Fairy-tale metaphors gain currency

From Raghuram Rajan to Kuroda, central bankers discover new ways to describe the uncertain environment.

July 13, 2015 12:07 am | Updated 12:07 am IST

The Reserve Bank of India Governor Raghuram Rajan is warning against ‘beggar-thy-neighbour’ policy, while his counterparts abroad have got ‘Peter Pan’ and ‘Alice in Wonderland’ to lean on when talking about the complexities of global economic situation.

A popular fictional character, Peter Pan is a mischievous boy who can fly and never grows up. On the other hand, ‘beggar-thy-neighbour’ was a popular card game played by children, but has become an economic jargon used for a policy of generating gains at the expense of other countries.

The central bankers and other financial commentators are also using expressions such as ‘rabbit hole’ and other metaphors from the fairy tales to summarise the uncertain global economic scenario as also for flagging their concerns.

Dr. Rajan, credited among the few to have seen the 2008 financial crisis coming, recently mentioned ‘beggar-thy- neighbour strategies’ in his remarks about policies followed by major central banks.

He warned that policies followed by major central banks globally were in danger of slipping into the kind of beggar-thy-neighbour strategies that were followed in the 1930s.

In a reflection of how difficult it is becoming to describe as well as navigate the staring uncertainties, Bank of Japan’s Governor Haruhiko Kuroda cited the antics of Peter Pan to describe the country’s monetary policy stance. Mr. Kuroda referred to Peter Pan while talking about the need for unconditional faith in the inflationary impact of Japanese monetary policy.

Quoting Peter Pan, he said, “the moment you doubt whether you can fly, you cease forever to be able to do it.”

German banking giant Deutsche Bank, while summarising such metaphors, said in a report that in financial market these days commentaries were often laced with expressions such as ‘topsy-turvy’ and ‘Alice in Wonderland’

“It is probably no coincidence that increasing use is being made of metaphors from the world of fairy tales. Indeed, this reflects the widespread despair about how to explain the latest developments in the financial markets,” the bank said.

Recently, the Bank for International Settlements (BIS) also said that unthinkable risks are becoming the routine and the new normal while referring to continuing low interest regime in different parts of the world.

Globally, interest rates have been extraordinarily low for an exceptionally long time, in nominal and inflation-adjusted terms, against any benchmark.

Such low rates are the most remarkable symptom of a broader malaise in the global economy, according to the annual report of BIS, a grouping of banking regulators.

“The unthinkable risks becoming routine and being perceived as the new normal,” the report said.

With Greece becoming the first developed country to default on loan repayment to the International Monetary Fund, more catchy words might find a place in financial lexicon to describe the existing desperate situation.

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