IKN

Hereditary sloth instructs me

Mervyn King and Diego Maradona

Apropos of nothing, here’s an extract of a 2005 speech given by Mervyn King, governor of The Bank of England. My thanks to darned good Twitterpal @omairzahid for the headsup, because any piece of script that starts with “The great Argentine footballer, Diego Maradona, is not usually associated with the theory of monetary policy” has to be worth a little of your time. However, it should also be noted that Mervyn King is an Aston Villa supporter, therefore his knowledge of good football is likely limited.
“The great Argentine footballer, Diego Maradona, is not usually associated with the theory of monetary policy.  But his performance against England in the World Cup in Mexico City in June 1986 when he scored twice is a perfect illustration of my point.  Maradona’s first “hand of God” goal   was an exercise of the old “mystery and mystique” approach to central banking.  His action was unexpected, time-inconsistent and against the rules.  He was lucky to get away with it.  His second goal, however, was an example of the power of expectations in the modern theory of interest rates.  Maradona ran 60 yards from inside his own half beating five players before placing the ball in the English goal.  The truly remarkable thing, however, is that, Maradona ran virtually in a straight line.  How can you beat five players by running in a straight line?  The answer is that the English defenders reacted to what they expected Maradona to do.  Because they expected Maradona to move either left or right, he was able to go straight on. 

Monetary policy works in a similar way.” continues here (page 6)

Leave a Reply

Your email address will not be published.

Hello, you are not in a chatroom, you are in my living room. Opposing views and criticisms welcome, insults or urinating on furniture unwelcome. Please refrain from swearing if possible, it is not needed.