Speaking in 1992, he said: “We are living in an interminable succession of absurdities imposed by the myopic logic of short-term thinking”.12 Taking a longer-term perspective on inflation, central banks might be compelled to act on the build-up of financial imbalances, even if they pursue only the single objective of price stability. This would also help to reduce asymmetric responses by monetary policy.
Unfortunately, in these crisis episodes, the devices in both the private and public sectors failed. The failure of these two sets of devices entails very important issues, but in the interest of time, I will focus only on the public-sector device. As a central banker, I believe we need to examine critically and thoroughly the failures of central banks and financial regulators and supervisors.