Washington Post columnist Neil Irwin stopped by to discuss his book, The Alchemists: Three Central Bankers and a World on Fire. It's a great read on the history of central banks, including how they responded to the financial crisis and the challenges they face in the future.
What did Neil learn over the course of researching and writing his book? In this brief video segment, he describes the relationships between the leaders of the world's major central banks, and how those bonds come into play when decisions need to be made. A full transcript follows the video.
Morgan Housel: We were talking earlier -- you spent two years writing this book, and you visited about a dozen different countries. What's one thing that you learned about central banking or the Fed that totally blew your mind, that you didn't know before?
Neil Irwin: What I think is amazing is how much these different global central banks think of themselves as being part of the same team.
They live in different countries, they come from different backgrounds -- different kinds of academic training, different languages, obviously. But there are these common bonds of understanding that somebody from the Federal Reserve and the Bank of England and the Swiss National Bank and the Bank of Japan, the Bundesbank in Germany -- even when they disagree, they have a sense of common purpose. That gets reinforced in a lot of different settings.
I have a scene in the book -- in Basel, Switzerland, there's the Bank for International Settlements. It's more or less the Central Bank of the central banks. Six times a year, the governors of the leading central banks, they fly there. They have two days of lengthy meetings to debate economics and what's going on in the world.
At night, the governors of the leading central banks -- the 10 or 12 top dogs, as it were -- go to the 18th floor of this building. They have a delicious meal, they drink good wine, they have this -- I call it the world's most intimate dinner party. It's in settings like that that they develop a shared understanding of how the world works, and what they can do to try and guide the economy toward a better place.
Again, as we discussed earlier, if you care about democracy and transparency, it certainly can worry you and be something that seems off-putting, but I think it did, during this crisis, pay some dividends in terms of the central banks being on the same page and avoiding some much worse outcomes.