Kahneman, D (2012) ‘Thinking, Fast and Slow’ Penguin See Carney (2015) ‘Three Truths for Finance’, Remarks given at the Harvard Club UK Southwark Cathedral dinner, London. http://www.bankofengland.co.uk/publications/Pages/speeches/2015/843.aspx 5  7  All speeches are available online at www.bankofengland.co.uk/speeches  7  It has been bolstered by two important institutional innovations since the crisis. The first is the handing of responsibility for the supervision of individual banks and building societies to the Bank of England. That has meant a change in approach to supervision, to one that’s prepared to make judgements about risks and act pre-emptively. The second is the creation of a new authority in the Bank – the Financial Policy Committee – with new powers, tasked by Parliament with monitoring risks in the financial system that could cause problems for the wider economy and with doing something about them. This has been christened ‘macroprudential policy’. Macro because it’s focussed on the wider economy; prudential because it’s about protecting that wider economy from excesses in the financial system. It is the institutional memory of the financial crisis; designed to hardwire into the system the vigilance to growing risks and the imagination of their consequences that were so dangerously absent before the crisis. In short, someone has the job of worrying intelligently. Is the same movie already playing again? Now let’s turn to the movies. The old classic, Debt Strikes Back, in which the spiral of complacency upends the economic galaxy, has been seen many times before.
Is the strategy of benign neglect the right one in times Asia is holding down its currencies? Trichet: On Asian emerging economies’ currencies we have a very clear message which the Central Banks of the G7 together with the executive branches have confirmed this spring. We all say the Asian emerging economies as well as the global economy would be better off if these currencies would be more flexible. DIE ZEIT: Markets are worried about the crisis of the sub-prime credit market in America. Are you worried as well? Trichet: In a number of segments in the global finance system we have observed in the past a certain under-appreciation of risks. That was visible in the low level of volatility, the low level of spreads, the low level of risk premiums. During the last weeks we saw a correction. At the moment I would say it has been a healthy correction. But I remain cautious: it is no time for complacency. DIE ZEIT: At the moment there's a lively debate in- and outside the ECB whether the second pillar, the monetary analysis, matters anymore. The first revision of the ECB strategy came 2003, five years after its implementation in 1998. Will the next revision come 2008, five years after the last one? Trichet: No. The two pillar strategy has been very effective.