Perhaps a society has to undergo a learning process on a broad front so that earlier mistakes yield new insights. Economic policy decision-makers like myself are, of course, no exception here. But as financial turbulence does not inevitably lead to a serious crisis in the real economy, we need to ask why it is that in certain cases output and employment do suffer severe setbacks and the attendant deflation. Much will have been gained if we can learn to tell whether or not an extensive share price fall, for example, besides being troublesome enough for many people, is likely to result in a situation with general deflation, rapidly falling output and rising unemployment. An answer to that question was suggested in the summer of 1999 by the Federal Reserve chairman, Alan Greenspan: While bubbles that burst are scarcely benign, the consequences need not be catastrophic for the economy. The bursting of the Japanese bubble a decade ago did not lead immediately to sharp contractions in output or a significant rise in unemployment. Arguably, it was the subsequent failure to address the damage to the financial system in a timely manner that caused Japan’s current economic problems. Likewise, while the stock market crash of 1929 was destabilising, most analysts attribute the Great Depression to the ensuing failures of Policy. Most things indicate that when banks run into trouble on account of financial turbulence, the supply of credit may dry up and the payment system cease to function.
Thomas Jordan: The significance of academic research and teaching for the Swiss model for success Summary of a speech by Mr Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, at the Dies academicus, University of Bern, Bern, 1 December 2018. * * * The complete speech can be found in German on the Swiss National Bank's website (www.snb.ch). The success of Switzerland in recent decades has largely been driven by the strong performance of its education system, which is crucial for economic prosperity, social cohesion and equality of opportunity overall. The Swiss National Bank (SNB), too, sets great store by a good education system, including universities that can hold their own against international competition. Many of the staff recruited by the SNB are destined for roles in which a university degree is a prerequisite. In addition, the SNB maintains close ties with the academic world, so that the latest related research findings can be incorporated into monetary policy decision-making. The competition of ideas stimulates and creates incentives for higher-quality monetary policy. This pursuit of excellence in academic education should not just be aimed at research, however; it should also target teaching. Experience has shown that foundation courses have a lasting effect on students' attitudes to certain topics. Teaching lays the basis for subsequent academic specialisation and career choice. As role models, professors carry a heavy responsibility.