The British royal wedding discloses that the abdication of Queen Beatrix is at hand... !

All right, I must confess, I watched most of the wedding on the BBC-channel, so I can't really give the complete Dutch picture. But there's one thing that I found remarkable today and yesterday. It appears that most people 'buy' the reasoning that Beatrix was unable to make it to the royal wedding, as she had to be back for the Queens Day celebrations, next day. Well, we're happily celebrating it now and oh surprise: we can see both Beatrix and Crown Prince Willem-Alexander and his wife Maxima. So, there must be magic technology that has warped them back over the small pond from London to the Netherlands. Which underlines that the official argument was a fake placeholder. So what may have been happening really?

In my view, the absence of Queen Beatrix is significant because she is the kind of royal to be present and to recognize the relevance of these occasions. The only reason why she wouldn't visit the wedding has to do with her job as a Queen and her ambition (and achievement) to do that job in an excellent way. And that can only mean one thing. She understands that it is important for Willem-Alexander and Maxima to step to the forefront and get the formal attention of the Windsors and their guests, without being burdened by the presence of their superior in hierarchy. So we must be nearing the date of her abdication.

In fact, the current moment(um) for abdication appears to be quite good. RTL nieuws today released the outcome of research that showes that 69% of the public find Crown Prince Willem-Alexander ready for the throne. 57 % are of the opinion that the Queen should remain part of government. 73 % finds that the Queen should remain head of state to symbolize national unity, with 65% outlining that the Queen also should stick to that role to facilitate international commerce. And asked for the best year of abdication, the preferences are: this jear (20,5%), 2012 (39%), 2013 (15,1%), later than 2013 (25,4%).

It is interesting by the way to note the current popularity for the Dutch royal family. I think, one of the reasons that it appears to increase, is the fact that we have a minority cabinet and an uncertain and unstable future with respect to our democracy and government. So the public seek the stability that the role of the Royal Family brings, while some MP's are still riding the older wave of removing the Dutch Royal Family from government.

As for the actual date of abdication, my guess is that Beatrix is a long term planner. So I would put my money on 2013 (or 2018), when she reaches the age of 75 (or 80).

PS. I just heard an interview on Amsterdam TV with a movie director who was shooting in 2009 in Amsterdam. He had heard from his network of camera/sound buddies that a special studio had to be set up in the Royal Palace that day, so that he prepared for the announcement of abdication (to be included in his filming). But it never came to that as one deranged mind conceived the idea to try and drive his car into the Royal Family bus. All of which makes 2013 more likely than 2018.


Bernanke sticks to low rates.... risky... but understandable

These days I watched and listened the first press conference by Ben Bernanke, in which he elaborated on the US-FOMC monetary policy. After a nervous start, he started getting the hang of it when it all became 'technical'. Whereas Trichet is a fully certified clueless-empty-can-but-very-capable-regent who brushes off all complicated questions with a number of standard mantras, Bernanke was in good shape. The guy very obviously knows what he is talking about and that is a huge relief in comparison to Trichet. I noticed that in general, also the US-FED-watchers shared the view that this was a good first premiere by Bernanke (see also here).

Wat Bernanke told us, is that the FOMC, with its double mandate on price stability and employment, chose to prioritize the economic growth and employment by maintaining low interest rates for the time being. The quantitative easing will end in June, but there will be reinvestments of matured bonds. The Fed considers a stop on this reinvesting as a tightening of monetary policy and will only do so after due consideration and on the basis of an explicit FOMC decision. So, for now, we will face a prolongued period (at least three months) of low interest rates in the US. Employment is the main thing.

The market effects were quickly visible with a happy stock market and a diving dollar. Meanwhile I was pondering the thought if the economy in the US would really be in such a bad shape that it deserved further easy-money? Or could there be another angle at all this?

