Everyone may have some advise for the RBI. Some may advise, 'Cut your lending rates and raise the deposit rate.' How will a bank function? We take a medium term view. The bank has an 80-year-old history. I don't want to destroy it for a few decisions.
Interpretation
This quote emphasizes the importance of long-term stability over short-term fixes in banking.
Raghuram Rajan highlights the complexity of banking decisions where quick solutions, like altering lending and deposit rates, might seem beneficial but can jeopardize a bank’s long-term reputation and function. He underscores the need for a thoughtful, medium-term perspective, considering the rich history and stability of the institution.
In practice
During a financial seminar discussing banking strategies.
The U.S. should worry about the effects of its polices on the rest of the world. We would like to live in a world where countries take into account the effect of their policies on other countries and do what is right, broadly, rather than what is just right given the circumstances of that country.
Customers often value a good more when its price goes up. One reason may be its signaling value. An expensive handcrafted mechanical watch may tell time no more accurately than a cheap quartz model; but, because few people can afford one, buying it signals that the owner is rich.
The problem with forbearance is that it always looks like a good thing to do until it stops working.
Perhaps the hardest challenge has been to persuade the public, impatient for rapid growth, of the need to ensure stability first. Growth, it is argued, is always more important, regardless of the looming economic risks.
Too many years away from academia renders you pretty incompetent at research and teaching. So I had to go back.
The gap in India has always been between the promise and the execution.
One of the things that happens when you have austerity is that wages get lower, and some people think lower wages in the short run can increase corporate profits.
If we wait until income inequality is much more severe, we will have a whole class of new superrich who will probably feel entitled to their wealth and will have the means to defend their interest. That's already gone far enough. We shouldn't let it become more extreme.
What do you think a stimulus is? It’s spending - that's the whole point! Seriously.
Capitalists seem uninterested in capitalism, even as eager entrepreneurs can't get financing. Businesses and investors sound like the Ancient Mariner, who complained, 'Water, water everywhere - nor any drop to drink.'
There are severe limits to the good that the government can do for the economy, but there are almost no limits to the harm it can do.
When inequality gets too extreme, then it becomes useless for growth, and it can even become bad because it tends to lead to high perpetuation of inequality over time and low mobility.
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