On procyclicality — “It’s the hardest thing as a regulator in my opinion…when things are really going well, the economy is going well, the market is not disturbed, but you see developments in an institution or in markets that is potentially destabilizing, doing something about it is extremely difficult. Because the answer of the people in the markets is, ‘what are you talking about? Things are going really well. We know more about banking and finance than you do, get out of my hair, if you don’t get out of my hair I’m going to write my congressman.’”
If the responsibility of the Central Bank is to stimulate the economy during entrenched economic situations, it’s other responsibility is to slow the economy during long booms. When the stock market is doing real well and everybody is popping the Dom, the Central Banker is suppose to be the guy that comes out and tell everybody to cork it back up and it’s late, time to go home.
In a democracy, it’s like high school: all the popular kids would just think you’re a loser and make you a social pariah.