42  Philip Coggan (2012): Paper Promises: Debt, Money and the New World Order, Penguin, London. 43  Many attempt to measure whether institutions are fulfilling their societal role, which is a difficult exercise. As a nation, Norway scores high. Individual institutions are also measured. If any of us has preconceived notions, at least mine bear out. The institutions I thought would be at the bottom of such lists are at the bottom, and vice versa – those I thought would be at the top are at the top. But this is not a static situation. Movement is possible – in both directions. 44  The expertise must of the highest standard. A central bank’s competence does not always translate well into performance. There are two reasons, in particular, for this state of affairs: First, the Bank is a monopoly and there is no domestic benchmark. Second, it has a potentially very generous budget, since it prints its own money. Even though Norges Bank ranks high in terms of reputation and confidence, it may quickly slip into a state of complacency and then mediocrity. It is only the Bank itself that can establish the mechanisms that will prevent such a development. BIS central bankers’ speeches  11  3. Leaders must be aware that the institution will be held accountable – it must practice transparency as a principle. 4. Leaders must utilise institutional memory and staff experience – they must learn from history and manage their wealth – their cultural heritage.
However, there is a connection between “what is a central bank” and “who is the central banker”. 8  BIS central bankers’ speeches  After the First World War, inflation and large-scale imports of goods caused a loss of confidence in the krone, which dropped considerably in value. When Nicolai Rygg became Governor of Norges Bank in 1920, he started work on putting the monetary system in order. In his view, the central bank was obliged to bring the gold value of the krone back to its prewar level – referred to as par policy.33 However, this ambitious aim entailed years of strong deflation and blight before the gold value was achieved in 1928. For 90 years, historians have discussed par policy. My contribution will have to be a presenttime analysis with the inherent scope and limitations.34 Was this a good policy? There is no doubt that the motives were good. Rygg considered that Norges Bank had a moral obligation to keep its word, as it had done a century earlier, but was also of the view that this was rational in the longer term. There is also no doubt that Rygg adhered to the rules of the game. Par policy had the support of the political authorities. Nevertheless, an action must also be assessed by the outcome. The central bank was blinded by the old gold content as a guideline for monetary policy and implemented a policy that inflicted large-scale real economic costs on the country.