Importantly, SOFR proved to be resilient even during the market stress at the height of the pandemic last spring and will provide a rock-solid foundation for the post-LIBOR world.3 The final comment I’ll add on this topic is that while much progress has been made in the transition away from LIBOR, time is running out, and your transition from LIBOR should happen as soon as practically possible. This is not something to leave until the last minute. Economic Outlook OK, enough on LIBOR, at least for today. I’ll now turn to the theme of the economic outlook and where I see us on the path to a full recovery. Let me begin by saying that we’ve come a long way since the darkest days of the pandemic, and I expect even brighter days ahead—and I don’t just mean that because it is finally summertime. 1/3  BIS central bankers' speeches  We find ourselves at an extraordinary juncture in the recovery. Thanks to widespread vaccinations and robust support from fiscal policy, the economy is reopening more quickly and more strongly than expected. When it comes to the economy, it’s getting better all the time. The rapid rebound is excellent news—it means more jobs and a brighter future. But, it also means that we are seeing strains as businesses try to keep up with the rapid acceleration in demand for their products. After sharp declines in employment, production, and prices last year, the opposite is now occurring.
BIS central bankers’ speeches  1  Our evidence suggests short-termism is both statistically and economically significant in capital markets. It appears also to be rising. In the UK and US, cash-flows 5 years ahead are discounted at rates more appropriate 8 or more years hence; 10 year ahead cash-flows are valued as if 16 or more years ahead; and cash-flows more than 30 years ahead are scarcely valued at all. The long is short. Investment choice, like other life choices, is being re-tuned to a shorter wave-length. Public policy intervention might be needed to correct this capital market myopia. 2. The short-termism debate  The short-termism debate is not new. Excess discounting of future outcomes was a familiar theme among Classical economists. For Jevons, “the untutored savage, like the child, is wholly occupied with the pleasures and troubles of the moment; the morrow is dimly felt; the limit of his horizon is but a few days off”.5 For Marshall, people acted like “children who pick the plums out of their pudding to eat them at once”.6 For Pigou, it demonstrated a “defective telescopic faculty” such that “we see future pleasures on a diminished scale”.7 And nowhere were these problems more acute than in financial markets. Keynes, himself part-time speculator, was well-aware of the perils of short-termism in investment choice, both moral and financial: “It is from time to time the duty of a serious investor to accept the depreciation of his holdings with equanimity without reproaching himself.