A few years ago, the television show 60 Minutes covered an undercover operation that captured on video fifteen out of sixteen Manhattan lawyers offering advice on how an African official could secretly move funds into the country. 14 The investigator posed as an adviser to an African minister of mining who managed to accumulate millions of dollars for personal use— expensive real estate, a jet, and a yacht. In the end, no firms actually took on the client. These were just preliminary meetings. And they were a set-up. No actual crimes were committed. Still, only one lawyer out of sixteen told the undercover investigator to get lost. What an eyeopener. As a lawyer and a central banker—and as a New Yorker— I found this report deeply troubling. Where Do We Go From Here? So that’s where I see us today. Where do we go from here? Let me share some ideas, which are not mutually exclusive. Build Good Habits For starters, let’s be honest about “looking the other way.” Many financial institutions have, at times, turned a blind eye to evidence of money laundering, sanctions evasion, corruption, kleptocracy, and plain theft. Over time, some institutions become weak links in our system when they take on riskier clients, perhaps in order to chase profit, without developing the ability to manage those relationships in a responsible way. Often these relationships start small: one lowvalue, ethically suspect transaction.
Monetary policy must therefore be elaborated taking into consideration a view of inflation over a one or two year period. Therefore, the Riksbank makes inflation forecasts for this time period at regular intervals. Monetary policy is therefore controlled by an intermediate goal, namely the inflation forecasts. It would be unreasonable to try to immediately bring back inflation to two per cent if inflation was higher. It would require a dramatic reduction of capacity utilisation and a deterioration of the situation on the labour market. 5  BIS Review 59/1999  The Riksbank therefore weighs in the situation on the labour market and the real activity in its assessments. In the short run, there is a trade-off between stability of the inflation rate and stability in the real economy. An unremitting stabilisation of the rate of inflation very narrowly around two per cent would at times lead to real economic instability. Precisely for this reason, the target horizon is set at between one and two years, during which time the Riksbank endeavours to gradually meet the inflation target, by steering inflation towards two per cent, guided by the inflation forecasts, which have been made for this period. In the long run, however, there is no trade-off between inflation and employment. A low, stable inflation provides the prerequisites for fast growth and high employment, according to experiences from earlier periods, such as the first two decades after the war. We are now seeing a development that seems to confirm this hypothesis.