firm phase one, being the largest of several discoveries in the contract area. The main Pecan field, located in ultra-deep waters ranging from 2,400 to 2,700
meters about 115 kilometers offshore Ghana, will be developed with a Floating Production Storage and Offloading (FPSO) vessel and a subsea production system (SPS). The operator and partners expect the Pecan field development and subsequent phases to provide significant proceeds to Ghana. “This has been a team effort and despite the significant challenges we faced, we have shown once again our resilience and unflinching commitment to the project. We now look forward to the approval of the PoD so we can get to work, developing and producing the resources for the ultimate benefit of the Ghanaian people,” said Ms. Amoah.
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Pensioners bondholders demands outstanding coupons by April 28
The Pensioner Bondholders Forum has threatened to resume its picketing at the premises of the Ministry of Finance if the government fails to pay all outstanding coupons and principals of bond investments by April 28, 2023. This it believes will put an end to the payment delays. Dr. Adu Anane Antwi, said it expressed disappointment about the government’s inconsistency regarding assurances to pay all pensioners their outstanding coupons and principals of bond investments. A Press Release dated April 14, 2023 from the Ministry of Finance indicated that a meeting held with the leadership of Coalition of Individual Bondholders groups and the Pensioners Bondholders Forum indicated that the Joint Technical Committee constituted on January 18, 2023 reconvenes and agrees on a pathway, towards the settlement of the outstanding debt obligations by April 28, 2023. However, the Pensioners Bondholders Forum denied that no such decision was reached. It therefore expressed much surprise about the misleading statement contained in para-
graph two of the Ministry of Finance Press Release of April 14, 2023. “We wish to state finally that if the payments of all outstanding coupons and principals are not made by April 28, 2023, we shall be left with no other option than to resume our picketing at the premises of the Ministry to further press home our demand for the payment of all coupons and principals in arrears, and an end to payment delays”. Pensioner Bondholders Forum rejected Finance Ministry proposal Furthermore, the Forum said “our attention has been drawn to a Press Release of April 14, 2023 from the Ministry of Finance on a meeting held with leadership of Coalition of Individual Bondholders groups and the Pensioners Bondholders Forum on April 14, 2023. Paragraph two of the Press Release contains a statement to the effect that the meeting agreed that the Joint Technical Committee constituted on January 18, 2023 reconvenes and agrees on a pathway, towards the settlement of the outstanding debt obligations by April 28, 2023. We wish to state that no such agreement contained in para-
graph two of the Ministry’s Press Release was reached”. It added that “at the meeting, the Ministry proposed that the Joint Technical Committee constituted on January 18, 2023 be given a period of four weeks to work and agree on a pathway, towards the settlement of the outstanding debt obligations by the government. The proposal from the Ministry was not accepted”. The statement further reiterated the Convener of the Forum position that some pensioners were going through a lot of pains and financial hardships, and therefore want the payments to be made by April 21, 2023, as demanded in the Forum’s letter of March 30, 2023 to the Finance Minister, Ken Ofori-Atta. “The Convener however promised that he will try and convince members of the Forum to grant the Ministry a one-week extension of the April 21, 2023 deadline for the payment of the Government’s outstanding debts obligations. The Convener advised that the Ministry waits to receive a confirmation from him on the
one-week extension after he has consulted with members of the Forum”, the statement continued. Additionally, the statement said “the Convener requested that upon the receipt of a confirmation from him, the Ministry of Finance should respond to the Forum’s letter of March 30, 2023 and indicate that after further engagement with the Forum, the Ministry agreed to pay the outstanding coupons and principals by April 28, 2023. The Deputy Minister agreed to do as requested”. After the meeting, the statement pointed out that the Convener sent this text message at 4:25pm to the Deputy Minister through two of the Ministry’s staff who were involved in facilitating the meeting, reading, “This is to confirm the one-week extension I proposed at the meeting, to the 21st April 2023 deadline demanded by the Pensioner Bondholders Forum for the payment of outstanding coupons and principals. Please convey the confirmation to the Deputy Minister. Thanks. Dr. Adu A. Antwi”.
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Jael, a trailblazer in hospitality industry
role models who can advocate for more wholesome “promotions principles.
pitality management work.
