Jon Cunliffe: Macroprudential policy – from Tiberius to Crockett and beyond Speech by Sir Jon Cunliffe, Deputy Governor for Financial Stability of the Bank of England, at TheCityUK, London, 28 July 2015. *  *  *  Historians still argue about the exact causes of the financial crash of AD 33 that rocked the Roman Empire. The commentators of the day did not unfortunately have, let alone record, the vast amounts of data that we have become used to today. But in a world still painfully extricating itself from the crash of 2008, the key features look eerily familiar, as a number of modern day commentators have observed. An extension of credit across the empire, a sudden deleveraging, debtors failing and bank closures in a number of Roman provinces, the total drying up of liquidity in the financial system and widespread panic. The remedies look familiar too. The Emperor Tiberius was not able to rely on a modern independent central bank with the ability to print money to staunch the crisis. But notwithstanding that immense shortcoming, Tiberius took effective action, injecting into the system a huge amount of liquidity stored in coin in his treasury, setting interest rates at zero for a three year period – an early example of forward guidance – and doubling loan to value requirements for property loans. He also executed those he thought most responsible: though some might advocate that today, I think in that respect at least we have moved on from AD 33.
However, it is likely that the distribution of income will be affected in terms of growing gaps between those with and without higher education. Wage shares have fallen in many countries, without any real explanation, while profits in the OECD area have been at an all-time high. Technological developments have led to both increased profits and increased demand for highly-educated labour in relation to less qualified. The possibility that increased competition from low-wage countries could be part of the explanation cannot be entirely ruled out. However, there is no support in the statistics to say that economies that are more dependent on foreign trade have higher unemployment than others. It is rather the other way round; that increased trade often goes hand in hand with lower unemployment and higher welfare. The rapid market growth in such large countries as China and India means that demand for goods and services produced in the old industrial nations increases. The investment in research and development in China and the transition to increasingly advanced production does not mean that "all jobs” will move there. Experiences from Europe’s trade exchange with Japan and Korea in recent decades indicates a different development. There one can see that an increasing percentage of trade has developed to become what is known as inter-sector trading, that is, one exchanges goods with one another that are produced using roughly the same technology.