Were that to happen, the breakdown in cooperation between sovereign states could all too easily give encouragement to those around the world who would like to use protectionist measures to shield their countries from the winds of global trade. If the international monetary and financial system relies, as it has since at least the collapse of Bretton Woods forty odd years ago, on the private banking system to supply the cross-border liquidity needed to underpin expansion of world trade, then we must ensure that the international banking system is safe and sound. That cannot rest solely on prophylactic prudential supervision. It must include effective arrangements for cross-border resolution. That has been an architectural faultline in the IMFS for decades.3 Third, across the world the operational independence of prudential supervisors4 from shortterm politics depends on credible and effective resolution regimes. Unless we can handle the failure of banks and other financial firms in an orderly way, it is hard for governments to tie themselves to the mast of eschewing the temptations of ‘bailout’ using taxpayer’s money. That would give them an interest in the day-to-day operation of prudential supervision which, as experience in some countries shows, all too easily morphs into attempts to promote and protect ‘national’ champions; and to operate supervisory policy for short-term gain rather than in the interests of medium-term stability. In any countries where that persists, we should expect higher government bond yields than otherwise, reflecting the state’s contingent liability for the banking sector.
Before 1960, the Beatles was still a struggling high school band. However, through some strange connections, Beatles got invited to play at some night clubs in Hamburg in 1960–1962. Within a year and a half’s time, the Beatles played in these Hamburg clubs for 270 nights. These Hamburg clubs were not the kind of music halls in which proper concerts are conducted. They were more like drinking clubs where lots of people came in and went out constantly as live entertainment on stage was performed. The Beatles had to perform 4, 6 or even 8 hours each night. Because of so many live performances of very long hours, the Beatles had greatly improved their stamina and team work. Moreover, they had to try out different varieties of music and songs in order to satisfy the customers. So, by the time the Beatles made their celebrated US tour in February 1964, they had already done an amazing 1,200 live performances. This is an astonishing and unusual number. In those days and even now, very few rock and roll bands are able to do that many live performances in their entire careers. Again the question that I have is: Would the Beatles be just as good and as talented without Hamburg? There was an enlightening study conducted by Ericsson in the 1990s.