She said: frequently entail moving as well as assuming new, time-consum- "To achieve the objective of ing tasks. It is challenging to having entrepreneurs emerge combine personal and profes- and have an impact on the next generation, our governsional life." ment should aggressively She says her first goal in line of support young people to her business is to create develop their ideas and branches of her travel company create businesses within our across the regions in Ghana and nation.”
also to become the major honJael shares a few words of eymoon travel company. wisdom to the youth and the I would love to serve as a role younger generations, everymodel to young women within one has heard the adage, "In the hospitality industry by pro- every caterpillar, there is a viding coaching sessions and butterfly ready to stretch its assisting them with their career wings, flourish, and soar to greatness." paths, she added.
One of the industries that’s thriving post-covid is the hospitality, travel and tourism industry and there are very few personalities that are making a remarkable impact in this booming sector. Jael, a Certified Hotel General Manager CHGM and an award-winning female hospitality professional, and is regarded as a trailblazer in Africa's fast-growing tourism & hospitality industry. She is the Director of Administration at African Association of Women in Tourism & Hospitality (AAWTH) and the General Manager of RB PARK- HILL HOTEL Ghana. With over 10 years of active operational experience in the tourism and hotel industry, Jael is also the country chair for G100, a group of significant women leaders from around the world with powerful advocacy and awareness across governments and worldwide organizations for a gender equal future. Having worked with a number of travel agencies in the UK
after she successfully completed her internship with JW Marriott in Central London, she came to Ghana to work with Marriott Hotel Accra. Jael is the founder and CEO of The Haven Honeymoon Concierge (Travel Company) and also the Teens Tourism & Hospitality Club. She has numerous achievements which include Top Ten Hospitality Influencer Africa by Hospitality Awards Africa 2022; 100 Most Powerful Hospitality Female in Africa by International Hospitality Institute 2022; Most Outstanding Female in Hospitality by Feminine Ghana Achievement Awards 2022; Most Admired Female Hospitality Professional by Hospitality Awards Africa 2021; and Travel & Tourism Excellence Award by the College of Enfield, Haringey and North East London. Amidst all the success, Jael has had a few challenging moments which she says include long, erratic hours, frequently including evening or overnight work, which are also a common feature of hos-
In few years to come, Jael She concludes that every discloses she envisions to own young person has greatness various boutique hotels across inside them that's just waiting to be released, similar to the country. butterfly. By guiding a young She stated that the strongest person in creating goals and known economic factor in inspiring them, mentors can Ghana right now is entrepre- act as a source of support and neurship and in order to steer direction in helping to the next generation in the achieve greatness. Find a correct way with regards to Mentor. A responsible adult entrepreneurship, she stressed who knows what is best for your well-being that “we need more positive
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GSE delists Sam-Woode Limited
Ghana Stock Exchange (GSE) has delisted Sam-Woode Limited (SWL) from the Main Equity Market of the Exchange, due to company’s cessation of operations. The company will be taken off the Official List at the end of trading April 14, 2023. A release from GSE said this decision is based on Rule 13(1) of the GSE’s Listing Rules which provides that “the Council may at any time and in circumstances as it thinks fit, suspend or cancel a listing and shall do so to protect investors and to ensure an orderly
market”. Among the reasons for which the Council may delist a company is where the company has ceased to be an operating company, as provided under Rule 13(4)(a) of GSE’s Listing Rules. In September 2020, SWL informed the Exchange of its intention to delist from the Exchange and restructure its operations. It had suspended its operations, as it had been hard hit by the introduction of the new Ghana Education Service curriculum, which had led to
