 Welcome back from that break. Now we have our final panel for this first day of the Central Bank of the Future Conference titled Monetary Policy in an Age of Inequality. This panel will be taking live Q&A, so please submit any questions to the Engagement Hub for registered attendees under the day one live stream. Welcome panelists and participants. I am delighted to be moderating a panel with three amazing women economists who have each explored the issues of monetary policy in an age of inequality in their research and in their career experiences. Income inequality has been a long-standing concern in the US and globally. It has persisted since the 2008 financial crisis and accelerated around the world under COVID-19. This session will explore how the mandate of central banks could evolve more directly address inequality and the implications of this shift. I'm actually getting a little bit of a echo. Is this the... I'm hoping that everyone can hear. Okay. Let me start by introducing the three panelists and myself. Oh, you're on mute. I'm sorry. Can you hear me? Yep. Okay. Great. So let me now introduce our three panelists. Julia Coronado is founder of the Economic Research Fund Macro Policy Perspectives and a clinical associate professor at the McCombs School of Business at the University of Texas at Austin. Earlier in her career, she worked as a staff economist at the Federal Reserve Board of Governors in D.C. Karen Kimbrough is chief economist at LinkedIn, leading the Economic Graph Research and Insights team. Before LinkedIn, she was at Google and the Bank of America. She was vice president at the Federal Reserve Bank of New York during the financial crisis. Viola Lou Mellon is president and co-founder of Ovamba Solutions, a trade tech company where she oversees innovation, strategy, and business development. Viola is globally recognized as an expert on African entrepreneurship, banking, fintech, diversity, and digital transformation for emerging markets. I'm Catherine Dominguez, professor of economics and public policy at the University of Michigan. My research focuses on macroeconomics and global financial markets. I'll start the conversation on how central banks can more directly address inequality with some targeted questions, and then we'll open out to a wider panel discussion and after 30 minutes or so, we'll take questions from conference participants. So, Julia, I'm going to start with you. And my question is, you have written a provocative policy proposal suggesting that the Federal Reserve needs new tools and it's mandate of, to me, it's mandate of price stability and maximum employment. Tell us about your proposal and how it can contribute to reducing inequality. Well, thank you, Catherine. And I want to thank the conference organizers for including me and including our proposal. So my proposal is jointly with Simon Potter. It's available in the Sharing Research Hub if you're interested in taking a look at it. And I'm going to start with a little bit of background, which is traditionally the main tool of monetary policy was interest rates that worked through the credit channel. And that, of course, had its own challenges with exacerbating inequality given what we know about the access to credit. But those problems have only gotten worse in the modern macroeconomy. Why is that? Well, it's because households are less interested in borrowing. The cyclical response to interest rates is a lot less, a lot smaller than it used to be. Why? We have an aging economy. So on a life cycle basis, older households are less interested in borrowing against future income. That has come with slower growth rates globally. That also gives less future growth for even younger firms and households to borrow against. And then in the aftermath of the great financial crisis, we've seen households be a little bit more risk averse. All of that has left the Federal Reserve and other central banks leaning more on unconventional policies, specifically balance sheet tool. And balance sheet tools, they're buying assets and it works by boosting asset prices, inflating asset prices, which work by boosting confidence and through the wealth channel. So firms and households that hold wealth feel better about the world and go and spend and invest as a result of these balance sheet stimulus policies. Well, given the distribution of wealth which has only gotten in more and more unequal, by definition, these policies exacerbate inequality and that's through no fault of the Fed. It is just a byproduct of the tool that they are using. So in a nutshell, what Simon and I have proposed is that the Fed establish a central bank digital currency, that they do that at the retail level and make that available to household through individual accounts. And then this would need to be approved by Congress, but that with Congress, with congressional approval, they then have the authority on a limited cyclical basis to deposit money into consumer accounts. So Congress would establish guardrails, it can key off the unemployment rate sort of via the SOM rule or it could also be restrained, constrained by, to be a certain percentage of GDP. So these are basically helicopter drops. So ours is one of several proposals for helicopter drops of money directly to consumers through digital currency account. So the common critique of this is that this is fiscal policy, not monetary policy, which is a bit of a strange critique. So I've listened to all the panels today and on the one hand, you get the critique that monetary policy is crossing boundaries. We've already blurred the line between fiscal and monetary policy. And ultimately, as Mary Daly said, monetary policy is there to create a healthy sustainable economic system to support a healthy sustainable economic