[Viewpoiont] An open letter to the new BOK bossDear Governor Kim Choong-soo,
You must be frantically busy settling in after your last mission in Paris and as you prepare to report for duty at the Bank of Korea. Although you have not yet formally taken office, allow me to address you as governor.
It may be laughable for me to offer a word of advice to a learned and revered economist like yourself, but if I may be so bold, I would like to take the opportunity to deliver news of the anxiety in the market and business world before you begin your term.
First of all, you must pay heed to what you say.
Fresh off the plane from your last posting at the Organization for Economic Cooperation and Development, you made a casual comment on the key rate policy when approached by reporters on Monday. Asked about the timing of a shift from the benchmark interest rate’s current historic low, you said you would raise it “when it is time.”
It was a theoretical comment, yet your first upon appointment, and it moved the markets. The BOK governor’s words serve as the bank’s key weapons. One must be discreet and save the bullets as much as possible.
We had a governor in the past who loved to talk to the media and made reporters’ jobs easy by providing a steady flow of writing material. Even in a casual lunch, he was liberal with his words, and reporters would discreetly walk out of the room to call their newsrooms on their mobile phones.
When misunderstood and misrepresented, a comment from the central bank can sway the markets at home and abroad. Bank officials used to sweat over fixing the consequences.
It is best to keep silent to avoid such messes. Reading out textbook theory could also be another tactic. Even your predecessor, Lee Seong-tae, despite his overall cool, caused zigzags on the foreign exchange markets with an ambivalent comment on current movement at a seminar. A small verbal blunder could taint your good name and reputation for wisdom and insight.
Second, your academic background may serve as a drawback. Of seven members on the central bank’s monetary policy committee, four, including you, are from academia.
Never have academics filled over half of the monetary policy committee’s seats since the decision-making board’s permanent establishment in the central bank in 1998.
There is nothing wrong with economists making rate decisions, but too many from the same league is no good. People with similar approaches and backgrounds can fall prey to collective logical fallacies.
Many have come to question the credibility of economists after the global financial crisis. Some say that among their ranks there are more salesmen trying to peddle their theories than those parsing the economic realities. There can be no turning back on the appointments.
Although it’s not your fault, the disproportion on the monetary board may come to be a strain on the job.
To silence such anxiety, the governor could display indisputable on-field leadership. Instead of theory, you can exact animal instinct from your academic peers on the board. This is the only way to build connections between the central bank and the market.
Third, you must exercise discretion in your interactions with the government. You should avoid unnecessary gatherings with government officials. Otherwise, you could be regarded by market players as “one of them.” In short, your authority could hit the floor.
Of course, you have to attend cabinet meetings chaired by the president in times of emergency. But in normal times, you must appear high-handed and aloof. By no means should you resort to showmanship such as taking your entourage to a marketplace to ask about consumer market prices just because the president has commanded you to do so.
You know the president personally, so you could ask him to do you a favor by sparing you from such acts.
We are less worried about your capability to truly lead the central bank. You have served various institutions so you know how to command.
But the central bank is an extraordinary organization. It brims with intellect produced by the highest education, yet like any organization it is a hierarchy of various sects and rules.
The mainstream sit on its high horse while the minority lives with a feeling of resentment. It is fractionalized and bundled into groups on policy making, research and international affairs. You have to give serious thought to whether such an arrangement is appropriate.
Lastly, you must contemplate the exit policy. You will have to draw your own conclusions through your own research and sense of responsibility.
But whatever decision you reach, the governor must bite the bullet. If you neglect the timing of making an exit from current economic stimulus plans, economic difficulties may extend into next year or the year after.
The year 2012 has a busy political agenda with the general elections in April and presidential election in December. It is difficult to employ strong prescription on the economy during a political season. Moreover, your term overlaps with the launch of a new administration. You must get off on the right foot to stay on course throughout your term.
Upon appointment, you had said you would try to narrow the gap between your thoughts and market expectations. But there is no hurry. Slowly but surely will do.
Take care of your health as a heavy workload awaits you. I hope you won’t need to wear one of those energy-enhancing bracelets that were spotted on your wrist two years ago during your term as the presidential secretary for economy.
Yours sincerely, Nahm Yoon-ho
*The writer is the business editor at the JoongAng Ilbo.
Translation by the JoongAng Daily staff.
By Nahm Yoon-ho