a subsequent obsolescence of its textbook inventories and the stoppage of its book sales operations. Its shareholders had therefore voted to delist from the Exchange and restructure the company. Following this, the Exchange notified the public and, per Rule 13(4)(a) of the GSE’s Listing Rules, suspended the listing status of SWL on the basis of SWL’s cessation of operations, in September 2020. The Exchange has since then, followed up several times
with SWL to commence the delisting process, with the expectation that SWL will carry through the voluntary delisting successfully, but the company has failed to do so. To ensure an orderly market, the GSE Council has thus directed the compulsory delisting of SWL due to the cessation of the operations of the company with reference to Rule 13(40(a) of the GSE’s Listing Rules. SWL will therefore be taken off the Main Market of the Exchange at the end of trading April 14, 202
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NTHC WEEKLY MARKET SUMMARY EDITION: 15/23 EST. 1976 TREASURY BILL MARKET ACTIVITY
MARKET TRADE ACTIVITIES | 03RD APR – 06TH APR, 2023
AUCTION RESULTS | TENDER 1845 | 10TH-14TH APRIL, 2023 Government at the just ended treasury bill auc�on announced a set target of GH¢1.767 billion across the 91, 182 and 364-day bills. However, total bids amoun�ng to GH¢1,883 billion was received for which GH¢1.855 billion was accepted. Securi�es 91 Day Bill 182 Day Bill 364 Day Bill
Bid Tendered GH¢ (M) 1,293.34 422.18 167.50
Bid Accepted GH¢ (M) 1,293.34 422.18 140.38
Top Ten Equity Trades
250.00
In '000s
200.00 150.00 100.00
Weighted Average Rate (%) 19.6934 22.2469 26.9585
50.00 -
The week-on-week yields witnessed an overall approximated increase of 0.31bps and 0.39bps across the 91 and 182-day bills respec�vely. Securi�es
Current Yield (%)
Previous Yield (%)
Change (bps)
25.00
19.6934 22.2469
19.3881 21.8569
+0.3053 +0.3900
20.00
91 Day Bill 182 Day Bill
15.00
EQUITY MARKET ACTIVITY | 03RD APR – 06TH APR, 2023
10.00
Days
Date
Volume
Value GH¢
Monday
03/04/23
67,842
168,907.91
GSE Composite Index (GSE-CI) 2,760.98
Tuesday
04/04/23
148,984
288,738.32
2,759.64
Wednesday
05/04/23
39,330
58,476.48
2,758.42
Thursday
06/04/23
106,743
182,746.42
2,758.42
GSE Composite Index (GSE-CI) GSE Financial Stock Index (GSE-FI)
5.00 -
3YR
4.5YR
10YR
14YR
Bond Value Traded
YEAR START (01/01/2023)
CURRENT (06/04/2023)
2,443.91
2,758.42
YEAR-TODATE CHANGE (%) +12.87
2,052.59
1,806.67
-11.98
In '000,000s
250.00
GSE STOCK INDICES | 06TH APRIL, 2023 INDICES
Bond Coupon Curve
200.00 150.00
100.00 50.00
-
3YR
4.5YR
10YR
14YR
CURRENCY MARKET ACTIVITY | 06TH APRIL, 2023 Currency US Dollar Pound Sterling Euro Japanese Yen Naira South African Rand
Currency Pair USD-GHS GBP-GHS EUR-GHS JPY-GHS NGN-GHS ZAR-GHS
Buying 10.9245 13.5890 11.9380 0.0830 42.1894 0.5993
Selling 10.9355 13.6037 11.9488 0.0830 42.2470 0.5999
NEWS HIGHLIGHTS Government borrowed a total of GH¢14.16 billion via Treasury Bills by close of March 2023. T-Bills auc�on: Interest rates rise again. Ghana’s infla�on to average 16% in 2024 – Fitch Solu�ons. Ghana’s bilateral creditors set to clear way for 3 billion dollars IMF Bailout. OUR SOURCES: GSE/GFIM/BOG/CSD
Subsidiaries NTHC Securi�es
NTHC Trustees
NTHC Registrars
NTHC Commodi�es
NTHC Proper�es
NTHC Asset Management
Thursday 26 January 2023 – Investment Times 9
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January 20,2023 April 6, 2023
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Thursday 26 January 2023 – Investment Times
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MONDAY,APRIL 17, 2023
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January April 6,20,2023 2023
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ź͖͕Ǥ͙͘ ź͖͘Ǥ͕͚ ź͖͗Ǥ͖͘ ź͖͖Ǥ͕͔
Thursday 26 January 2023 – Investment Times
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Thursday 26 January 2023 – Investment Times
