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Ruth Krivoy

lines on the record: 36
first: 2020-10-29
most recent: 2020-10-29
sittings or episodes: 1
sources: podcast

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“with the pandemic we're seeing how countries including the United States are seeing that the poor and the underserved communities are being hurt more strongly by the pandemic. Imagine what happens if the pandemic also adds up to a financial crisis and then you get a double whammy. And that is why this whole idea of working toward financial stability and preserving the confidence in the currency is so important.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Think apply everywhere and should be forefront in our menu for financial stability. And in times of a pandemic, when you're trying to prevent the collapse of a financial system, you have to think of these things. And let me add one more idea I would like to share with you. Thank you in crisis are very harmful to the poor. And whenever an emerging market or a low income country suffers a banking crisis, it is the poor that are more strongly hurt. And it's the women and girls among the poor who get more strongly hurt. And financial crisis have a regressive effect on income distribution and make societies more unequal. And we are seeing it.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“When they understood that unless the country moved towards compliance with Basel regulations, they would not be able to continue doing business in the United States, they switched gears and they became more accepting and they finally agreed to have the reforms in the banking law and to comply with the Basel rules in exchange for being able to continue to have their business in the major markets of the world. And that is why the international rule setting bodies play an important role in overall stability in the financial system. And those four lessons, I think,”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“International rules compliance with international rules is a way to ensure their ability to do business in the global markets. If the country doesn't comply with international rules, be it in banking securities or insurance, the domestic players are restricted. And in an increasingly interconnected world, that means you're condemned to poverty and you can't do anything. We lived a very interesting experience in Venezuela when we were trying to implement the Basel rules in a country that never had it. The bankers that initially opposed reforms”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“One is legal protection for regulators. Being a regulator and supervisor is a lonely job And being a supervisor in an emerging market is also a dangerous job because supervisors don't have the necessary legal protection that makes them comfortable in making decisions with incomplete information. Which is what you have to do when you face a crisis. So they risk being sued by depositors, by shareholders of banks or companies, and even by the government. And when supervisors feel insecure, they tend not to act and not to make decisions and hope that things will get solved. legal protection for regulators and supervisors is, in my view, a key element of stability in the financial sector. And the fourth is international rules. International rules became important in the 1990s. And for banks in emerging markets,”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“And that is true everywhere. Because when you have politics and politicians fiddling with banking regulation and supervision, you end up having a weak financial system that is not able to withstand the shocks. The second is not to underestimate systemic risks. And that means that you need to be proactive have early actions before things get worse. And that means having well-defined roles for each government agency involved, be it the central bank, the supervisors, the deposit insurance, managing a crisis, having contingency planning as an essential tool, and in the central bank's independence and the independence of bank supervisors. And there are two things that are normally overseen because in some countries, especially in developed countries, they don't seem to be a big problem.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Some aspects of what we learned from our banking crisis, which our overarching lessons for the world, both in emerging markets and developed markets, and they are relevant in times of a pandemic because a pandemic may raise systemic risks when banks are not strong, when governments don't have more sufficient fiscal space. And when there is a crisis that may be brewing, and in fact, there's a lot of work being done now on how to better equip banking supervisors with the tools, the knowledge, and the wisdom to deal with the financial instability risks that come with COVID. The lessons are essentially the same that we face in our banking crisis 20 years ago. First, get politics out of banking regulation and supervision. That is a mantra.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Example where there is little room for this stimulus is again Venezuela. Venezuela needs the fiscal stimulus and the monetary stimulus to prevent the recession from getting worse. But there's no room for it because everybody that gets into the system goes to the foreign exchange market, pushes the price of the dollar up, the currency loses value, and inflation goes up. So there's no room for any kind of mitigating policy to avoid the pains of the pandemic compounding with more economic pain. And instead of moving towards reforms, the government moves towards more authoritarianism, which makes things worse. I would want to share with you”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“As I see the consequences emerging from the effects of the pandemic, it becomes clear that the basic principles to prevent the recessionary impact of pandemics and lockdowns and so forth is again the basic combination of confidence, trust, and