The discussions around the family dinner table in the Buiter-Sibert household are about to become even more fascinating for the adults and even more mind-numbingly tedious for the children. My wife, Anne Sibert, has just been appointed an external member of the provisional Monetary Policy Committee of the Central Bank of Iceland (CBI). The five-member provisional MPC has three executive or internal members: CBI Governor Svein Harald Øygard, Deputy Governor Arnór Sighvatsson and Þórarinn G. Pétursson, the CBI´s Chief Economist, and two external experts, Anne Sibert and Gylfi Zoëga. This Monetary Policy Committee will operate on a provisional basis, with formal appointments for the next five years likely to be made following national elections in Iceland in April.
Iceland’s largest three internationally active banks collapsed during the autumn of 2008; its currency collapsed and tight capital and foreign exchange controls are now in place. That this was the likely outcome of Iceland’s unsustainable credit boom and banking sector over-expansion had been predicted in a paper by Anne Sibert and myself, written in April 2008 (for fruit flies, a shorter version can be found here).
The country now faces an extremely difficult and painful restoration of internal and external balance, with high and rising unemployment, declining activity and falling living standards. Even the best-designed and competently-implemented monetary and exchange rate policies cannot alter that sombre reality. But competence and courage can help avoid unnecessary, avoidable economic distress and dislocation, thus minimizing the economic cost and human suffering that are bound to follow what may well have been (relative to size of the underlying economy and population) the biggest banking boom and bust in history.
There are a couple of Trivial Pursuit aspects to these appointments. First, Birkbeck, University of London, will be as well-represented on Iceland’s MPC as the London School of Economics is on the UK’s MPC. Anne Sibert is Professor of Economics at Birkbeck and Gylfi Zoëga holds a part-time appointment as Professor of Economics at Birkbeck.
Second, Anne and I are likely to be the only couple to have served on the monetary policy committees of countries whose citizenship they did not hold. When I served on the Bank of England’s MCP, I had Dutch and American citizenship, but not (yet) British. Anne holds American and British citizenship, but not (yet) Icelandic. Once Anne’s term is over, we can go around the world doing a Box and Cox on banking implosions, regulatory capture, financial crises, exchange rate collapses and related disasters. At the very least, the policy-making experience should stand us in good stead for the course Banking in an Age of Turbulence Anne and I will be teaching at the LSE’s Executive Summer School early this summer.
And who knows, the adults may be forgiven their dinner-table chit-chats about the monetary transmission mechanism, credit default swaps and collateral requirements once the children get to see and experience the bleak beauty and at times magical atmosphere of the extraordinary country that is Iceland.