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Ƭ ȋ Ȍ ȋ ȌǤ ǣ ǣ ̷ Ǥ ǣΪ͖͗͗ ȋ͔Ȍ ͖͔ ͕͜͜ ͙͛͜͝ ǣ Ǧ ǣ ̷ Ǥ ǣΪ͖͗͗ ȋ͔Ȍ ͖͘ ͘͝͝ ͔͔͚͝ Ǥ ͕͚͝ ͚ ǡ Ȃ ǣ Ϊ͖͗͗ ȋ͔Ȍ ͖͚͕͕͛ ͔͔͕͛Ȁ ͖͚ ͔͔͗ ͕͗͛͝ ǣ Ϊ͖͗͗ ȋ͔Ȍ͔͗ ͖͙͘ ͙͕͗͘ ǣ ̷ Ǥ ǣ Ǥ Ǥ Ǥ Ǥ ǡ Ǥ
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14
The pitfalls of dollar hegemony
In Money and Empire, Perry Mehrling of Boston University recounts the remarkable moment, in 1965, when Congress summoned international monetary economist and historian Charles P. Kindleberger from MIT to testify on the troubling US balance-of-payments deficit. After World War II, the United States had persistently exported more than it imported. But by 1965, the reverse was true: West German goods were flooding the US domestic market, and Japanese imports were soon to follow. With dollars flowing overseas as payment for these imports, many had begun to ask if it was time to reform the post-war Bretton Woods international monetary system, which had pegged the US dollar directly to gold and tied other currencies more flexibly to the dollar. Kindleberger’s answer was no: US trade could be financed, and the dominant international status of the US dollar secured, he argued, by an alliance of central banks led by the US Federal Reserve. “Many of my colleagues are terrified at the thought of collaboration of central bankers superseding [national] economic sovereignty and so on,” he observed. But central bankers “are technicians,” he said, “and this is the kind of problem they can handle easily.” In hindsight, Kindleberger’s comment is uncanny, considering that central banks have since become economic policy-
making’s “only game in town.” Fed Chair Paul Volcker’s 1979-82 interest-rate shock, which halted the high inflation of the 1970s, was followed a decade later by the ideological and policy triumph of “central bank independence,” with Fed Chair Alan Greenspan becoming something of a financial industry folk legend. During the 2008 global financial crisis, central banks took charge again. Under Ben Bernanke, the Fed extended “swap lines” of dollar credit to other central banks around the world, and these were soon followed by “unconventional” monetary policies like quantitative easing – trillions of dollars in asset purchases over the course of more than a decade. In 2012, the president of the European Central Bank, Mario Draghi, famously backstopped the euro by pledging to do “whatever it takes” to ensure its survival. All these unconventional and extraordinary measures turned out to be merely a dress rehearsal. When COVID-19 struck, central banks unleashed even larger waves of liquidity, and most governments opened the fiscal spigots. But then came the inflationary surge of 2021, and monetary authorities have found themselves tasked once again with restoring price stability, à la Volcker. THE MIT CONNECTION Neither Kindleberger nor anyone else could have seen all this coming. Back in 1965, the only game in town was fiscal policy: the US economy was
roaring in the wake of President Lyndon Johnson’s vaunted income-tax cut (first proposed by his predecessor, John F. Kennedy). This is also the moment that economist Alan S. Blinder chooses as the start of his A Monetary and Fiscal History of the United States, 1961-2021. In the late 1960s, Blinder was a doctoral student in the MIT economics department, where he presumably took Kindleberger’s classes in economic history. Today, Blinder warns that economics has become ignorant of its own past. Since his student days, the discipline has become more mathematical and less historical, and Kindleberger has been read less and less. Following his retirement in 1976, and until his death in 2003, Kindleberger devoted himself to writing history. According to Mehrling, “Charlie” (as he calls him) knew something fundamental about how the global economy works that many mainstream macroeconomists have never absorbed, partly because they have insisted on viewing macroeconomics within a strictly national context. Here, he has in mind those generations of economists who earned their PhDs from MIT in the decades after World War II under the supervision of lions of the discipline like Paul Samuelson, Franco Modigliani (Draghi’s doctoral adviser), or Robert Solow (Blinder’s doctoral adviser, and a member of Bernanke’s dissertation committee).