consistent policies. Central banks are called to provide support. Companies big and small need loans and unless you relax the monetary policy stance, you can't provide this increase in lending that the economy needs. And the room for this expansionary policy is the fiscal space that the countries need to have in order to produce this stimulus. And fiscal space is a term for the help of the public finances. And how much deficit can you run before derailing the economy? So the central banks have to step in, they have to provide the stimulus. And again, going back to an”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“And confidence in the currency is built by confidence in the government, the government's policies, and the central bank's ability to rein in excesses, not to hinder growth, but to avoid excesses. So there's a simple way of putting things. When you have a strong banking system and you have a strong economy, you tend to have stability. Because your system can withstand shocks. When you have a weak banking system and you have a strong economy, you can solve the banking system's problems with less disruption on the economy. But when you have weak banks, a weak economy and a weak institutional framework, that is a recipe for disaster. And that's why you have to try to fix the three legs of this stool, the health of the banking system, the health of the economy, and a good policy mix.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Central bank independence is an important issue everywhere. And there's a lot of studies and discussions and measurements on how you measure central bank independence and how you make it work. Preserving the value, the institutional value of an independent central bank is important everywhere. The United States have less restrictions because they issue the currency that the world uses. So, you don't have the connection that you may find in the rest of the world and especially in emerging markets where The countries depend on their foreign exchange revenues through import or capital inflows in order to keep the country running. And that is why countries need healthy foreign reserves to build long-term stability. And that is why you are so much more vulnerable to the confidence problem in emerging markets.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“That goes through the central bank's law, what it can do, what it should not do, how it communicates with the people, and in fact central bank communications are a very important tool to build confidence and are especially important also in times of crisis when you need a single voice to re-establish confidence of the people.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“The case of Venezuela, we lost all anchors, we have no anchors, there's no fiscal anchor, there's no monetary anchor, there's no foreign exchange anchor. So what do people do? They look for dollars and any additional bolivar that comes into the money supply goes to the foreign exchange market and ends up triggering the need for exchange controls. The representation of the lack of confidence. You can't keep the money in the country unless you fence it in. And that is a sign per se that things are not going well. When a government, like the Indonesian example undertakes debt monetization and establishes a stimulus to the economy, the basis for the Central Bank of Indonesia is to retain the people's trust. And that is a subtle combination of science and art.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“The other thing is that you need anchors to anchor expectations of the people. And here you have inflation targeting, for example, where people know that if inflation goes beyond a certain limit or falls below a certain limit, the central bank will step in and will keep things on track. Same thing happens with a fiscal deficit target. People know that if the fiscal deficit goes beyond a certain percentage of GDP, the government will cut expenditures or will raise revenues in order to not put undue pressure on the central bank. And there's also a foreign exchange anchor when countries have a clearly stated exchange rate policy.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“To prevent a strong recession. And at some point, the central bank expects or demands like Mr. Powell has done in recent days that the government and fiscal policy take its role in the stimulus and money supply can then take a backstage, that's fine as long as people trust what the central bank is doing and is willing to accept this increase in money supply. Independence for a central bank doesn't mean that the central bank is a state within a state and won't listen to anybody. Monetary policy is part of the economic policy mix and by definition it has to be consistent with the country's growth and inflation goals.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Part of the answer to your question is on the word independence. What do we really mean by central bank independence? What we mean is the central bank's ability to say no to a government that wants to derail the basics of economic stability. So there may be times at which the central bank agrees to fund in an unorthodox way the needs of the economy for a while, but it has to have a clear stance on what it means and how you will exit from this policy and why the economy needs it. So if the economy needs the monetary stimulus,”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“And even if the law says that the central bank cannot lend to the government, it says it can lend to government-owned entities. So what the central bank is doing is lending to Pede Vesa, the oil company, and Pedavesa transfers the money to the government, which simply is one step along the way. So you do have monetary expansion and you have fiscal deficit that creates the so-called fiscal dominance of monetary policy and that's the worse of both evils.