It’s never really good

Facts: Stefan Ingves in brief

Upplands Väsby resident Stefan Ingves – 68-year-old great-grandfather with roots in Ostrobothnia, Finland – has in various positions handled the Swedish banking crisis in the 1990s, the great recession and the euro crisis after the Lehman Brothers crash in 2008 and since 2020 a pandemic that pushed forward historically massive stimulus packages.

If you look at Ingve’s CV, you see that when the crisis of the 1990s was built up – before he became head of what came to be called Bankakuten – he was a member of both the Debt Office’s and the Stockholm Stock Exchange’s board while he was head of the Ministry of Finance’s department for financial markets.

He has also held a number of different international assignments, including within the International Monetary Fund (IMF) and the Bank of International Settlements (BIS).

Before his long career as a civil servant, Ingves became a doctor of economics in 1984 at the Stockholm School of Economics.

Source: The Riksbank, TT

– But you always tend to think that it is extra uncertain right now, says Stefan Ingves.

– A small open economy like the Swedish, which is so dependent on the outside world, will probably have to live with the fact that this is roughly what the world looks like, he adds.

May be the last year

After the turn of the year, Ingves begins his seventeenth year as head of the Riksbank. Then there is one year left on the mandate.

TT: Can this be your last New Year as Governor of the Riksbank?

– Yes, we’ll see, says Ingves.

TT: So if the council were to ask, would you consider another term?

– I can not answer that at present. We’ll see that day.

During the pandemic, the central banks – including the Riksbank – together with many governments have broken new records in terms of stimuli. Since inflation picked up, many central banks have completely changed and begun to tighten.

“Governments have come and gone, but there has not been the energy or ability to deal with the housing market problems,” says Stefan Ingves, who is happy to see the newly appointed Minister of Finance Mikael Damberg (S) address the issue.

A side effect of the large stimuli is increased gaps. They increase when real wages are pushed down by inflation at the same time as housing and share prices continue to rise.

– But if we did not do this, the probability of the pandemic becoming a financial crisis would have been much greater.

– And unemployment is lower now than it otherwise would have been. The vast majority benefit from it. Had we had a financial crisis, we know that it is those who have the worst who are hit the hardest.

Fiscal policy has been crucial in crisis management in the pandemic, according to Ingves. Unlike the broader stimuli from the Riksbank, the government can be more precise in its support and reach those who are worst affected.

Ingves expects even more from the Ministry of Finance in the future, in order to speed up the structural transformation.

“Like turning an oil tanker”

From the newly appointed Minister of Finance, Mikael Damberg (S), Ingves would also like to see measures to deal with the imbalances in the housing market.

– Governments have come and gone, but there has not been the energy or ability to deal with housing market problems.

TT: Reduce the interest deduction?

– It is an example.

– It is most likely that you need to take a long list of different measures, also for quite a long time. This is like turning an oil tanker.

If the Riksbank’s latest forecast were to hold, the policy rate will not be raised until three years from now. Then Sweden has had zero or minus interest for ten years. The so-called real interest rate – ie the interest rate minus inflation – has also been negative during this period.

He does not want to speculate on any bubble risk as a result of the loan and stock market party during the low interest rate years. But higher interest rates, sooner or later, should be expected according to the Governor of the Riksbank.

– But when it happens and how fast it goes, it is incredibly difficult to know, he says.

At the same time, he reminds that there can be a lot of movement in the world of interest rates.

– I have been on the whole trip, from 500 percent down to minus 0.5 percent. It’s a big team.

“Money is something we have in our heads,” says Stefan Ingves, who in 2022 hopes to be able to take new steps towards the introduction of a digital Swedish krona.

“Fun” with digital crown

In 2022 – regardless of whether it is the last year as Governor of the Riksbank or not – Ingves would like to push the process towards the introduction of a digital Swedish krona.

– I think it would be fun and good.

– These are structures that will exist for a long, long time.

The digital crown can not only be seen as something that only exists in computers or mobile phones.

– Money is something we have in our heads. It’s a convention. Then you need to combine the IT side with how we view the law and what we want with this electronic money in the future, he says.

TT: When was the last time you used cash?

– Three to four weeks ago or something, when I cut my hair. I do not have much to cut.

Ingves belongs to the crowd of Swedes who still always have some cash in their wallets.

– But as it is now, it is only when I cut myself that I use them.

The physical banknotes and coins come despite the digitalization were important, according to Ingves – as a last resort if everything else crashes. This means that the Riksbank must not only have large amounts of cash on standby, but also a distribution system in place.

– Cash is circulating. If they do not have that ability then you will have a problem sooner or later.

The challenge: Study banknotes

It is also important that people learn to recognize the Swedish banknotes and coins – something that is not only difficult for new generations growing up cashless but also for the elderly, who may not have gotten to know the new banknotes and coins that have been launched.

– If you have never seen a banknote, it does not matter what security details are in them, says Ingves.

– It is a point in people getting to know what the banknotes look like. Because sometimes it may not be so good, if you receive banknotes at two o’clock at night in dim lighting, he adds.

Source: by

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