Lessons From Ruth Krivoy, the Former Head of Venezuela's Central Bank

Joe Weisenthal (0:11)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:17)

And I'm Tracy Alloway.

Joe Weisenthal (0:18)

Tracy, obviously, one of the big themes that we've been discussing for months or maybe years is that we really are in a era of policy experimentation, particularly with respect to monetary policy.

Tracy Alloway (0:34)

I've been thinking about this. Maybe we should change the name of Odd Lots to Odd Monetary Policy, Unconventional Monetary Policy. It does feel like we've been talking about this over and over and over and over.

Joe Weisenthal (0:46)

Let's revisit that name.

Tracy Alloway (0:50)

Okay, that's fair enough.

Joe Weisenthal (0:52)

I don't know if it quite rolls off the tongue, but yes.

I mean, absolutely true. Just like an extraordinary amount of sort of rethinking, thinking going on about the conventional wisdom that we've talked about. I mean, we do episode after episode on just sort of like what people are learning. And it really does feel like this moment is the intersection of two things. There's the long-term trends, and already there was this sort of rethinking about the shape of policy, and then this sort of acute need for immediate innovation and experimentation and aggressive action on the fly.

Tracy Alloway (1:29)

Yeah, I think it's that thing that people have been saying, which is that the coronavirus crisis has basically accelerated a lot of the trends that we were seeing before this year. So with central banking and with monetary policy, we had seen a lot of criticism about monetary policy's ability to generate inflation, its ability to generate reasonable levels of growth. People were already talking about the need for fiscal stimulus and the sort of handoff to governments from central banks.

And all of that has crystallized this year thanks to the economic crisis.

Joe Weisenthal (2:09)

Now, the one thing I should sort of caveat this with is, it's almost always in the context of developed markets that we talk about this. So as you mentioned, the inability of central banks to generate inflation, as they say, that's a first world problem of the highest order. Like most of the world historically for most countries, the inability to generate inflation has not been the issue and arguably still isn't at all.

Tracy Alloway (2:40)

Very much a first world problem. And a lot of emerging markets, they obviously would have the opposite problem. I would say though, we have seen, one of the really interesting things about this year is we are seeing emerging markets start to do things a little bit differently when it comes to monetary policy. So for instance, the Bank of Indonesia is doing debt monetization.

And I think it's really one of the first ones, certainly in EM to do that. And that's been interesting to watch, to see emerging market economies take on unconventional monetary policies that we associate more closely with developed markets.

Joe Weisenthal (3:17)

Totally. And I think that actually is something we need to explore a lot more in future episodes, which is whether this crisis actually revealed, maybe in a good way, that EMs have more policy space than previously anticipated, things like UE.

Maybe they have more ability to do that. But I want to, you know, today's conversation, I'm very excited about our guest because she's someone with a very distinct background that's very different from most of the people we speak to. Our guest today is Ruth Krivoy. She is the founder and CEO of Synthesis, Financiera, which is a Caracas-based consulting firm focusing in large part on Venezuela and country risk there. But also she was the president of the Central Bank of Venezuela from 1992 to 1994, the first woman in that position. And just someone who by dint of that perspective, Venezuela, of course, we all currently associate with both the sort of massive economic collapse and hyperinflation.

Someone with a sort of very interesting perch and perspective on the state of the world, there should be plenty of interesting things to discuss. So Ruth, thank you very much for joining us.

Ruth de Krivoy (4:42)

Thanks for having me.

Joe Weisenthal (4:44)

Ruth, just sort of give us your story. I mentioned your title and your background, but obviously you have an extraordinary past and so for people who aren't familiar with the work that you've done and your experience over time, sort of give us the short book jacket bio, so to speak.

Ruth de Krivoy (5:06)

My professional career was shaped by the Central Bank of Venezuela. I started working there when I was a student at the university.

My mentor was a German economist who came to Venezuela in 1939, fleeing from Germany. His wife was Jewish and he sought refuge in Venezuela at a time when Latin America was establishing central banks all over. Under the influence of the German economist called Herman Max, who went to Chile and other countries and helped establish a central bank. And our central bank was created in 1940 Mr. Pelzer, my mentor, was my professor at the university, invited me to work at the central bank. And the central bank became sort of my guiding star. I had a career there. I then went to work in the private sector. And in 1992, in the midst of political turbulence, I was invited to become the governor of the central bank. I got to the central bank, hoping I could help establish the central bank's independence and stabilize inflation at the time, because I strongly believe that central bank independence adds value to a country, to its prosperity, to its stability.