system. The Fed's goals are financial stability, maximum employment and stable prices. It is a goal-specific institution. It is not a tool-specific institution. So if a democratically elected Congress politically decides to give the Fed a new tool, then it's monetary policy. And so, and I think that our argument is it achieves the Fed's objectives more efficiently and effectively. Think about the COVID crisis. If the Fed had the power to deposit money directly to households, they wouldn't have needed to intervene in markets as aggressively, very likely. Because the underlying risk is that household spending will collapse. And if you address that problem directly by giving money to households, then they won't need to engage in as heavy-handed, market-heavy intervention, which we think would be better for market functioning and financial stability, not worse. And again, with guardrails, you could protect against the potential loss of confidence and the currency's stability. And then also the final argument in terms of this fiscal monetary line blurring, again, we politically, democratically established independent central banks because the fiscal process can be so heavy and lagged in a crisis. We want those institutions to be nimble and be able to take actions quickly. So there's no reason not to give the Federal Reserve better tools to achieve its mandate. You're on mute. Sorry about that. Thank you, Julia. We're gonna come back to these, but I thought I would just start off again with targeted questions for each of you and then we can kind of go back and forth. So Karen, I'm gonna ask you next. You started your career at the New York Fed during the financial crisis. You had an inside view of the policy process during that difficult and chaotic time. It'd be great if you could tell us what you learned from that experience and what changes you feel are needed to make policy less narrow and passive. Sure. And again, as Julia said, I'm also really honored to be part of this panel. So thank you for having me. And I'll start by just saying, maybe I'll focus my remarks on metrics. If Julia was speaking to options around tools, I'll start with metrics. I spent most of my time at the Fed in the markets group. So we spent a lot of time analyzing how markets were responding to policy initiatives, discussion around policy, what people were expecting. And I think what I wanna focus on is maybe asking ourselves, are we looking at the right metrics? I know we have the intent to be inclusive in central banking, but I don't know if we're actually tracking impact, if we're looking at the right metrics. And I would say if I just jumped to my main story is one, maybe we should be asking ourselves, what is the objective of central banking? And I don't think we should change it. I'm simply saying, are we actually meeting it? We should really ask ourselves, what are we saying is the objective and how are we actually measuring it? And who is the central bank looking to when it gauges its success of its policies? Is it just one group? Does everyone need to do well? Does a little sliver of each population need to do well to count as an upswing? Or is it just a raw count of a majority that does well? And if there are people in the tail, then so be it. And that leads me to my third point or third question rather, which is that I pause it often that we're, perhaps we're looking too much to a median of a distribution of outcomes or a median of a distribution of impact on people and we need to be thinking more about the tails. If one group of people is sort of tucked in the tail of a distribution of outcomes, we maybe need to be thinking along a bigger set of the distribution and not just measuring to the median of the population. So here's an example, of course, the central bank here in the US is clearly focused on full employment. I'm super excited about the new stance that they've taken. I think the rationale for adjusting it makes a lot of sense. It's extremely inclusive. The Fed's basically saying, as I read it, that they're willing to tolerate more inflation to achieve full employment. And I think that's fantastic. But what in monetary policy is full employment now? I don't think we ever really knew it. But if we're looking at any kind of employment measures, we could easily say, we've done pretty well. Men and women's unemployment in the US is down to nearly 6.5% give or take. That's fantastic. But we're not measuring in the tails where black and Hispanic employment is still sitting at 9 and 11%. Much improved from where it was a few months ago. This has been a really fast recovery in many ways, but clearly we have this huge distribution of outcomes. And I think we're often measuring to some median that counts a majority, but not an underrepresented say minority. So again, terrific on where we are in the current policy, I'm excited about it. But when you look at or disaggregate unemployment, you see that there are lots of groups that aren't being served often by central banks. You can look at women versus men, it's particularly black women and Hispanic women got hit very, very hard during this crisis. You can look at just widening poverty gaps. You can look at college degree holders and non-college degree holders where there's a 4% percentage point difference between college degree holders who really don't have much struggle finding a job. And those with just a high school degree who are seeing double the level of unemployment. So I think we really need to kind of disaggregate the numbers a little bit and stop focusing on some sort of aggregate single metric because I think it's missing a lot. And it's suggesting that we're not serving everybody. There's a quip in the black community that is blacks are often last hired, first fired. And