I realised that we are in the run up to new elections and recalled literature from a while ago: research by the FED that observed a correlation between the behaviour of the FED/FOMC and the pre-election year. This would be either an explicit or implicit case of the principal-agent situation. Meaning that in the year before the elections, the US Presidents appreciates a solid economy which then creates jobs that he can show off with in the election year. And from that perspective, the FED-decision is quite clear (and a case in point).

Still, this is playing with fire, as we are in the same situation that brought us the financial crisis: a prolongued perod with low interest rates, which may seduce markets into taking too much risk. Which may lead to the situation where we get rid of the hangover by taking a new beer, the day after (as we all know, the recipe for die-hard alcoholism). En also our central bank (De Nederlandsche Bank NV) states a serious warning in its financial stability report which does not sound happy at all:
Just as in the run-up to the crisis, we can observe overliquidity in the worldwide financial system, with global imbalances. These developments may, in the medium term, threathen the financial stability, when once again bubbles in financial markets or unsustainable debts will come into being. We have almost stretched the accomodative monetary policies that we see worldwide, to their maximum limits.

In sum, the historic days are not over yet. As we are very much aware how we came into this crisis, it remains a risky approach to stick to low interest rate policies. Time will tell.

Trouble in The Hague and Amsterdam: Ministry of Finance does not favour Hoogduin as DNB-President...

In the Netherlands we are looking forward to hearing from our government who the next president of the Central Bank will be. You know my personal opinion and preference voor van Dijkhuizen as the next President. And this morning the Financieele Dagblad outlined that he is one step closer as it appears that the Ministry of Finance has a strong preference for an outsider candidate rather than the candidate Hoogduin, preferred by DNB itself. Het Ministry thinks that this is necessary to ensure that DNB will effectively change its culture and does not believe that an internal candidate can do this.

Now that the Ministry of Finance doesn't rubberstamp the proposal of DNB (which they used to do until now), the official decision by the Dutch Cabinet has been delayed a couple of times. And the Financieele Dagblad notes a couple of arguments, among which the political colour of candidates, as possible reasons. But we don't get the full picture, as there is also a candidacy for the role of Executive Director Bank Supervision. But we don't hear anything about that appointment procedure.

I have been pondering the continuation of this sequel. I wouldn't be surprised if a new solution to the problem surfaces in which the executive director on Bank Supervision is also named: vice-President of DNB. In that model Hoogduin would be promoted to President and remain the monetary expert he is, while the real weight rests with the Vice-President, responsible for Supervision.

We'll soon discover how this ends: I am most curious!

PS 1: Dow Jones reported this morning that Ministry of Finance, De Jager, has reacted that the political colour of the candidate does not play any role:
'I haven't seen a final list of candidates' according to the CDA-Minister. Hij continues to outline that he is not in a hurry, because: 'we still have until June'.

PS2. The PVV has explicitly noted that they wish the successor for Wellink to be an outsider, in order to change the DNB-culture properly.


The successor to Wellink: why I think van Dijkhuizen is the best for the job !

These days, decisions are in the making about the best man to succeed Wellink as the President of De Nederlandsche Bank (our central bank). There are three candidates for the job: Hoogduin, Kremers, en van Dijkhuizen. Whereas in former days, the President used to be responsible for both monetary and supervisory matters, the Minister of Finance, JanCees de Jager, is now choosing for a separation of duties (see here Dutch source 1 and here Dutch source 2). Due to the failures in Dutch banking supervision of the last years, there will be a separate executive director responsible for bank supervision. That director can independently judge and committ the whole central bank board (and its President). And as to the general set-up for bank supervision in the Netherlands, I am amazed at the following statement of the Ministry of Finance:

The Minister trusts very strongly on the internal systems of checks and balances of De Nederlandsche Bank (DNB) and the Authority for Financial Markets (AFM). Both supervisors are themselves responsible for the proper functioning of their internal governance, the legality of their expenditure, the execution of supervision and the determination of priorities and accents of their work.