Back in those days, MIT was the center of American Keynesianism, and its economics PhDs were poised to rise to powerful government positions – as Draghi, Bernanke, and Blinder’s career paths all attest. Yet, as Mehrling shows in his own subtle critique of this school, even if Kindleberger’s economics is not what men like Draghi and Bernanke profess, it is what they practiced as central bankers – thereby creating the world we live in today. Mehrling, by contrast, has never occupied a government post. Instead, he has tirelessly developed his own distinctive “money view,” claiming Kindleberger as a direct antecedent. Though his positions are not obscure (he has a substantial following in financial and online circles), they tend to receive much less consideration within mainstream economics departments, such as at Princeton, where Blinder has long been based. Hence, in his recent book, Blinder has 19 citations to works by the conservative University of Chicago economist Milton Friedman – the foil to his own liberal Keynesianism – but no reference to Mehrling’s scholarship, and only one passing mention (in a footnote) of Kindleberger’s 1978 classic, Story continues on back page
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Manias, Panics, and Crashes: A History of Financial Crises. So, while both books are about the same subject – monetary policy and history – they are like ships passing in the night. The question, then, is what might be learned from reading them together. If Mehrling’s book is a love letter to Kindleberger, Blinder’s book could be called a love letter to Kindleberger’s MIT colleagues – that is, to Blinder’s teachers and the architects of post-war American Keynesianism. These men, Blinder contends, basically got it right. THE OTHER GAME IN TOWN Fiscal policy is a powerful instrument, and it is often an appropriate way for governments to intervene in the business cycle to manage macroeconomic conditions. When national economies are in recessions (or depressions), a “fiscal multiplier” validates countercyclical government spending aimed at increasing aggregate demand, output, and employment. According to Keynesian theory, each dollar of additional fiscal stimulus (spending or tax cuts) will yield more than a dollar in economic output, because the extra dollars in people’s pockets will create demand for even more products and services. But, of course, fiscal-led expansions run the risk of causing inflation. Thus, the job of monetary policy is to manage the tradeoff – depicted in the classic “Phillips curve” – between price stability and employment by positioning the economy at a point on the curve where there is neither too much inflation nor too much unemployment. This is the admittedly simplistic
distillation of both post-war American Keynesianism and Blinder’s view. In his book, Blinder goes much further to offer a judicious assessment of the many historical events and intellectual fads in mainstream economics that have challenged its basic framework between the 1960s and the 2020s. Through it all, he concludes, the original framework held: “Rival doctrines to Keynesianism have come and gone over the decades covered in this volume: monetarism, the new classical economics of ‘rational expectations,’ supply-side economics, and others. But only one survived.” Competitors to Blinder’s Keynesianism either stumbled on their own, like Friedman’s monetarism, or were absorbed into the “New Keynesianism,” which incorporates rational expectations. Today, supply-side economics lives on only as an embarrassing political canard. MIT Keynesianism survives, but with an important twist: the game shifted from fiscal to monetary policy. The three milestones were the inflation of the 1970s, President Ronald Reagan’s budget deficits in the 1980s, and the triumph of “central bank independence” in the 1990s, which set the stage for the “unconventional” monetary policies that have defined the post-2008 era. In macroeconomics, the double-digit inflation of the 1970s was a boon for monetarism, which held that “inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in
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the quantity of money than in output.” Blinder counters this and lead to higher rates of economic famous remark by Friedman by productivity, growth, government revenoting that the inflation of the 1970s resulted largely from nue, and hence lower budget energy and food “supply deficits. But none of this hapshocks.” Still, other critics of pened after Reagan’s 1981 tax Keynesianism, like Robert Lucas cut. Instead, budget deficits of the University of Chicago, ballooned. correctly criticized its standard When Bill Clinton took office models for not sufficiently con- in early 1993, Blinder joined sidering the expectations of eco- the administration as a member of the White House nomic agents. When Volcker was appointed Council of Economic AdvisFed chair in 1979, inflation had ers, and the budget deficit been running high for almost a took center stage. Robert decade. In a show of resolve, he Rubin, a former co-chair of pivoted US monetary policy Goldman Sachs, took charge toward Friedman’s preferred of Clinton’s economic team approach: managing the quanti- and convinced the president ty, or stock, of money. By target- to balance the budget to ing a lower stock, Volcker relin- assuage the bond market. A rally, he quished the Fed’s discretionary bond-market reasoned, would cause control over short-term interest long-term interest rates to rates, which duly skyrocketed. But Volcker soon abandoned fall, inducing greater private that effort, partly because the US investment in the “New Econeconomy had fallen into a steep omy” of high tech. Clinton recession by 1982, and partly balanced the budget, and because it had proven practically investment surged, owing impossible to measure – let alone partly to accommodative adjust – the stock of money. monetary policies from the After all, the quantity of money Greenspan Fed, which wisely is determined as much by the bet on the power of the New elusive demand for it as by its Economy to increase producraw supply. Although price infla- tivity growth. tion was reined in, monetarism It was in this context of caterwas discredited, and liberal ing to financial markets that Keynesianism learned to appre- the Clintonites trumpeted bank indepenciate the importance of “infla- “central dence.” Blinder, defending tion expectations.” his brand of Keynesianism, THE DEFICIT FACTOR Volcker ended his term as Fed insists that the 1990s boom chair under Reagan, who subse- was an exceptional occurquently appointed Greenspan. rence, while many liberals, Reagan’s focus was not on mone- like Rubin, mistakenly took it tary policy but rather on taxes. as an indication that the fiscal Invoking the supply-side gospel, multiplier was “negative,” he promised that tax cuts would implying that it is always best to balance the budget to win increase business investment private investors’ confidence.
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