the reason I bring that up is because when you do have an upswing, when you do see the business cycle start to repair itself and come up, you can assume that everybody's participating equally in that upswing. I don't think that's the case. I think there are many groups that benefit only much later in the cycle. And historically at that point, that's when the fed started to think it was time to take the punch bowl away. And so the length of time that any particular group actually enjoyed an upswing in the business cycle might be very different. And I'm not saying everybody should have exactly the same length of time or we should be looking to achieve that but we need to be aware of it and measure it. And I don't know for asking all the time the right questions. Let me give you another example of that. So when I was at the Fed and it was several years ago and I think this one of the smartest bunch of people I've ever worked with. So I'm sure that they're focused on this problem as much as I'm thinking about it. But we spend a lot of time looking at the impact for example, of a lot of market metrics. We spend a lot of time focused on what the stock market was doing or what the tenure was doing or asking ourselves, is a term premium drifting in some way or mean reverting. And these are really deep questions and we would unpick one metric in a hundred different ways to try to understand what was going on whether it was reflecting expectations of a bigger group. I don't know if we do the same when we're looking at just generally how people are benefiting. For example, asking ourselves in a financial stability crisis what makes it a crisis? Is a financial stability a crisis if it only affects one minority of people? Is it a financial stability crisis if everybody recovers except for one group? I think these are questions that we should be asking ourselves. We know that only about half of all American households have access to the stock market and yet we look at it very, very closely from measures of how we're doing as a central bank. Only about a third of American households have a 401k. So there's a lot of people who aren't really participating in the metrics that we look to to evaluate whether or not our messages are coming across. Now, of course the Fed has done a lot since then to go on listening tours to try to communicate much more transparently. And I think honestly we should applaud the Fed for all of that. They're completely on the right track but I think there's just much more to do. If you take a look right now at what racial wealth gaps are it's incredibly depressing. And I don't know if people know this but the gaps are huge. They're widening. By race, a black family in a household their net wealth is like eight times as small as a white family. So you're talking about maybe $15,000 to maybe $25,000 of net wealth for a black family and $115,000 to $200,000 for a white family. And Hispanics are similar to blacks. So there's these huge wealth gaps that really aren't closing. And if people are participating only for short periods within an economic upswing, they never catch up. It's just institutionally and structurally impossible. So I think we need to ask ourselves if everybody gets set back during a financial stability are they all set back at the same degree? And if everybody moves forward during an upswing are they moving forward for the same length of time and to the same degree? The answer is probably no. So I think we need to spend a little bit more time unpicking that. And I think that the Fed is, why should the Fed care? We've talked about this, Julia mentioned this, this idea of fiscal policy is perhaps a better tool. It's more targeted, it could be quicker. And monetary policy is maybe getting over its skis by doing things that try to target different populations. But I would say, the central bank needs to kind of meet more than one mandate and it needs to meet more than one subgroup of the population. And I think for a long time it's sort of assessed itself on the performance of one group within the population. And it's time to broaden that. A good example of this is if it's setting interest rates it has to recognize that that's gonna influence home ownership. Home ownership is of course important because it's one of the main avenues for building wealth which gets us back to how do we narrow a racial wealth gap? How do we create substantial and consistent streams of income for families so that they can make plans and invest and save? And that's part of getting them back into the labor market. And I think again, the Fed is focused on that but it needs to understand why it's focused on that. And it needs to pick apart some of these metrics. So if I were to kind of like sum up my argument it's about metrics and being really thoughtful around what metrics we're gonna look at. When I was at the Fed I distinctly recall asking whether or not our liquidity facilities would be able to target like black owned businesses. And at the time I was told that's, we don't have time for that in a crisis we can't think about that. So that's 10 years ago and I think we learned a lot since then. And I'm pretty confident that we're now trying to target black owned banks, black owned businesses thinking about vendors and suppliers thinking about the constituency of black and brown and by the way women in America who might need to be counted when we're thinking about the metrics of how they're doing. And I mentioned women, this is my very last point but I mentioned women because if you look at the current track of the labor market you can see that women aren't participating as much as men. I have pulled back since COVID and I think a good question to ask is like is that just a temporary effect or is that something that could