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Money printing has been one of the ingredients of Venezuela's hyperinflation, but it's not the total explanation. The fiscal deficit, the lack of fiscal rules and transparency has been very, very damaging. And when you think of a country that loses its anchors because it doesn't have sound fiscal policy, it doesn't know where the government is going. The government runs a deficit and the central bank funds the deficit by printing money.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“You get the economy back on track and you clean up the banking system and you move out of the crisis. So in a way, this is something that you can connect to the current challenges of monetary policy. When monetary policy experimentation and the move to unconventional monetary policy or to heterodox monetary policy is nowadays more acceptable than it was 10 or 15 years ago. And new instruments are being developed. The key for success is to keep the trust in the central bank and the currency. Otherwise, these policies get derailed.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Or in the country, or in the government, this increase in money supply translates into capital flight. And when there's capital flight, the country loses its international reserves. And that means it may not be able to import what it needs to feed its people. So in Venezuela, that was a big challenge, and that is why one of the things that was important to me at the time was that the government should tackle the insolvency of the banking system while the central bank was tackling the illiquidity. So you may have illiquid banks, you lend to them, but if you are at the same time trying to make them solvent and keep the confidence of the people in the banking system.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Did not have supervisory responsibilities and could only lend to solvent banks. And we had an insolvent deposit insurance institution. So all I could do from the central bank was lend money to banks Did it through the deposit insurance and in fact we kept the payment system running. Of course, as you mentioned initially when you have this unorthodox monetary policy in a way, there's a parallelism between monetary policy in a banking crisis and monetary policy in a pandemic in the sense that you have to help the economy keep moving. That means you're pumping money into the system. If there's confidence in the currency and confidence in the long-term stability of the country, there is no major damage because the demand for money that is there means that people keep the local currency and use it legitimately for transactions. When you don't have confidence in the currency,”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“In a banking crisis, the central bank's initial fundamental concern is the stability of the payment system. which means you cannot allow payments not to be settled efficiently and securely because that really puts sands in the gears of the economy and stops the economy. So when we had the banking crisis, my first concern was to keep the payment system running. That is why you see central banks being concerned about the money market and trying to sustain the flow of transactions all over. My concern at the central bank was the payment system because when I was faced with the banking crisis, 40% of our banks were about to be closed or taken over. And I would like to clarify that in my case, the central bank”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“The wrong moment that influenced our political support for reforms and after the coups everything went down the hill. So essentially when you have all these combinations, it's a disaster waiting to happen.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Prudent fiscal and monetary policies inherited from the post-war years to a short-term shock-prone situation. And the military coup in 1992 shattered the country's confidence in its democracy. We had a first coup in February and we had a second coup attempt in November. And then the president was impeached and in 1993 we had four governments until we had elections in December. I, as a president of the central bank, had to deal with four presidents and four ministers of finance until we had elections in December and the winner was an anti-reform candidate. So it was clear to Everybody, that the reforms will get derailed. And furthermore, he didn't want to get involved in the banking crisis that was around the corner. So that was bad luck because we had a combination of oil price spikes.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“And then bad luck. Why bad luck? Because the lead up to the crisis really began in 1989 when the reforms program were initiated and it meant increasing prices, increasing the price of gasoline, deregulating interest rates, interest rates went up. People felt scared and that was in 1990. And in 1990 Iraq invaded Kuwait and oil prices shot up again. And the reform program lost political support. So even Acion de Mocaratica, which was the president's party, distanced itself from the program and the reforms got stuck and it was really a very bad spot because after going up in 1991 oil prices fell in 92-93 And when oil prices fell an oil-based economy suffers loss of confidence, capital flight and so forth and in 1992 is when the military coups that were brewing came into the open. So the country goes from a relatively long-term stability with”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“And we had some very important bank failures in the 70s and 80s. Those were all large banks and went under because of bad lending. Connected loans, loans to shareholders, to friends and family and so forth. And they were bailed out by the government. Ever had a loss? The depositors were bailed out and the bankers were bailed out. So we ended up having a moral hazard problem where everybody was trusting that the government would come in and bail everybody out and it doesn't really matter if a bank goes under because in the end you don't lose access to your deposits and you can continue your day-to-day life.