And a long period with underutilised resources may cause durable damage to the supply capacity of the economy through a variety of hysteretic mechanisms, such as skill atrophy on the part of the unemployed and foregone opportunities for learning by doing. In any case, to me this sets up a false dichotomy. There are both Keynesian and Hayekian dimensions to the post-crisis environment. A “two-handed” approach is called for, in which supportive aggregate demand policies on the one hand are complemented by policies that facilitate the necessary restructuring, particularly of the banking sector, on the other. So rigorous evaluation of the assets on banks’ balance sheets, followed by recapitalisation, should be the order of the day (see Tucker, 2013, for a similar perspective). The United States has been a model in this regard. In Europe, we have lagged a little, but are now catching up. In the United Kingdom, the Prudential Regulation Authority, at the instigation of the Bank’s Financial Policy Committee, has required several of our major banks to strengthen their capital buffers against potential losses. And, in the euro area, the European Central Bank is about to undertake an in-depth health check of banks’ balance sheets. Of course, there are some risks attached to pursuing such accommodative monetary policies. Quantitative easing can threaten future financial stability if it leads investors into excessively leveraged positions in the search for higher yields.
In formal terms, the General Council may only severe a member of the Executive Board from his or her appointment if “…he no longer meets the requirements which are made on him to be able to carry out his duties or if he has been guilty of serious misconduct.” 2 The legislation strengthens the Riksbank’s independence and credibility for monetary policy. For example, it should not be possible for those in power to be able to groundlessly dismiss a member of the Executive Board for the purpose of appointing their “own” decision-makers. As the question of accountability is stated in law, it is not actually the Riksbank’s task to take a stand on how this should be achieved. However, what we can do – and also strive for – is to create the best possible conditions for accountability. We do this by being as open and clear as we can. This makes it easier for outsiders to critically examine how monetary policy is conducted and how well we live up to our principles. 1  Sveriges Riksbank Act (1983:1385), Chapter 8, Article 1. 2  The Instrument of Government, Chapter 9, Article 13. 4  BIS Review 62/2007  There are also certain formal requirements for providing information to our principal. Our tasks include, for instance, presenting a written report on monetary policy to the Riksdag Committee on Finance at least twice a year. In connection with this, the Committee also holds a hearing with the Riksbank Governor.