be more permanent and something that we need to think about or understand and how do you make sure that you are creasing the participation of all groups in all circumstances. And I think that is really something the Fed can contribute to. Thank you, Karen. Viola, I think I pronounced it wrong the first time so I apologize. Your work is focused on the costs of exclusion from finding new markets from those in the informal sector. Tell us about your proposal for how central banks can be part of the inclusion solution. Thank you so much. And I've been scribbling furiously as both Karen and Julia have been making some really great points. And thanks to everyone for allowing us to put forward our white paper that is available also in the data repository mentioned. by Julia and will soon be on our website within about an hour or two now that we've had a chance to present it. Cost of inclusion. Now, for some context, Avamba Solutions is an emerging and frontier market solution that has gone through the usual process of innovation, well, creativity, for lack of a better word, in trying to answer the question of access to capital specifically for African businesses, which is where we operate. And when we started out, we took the same traditional routes that have been recommended by the IMF from what we've read from the regulators of policy that there are businesses who are not included in financial services and are also at the same time looking for capital to grow. Now, the idea of capital to grow tends to lend itself to the idea that lending will solve the issue of inclusion. And we discovered that it does not look for a market because it comes along with baggage that further muddies the picture and the economic outlook in the markets where we're trying to operate and the central banks and even many of the traditional banks are using very narrow parameters for quote unquote lending and for engaging and serving. Now, at the same time, these same banks are being put in a pretty bad situation and are being penalized by central banks. For example, you take Nigeria that had non-performing loans that jumped from somewhere around about 6.5% all the way up to 11% in 2017. So at the one hand, the central bank is saying, thou must lend. That is a major mandate, it's definitive, but the banks are more than willing to pay the fee and the penalty of not lending because they cannot figure out non-performing loans and that impact to their portfolios. When Obama came into the market and took a look at what was going on, we realized that for financial inclusion to happen at a greater level, not only does financial debt have to be addressed in these markets before financial inclusion can even be counted, we need to change some of the questions around who is looking for money and what are they trying to do with it. Bottom line and excuse the pun is that the bottom of the pyramid is not accessible or visible. Neither are there instruments at the hands of the central policy and central banks and policymakers to make sense of what these businesses are doing. For them to be included in finance and also to be able to have general generational wealth and to grow, things that they don't understand about these businesses is further exacerbated by the fact that they don't have the tools to understand them, not anecdotally, not by data and not by financial growth. And because the banks are instructed to expand their lending, yet they've gotten high non-performing loan portfolios, they instead not addressed lending to these groups in the informal sector. Obama looked at this as an opportunity to not just help the banks but to address what the cost of inclusion ought to be, which is very high if you don't include these people, by trying to figure out how to level the playing field number one and number two, figure out what risk mitigation needs to be in place both ethnically, culturally, financially, economically in order to create the right circumstances for these banks to safely be funded and to be safely brought into financial inclusion. Now, the idea that those in the informal sector are seeking inclusion is actually not always the case. Some of these businesses truly are very well run, do use technology, change their inventory often and even change their business model to meet the environment, the business ecosystem, which is impacted by the flimsiness of central bank policy. So they react to that by making change. Now, with those types of businesses, they don't get included and the traditional credits scoring that these banks have does not address their needs. In Africa, we have a challenge with the fact that even the risk and the credit models that have been created to use by these banks come from outside and they're not built for African norms. Neither do they take into account what makes one ethnic group more successful than another. And if we're going to have the central bank that engages everybody, we should at least have an understanding of why one group of individuals behaves one way versus another. We even have seen situations where there are those in certain areas of Cameroon, for example, that do not want to have any engagement in the formal economy. That's because in their opinion, their children overseas who are making remittances are their economic support and therefore they feel that the economic policies of the central banks has nothing to do with them. Now, the cost of not including a group like that is very high. Not because no finance is being made to them, but because the data required to project their activities in the economy or lack thereof is not counted. And that's where the cost of inclusion becomes a problem and is directly impacted by the lack of technology that will look at all the other alternative data points that