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“The Venezuelan banking crisis came as a result of bad policies, bad banking, and bad luck. Bad policies, both macroeconomic policies, which were not promoting stability, as I said, but also banking regulation and supervision. Banking regulation and supervision was a weak spot. Was largely dominated by politics. There was a cozy relationship between bankers and politicians over the years. So there was little concern for having banks being well capitalized, lending prudently, being concerned about the long-term health of the banking system and the securities industry. And this led to bad banking because many bankers saw this as the path to riches, to wealth. And that made the banks weak.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“So that's a short explanation of why Venezuela, which used to produce three million barrels of oil a day, is now producing 200,000 and has lost about 70% of GDP in the last five years. Inflation got up to 2 million per year in 2018. It's now in the thousands per year, which may sound as much lower than 2 million, but it's still extremely painful if you think of inflation being 2% or 3% or 8% at the most.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Destroying institutions, destroying the rule of law, undermining the confidence in the currency, and expanding the fiscal deficit to the point that led to hyperinflation. So while the world moved towards stability, Venezuela moved towards instability and authoritarianism. There used to be a saying that God is Venezuelan because for decades when Venezuela was in trouble, oil prices came up. There was something in Saudi Arabia or Iraq invaded Kuwait, oil prices rose, and the need for sound economic policies was wiped out. But as you weaken the economy and also allow for the oil industry to be destroyed, then you kill the hen of the golden eggs and the emperor is naked.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“The trust in the economy, the confidence in the currency are aggrandizing the government and shrinking the private sector. Then companies were expropriated, taken over by the government and essentially ruined. Along the way, the government became more and more authoritarian. Oil prices remained volatile, so we had ups and downs and ups and downs. And when Chavez died and Mr. Maduro took over the presidency, he was hit by a sharp decline in oil prices and instead of moving in the right direction of an economic policy that promotes private investment, that builds confidence and re-establishes growth. The path was towards lawlessness.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Charge of generating the jobs and producing the goods that fill the shelves in the market. The oil economy was generating the revenues that made the government rich and made politicians powerful. In 1999, when Chavez got to power, he started undermining the rule of law”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“Venezuela never tackled its vulnerability to oil and has therefore always been a very unstable, volatile economy. It didn't create the stabilizing mechanisms such as a sovereign wealth fund where you save for the future generations diversification was not an issue. It was lip service. You talk about diversification, but you never really tackle it because oil is producing whatever you need to survive. And politicians had a short-term horizon. So they just wandered from one five-year election to the next. The economy continued being highly dependent on oil. Yet there was a private sector. The private sector, the non-oil private sector, was in China.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“We had the first military coup by Hugo Chauvis, who then became the president of the country. In April 92, when I got to the central bank, we were in the midst of political turbulence, which lasted for over two years and then got worse and worse. And so the banking crisis was brewing and exploded. So I lived through the banking crisis from the central bank.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“I got to the central bank that was in itself an ambitious goal because of fiscal dominance. If you have a country that is running a heavy fiscal deficit, there's little room for monetary policy. And in a country that is oil-based where the money is created by the extraction of oil and spent by the government and largely allocated by politicians on a very short-termist perspective, monetary stability is challenging. In 1989, the country undertook a massive structural reform aimed at deregulating rebuilding institutions, getting rid of controls, and establishing stability. But we also had a strong political backlash and in February”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“I had a career there. I then went to work in the private sector. And in 1992, in the midst of political turbulence, I was invited to become the governor of the central bank. I got to the central bank hoping I could help establish the central bank's independence and stabilize inflation at the time because I strongly believe that central bank independence adds value to a country, to its prosperity, to its stability.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source
“My professional career was shaped by the central bank of Venezuela. I started working there when I was a student at the university. My mentor was a German economist who came to Venezuela in 1939 fleeing from Germany. His wife was Jewish and he sought refuge in Venezuela at a time when Latin America was establishing central banks all over. Under the influence of the German economist called Hermann Max, who went to Chile and other countries and helped establish a central bank, and our central bank was created in 1940, Mr. Peltzer, my mentor, was my professor at the university, invited me to work at the central bank, and the central bank became sort of My guiding start.”
2020-10-29 · Odd Lots · Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank · IDENTIFIED FROM THE TRANSCRIPT · source