I find the above quote highly interesting and surprising because things haven't gone that well at the two Dutch supervisors of financial institutions. Too much money has been billed to the institutions under supervision, which had to be corrected by the administrative judge in an appeal (while the Ministry of Finance and supervisors for years ignored the complaints of representative organisation that highlighted this excessive billing). Three banks have failed, not the least as the result of a strong monoculture at the prudential supervisor, DNB. And the AFM has shot bullets as well as blanks by using open norms on anything that moved. So with a Ministry of Finance that doesn't change any of this and just trusts those supervisors to continue doing their job well, we don't have to wonder why the Netherlands will be quite likely to soon face another financial crisis or failing bank. Perhaps the only positive thing that we can say for the Ministry of Finance is that at last, they have formulated some sort of vison on supervision 0.1, because so far it was the only Ministry in the Government that hadn't done its homework properly.

Yet,it might also be the case that the Ministry does not aim to steer policies by a proper structure, but by manning the supervisors with the proper President. It might be this choice that underlies the choice of the Ministry for Ronald Gerritsen, currenty it's own secretary-general, for the role of President of the Authority for Financial Markets (AFM). And similarly one might expect a choice for Kees van Dijkhuizen (former Treasury of the State, just as Wellink was), for the new boss at DNB. But let's not rush too much with my personal preference.

Apart from all the above, we have to be aware of the challenges for the successor of Wellink. The first one is that he (a she could not be found apparently) needs to work with an impossible governance structure in which a pigheaded Director of Supervision can committ the whole DNB-board without consulting them in advance. Second of all, the new President needs to be someone who is able to change the internal culture at DNB from a Kings-Court attitude to more street-wisdom. it must be someone that not just thinks, or prefers study of legal implications, but is also able and willing to act. So we are looking for a pro-active and inspiring leader, with sufficient political flexibility and insight.

Looking at the candidates it is obvious that not all of them are known to the public. Hoogduin, is an abstract macro-economic expert and doing very well in that role. But it is also clear that the analytical approach isn't suited to the public and staff: it's not the man to inspire staff with a warm / human vision and he appears to be less able in communicating simple messages to the public at large. In his way of work he is thus quite likely to condense problems into a set of mathematical equations of an economic logic, which dictate the outcome in the long run. Finally it is unknown whether his political antenna is sufficiently well tuned. 

Kremers is the architect of the current supervisory (Twin Peaks) system. After his job at the Ministry of Finance (in the nineties), he joined IMF. From there he congratulated the Ministry with te well chosen twin peaks regulatory system. In fact, he thus complimented himself over a distance and this was quite embarrassing to watch. It is unclear what job he holds exactly at RBS, after the merger. He does fit the criterion however, that he used to work at the Ministry of Finance worked. And he will also be politcially versatile, though lacking in hands-on experience. He seems too self-involved in his mental ideas and recipes. Placing him in the chair of President of DNB, means that DNB gets a new version of a mastermind at the top who has an audience bowing for his great thoughts. It is exactly this symbiotic groupthink relationship between Wellink and his staff that needs to be changed and with Kremers, it seems unlikely that his unhealthy relationship between leader / staff will change. So Kremers is not the right candidate, although many may say he is the right man because of the increasing importance of avoiding systemic risk (and relationship with the IMF).

Finally, Kees van Dijkhuizen. He worked as the Dutch Treasurer and then at NIBC, which wasn't the most obvious choice as it was a bank in special circumstances and trouble (takeover by Kaupthing didn't succeed so NIBC is still in the hands of a a consortium of JC Flowers). He actually worked there in silence, introduced a new consumer savings account (NIBC Direct), to broaden its funding, and made some steps into expansion abroad. All are quite healthy and logical steps, and what appeals to me in this is the hands-on nature. Dijkhuizen, then, is the only candidate that demontrates his ability in hands-on management in both public and private sector, surrounded by complex political, macroeconomic and market dynamics. It seems to me that the richness and diversity of qualities you need to succeed as he does, are precisely the qualities that we require of the new president of DNB.

Henceforth my sincere advice and conclusion: van Dijkhuizen is the best man for the job!