are necessary to understand the informal sector in Africa. And Ovumba has found ways to deal with that. Starting with our products, growth as a service and bank partner, which is now licensed by banks, and we've recently have just started in Egypt, which is a very important market for Africa. We've put these products in the hands of bank partners and are speaking to central banks to explain a few things in order to help address inclusiveness. Number one, Africans are not just on the continent, they are in the diaspora board. I've recently been speaking to credit unions around the United States asking, do you actually understand and know what your non-traditional, non-white African deposit makers are doing with the rest of their capital that does not flow through your systems? Or have you been able to interface either by API or across the platform like Ovumba's to understand what is the Kenyan depositor in Wisconsin? Where are they pulling for their asset base and their wealth profile? You're not including that. And what about what the money that is being originated through their bank accounts doing once it hits African shores? Or conversely, even speaking with the central banks to say, have you figured out how to use AI and technology to understand what Africans are doing abroad and make sure that those remittances are not just going into some vague opaque space where it's helping somebody's aunt and uncle, but are you tracking its effectiveness in the economy or even using it as a way, I love what you were saying, Julia, with the digital currency and having the ability to put capital into bank accounts. Well, the same thing can be done if companies like Ovumba are helping the central banks to create so-cooks or bonds because we are Islamic finance as well, to activate the diaspora to invest in government bonds that can have a much longer exposure, which also affects that financial depth we were talking about. Africa's main problems for inclusion are the fact that things are short-term lending. The financial depth is very shallow. The central banks have not figured out how to track inventory and capital movements in the trade sector, especially with the informal sector, in order to come up with new, even post-COVID solutions to have an understanding of the cost of inclusion or the cost of not having it. So as a company, that's what we're focused on is economic ecosystem development, using trade tech and trade data to understand the movement of capital. And now that the supply chains have been broken due to COVID, how do we reassess and reconfigure for what are going to be smaller nodes of trade and the velocity of that capital will be counted in a very different way? I don't know what the outcomes are going to be, but as a company, creating these solutions, understanding the best ways to provide inclusion for the different individuals in their realistic format, because not all solutions work for everyone is something that we're concerned about and what our white paper really is about. And it's about putting inventory at the center of a transaction, giving central banks an viewpoint into how that capital is moving around inventory and understanding the spending habits of the informal sector and small and medium enterprises in a way that you will not get that same visibility if they were just doing a traditional loan. And by the way, our studies have also shown that lending in our market does not lead to financial growth. It really just leads to lazy depositing, no access to commercial products that the bank would have because it cannot measure the risk of these individuals and for people to think of money and the relationships with the bank is just somewhere where capital sleeps, but they go to gray market sources where they actually want to do something to do with trade engagement and growth. So I'll stop there because I'm really excited to hear what the rest of my colleagues are talking about. And I love the fact that these are some pretty tough women running what happens in the pockets of millions of human beings. So I'm completely giddy on the inside being here. Thank you. Thank you so much. If this is awesome to have a panel of women talking about monetary policy. So my sense is that across all of us, there's a connection between technology and metrics. So technology is one of the ways that we can get more information. And Karen, I think really nicely laid out what important it is to expand the kinds of metrics that we look at and in particular the central bank looks at. So I'm gonna ask you to sort of just jump in rather than going around necessarily in a circle, but I'd love to hear more. So one argument that's out there is technology can be our friend in this challenge to make central banking more inclusive, but it can also be very difficult for again, using Karen's words, the folks in the tales that may not have as much access. So I'd love people to sort of talk more about how we can be sure that the technology that we're hoping will help us improve things won't actually potentially make things even worse. So I'll mute and let somebody else jump in. I can jump, I can kick it off with a few thoughts. I mean, I think that, and I think both my panels will agree that this is not gonna be easy. It has to be done with great intention and measurement and metrics and plumbing are essential to get right the issues with cybersecurity and data privacy, inclusion and getting that technology delivery to people in a way that they can use. It's not something that's just gonna happen on its own. We're talking about something that the private sector hasn't solved, probably won't solve without public sector channeling and direction of resources. So it really has to be, I think, a public private partnership where you're leveraging the innovation and the dynamism of private sector players, but you need that public sector scale and resource depth to get this done right. So that's just a couple of thoughts to kick that off. I can add something really quickly to that, which I'd say it's just from, with my technology hat on right now, a couple of things essential to have, Julia mentioned scale and she's absolutely right and also trust. You need to have a very credible and minister of the platform because people rightfully so feel fearful about handling very personal information over technology. And then, so one is trust is essential. And if the central bank is gonna kind of move into this foray, then they need to really be credible about preserving that trust. And then the second thing I'd say, just watching how we in my current company deal with fairness, there's a lot of ways in which great intent doesn't actually lead to great impact, which is why I started with that. There's a lot of digital divide. There's a lot of people don't have the same amount of access and I don't have to say it. I think Viola has spoken to it, Julia has spoken to it. And we can move forward with a great tool but unless everybody has a way to access it, it's somehow gonna fall short. So we need to also think about that. I'll just add something to that. That was one of the first challenges that we came across as a fintech solution that had not quite graduated to where we are, which is trade tech. The access to digital solutions, access to finance actually was barricaded by language choice. Not everybody is functionally literate. Not everybody can go into a bank and understand the small print on documentation. Not everybody's debt to income ratio is visible enough for a bank to have the ability to say, you know what, this isn't a good idea for you. We've got something else for you. And those are the main challenges that we experienced. So we've created natural language chatbots in African languages that actually, just because it's in their language and it's for Africa will make them far more globalized strangely enough because in this digital world, you can do business with anybody anywhere. And I mentioned earlier about supply chains with the ability to transliterate what people are saying. It means that we can have the movement of goods and services way quicker. And with that increased velocity, you'll have the information necessary to make sure that the digital divide does not turn into an additional wealth divide, which is something we should all be very concerned about. I've often spoken to innovators within the fintech world do not innovate for the sake of innovation itself. Do not talk about your app with VCs just because there's an app to be funded. Really think about the larger problems and the impact of humanity, what it will do when human beings get their hands on this. There's so much responsibility required from those that innovate to pay attention to this. And I couldn't stress it hard enough. We have a number of fantastic questions that have come from the audience and I thought I would sort of slightly refocus us. None of us have sort of directly hit on this, but there is this question of, are these new attempts to deal with inequality at the central bank level going to lead to politicization, can't take that word. And might there be pushback? If central banks move into this area, sort of in the past, it's been kind of technocrats, looking at things in a very kind of analytic way. Although I think that you can be analytic and still focus on inequality, is there a worry that the central banks will start sounding too political in the new focus on inequality? I'll let anybody jump in. I have to jump in, I'm sorry. Yes, I guess you do. You are all about caring too much. All right, I'll calm down. I would say, one, it's kind of hilarious because I do think that there's been a lot of actions taken that have disproportionately benefited other narrow segments of the US, I'll speak to the US in particular, the US community, so that we're suddenly worried that maybe we're not only benefiting that community. I can only say it's hilarious. I think the question though is very valid about is there a risk of looking to politicize? And that probably is a risk, but I would encourage some really brilliant former colleagues of mine at the Fed to put on their best communication hats and talk about the benefits to an economy when everybody is fully participating and the benefits to an economy when we realize the full potential of our GDP and to leave certain segments out is clearly not meeting the mark. The other thing I would say and then I will climb off of the soapbox is that I'm always a little bit disheartened when we kind of, and I'm saying anybody in particular, but just when anybody kind of feels like the market is just gonna generate the right solution. Hard things are hard and sometimes markets don't generate the right solution. They generate an efficient solution, often a very clear one, but it's not necessarily the right one. And so sometimes we do need to do something that's a little bit trickier to get to the right point. And I think we have to try. Yeah, I would just build on what Karen is saying because I agree with everything she said to pretend any institution that is a creature of Congress isn't political is just not right. It's just that it's been serving a narrow constituency and we sort of call that a political, but it's not. And if we are going into, we are experiencing a lot of change in the country and that has come with some fraught political backdrop, but the Fed, just like any other institution needs to participate in that change. And they've been doing so. They've been earnestly trying to, one of our arguments is that they need better tool to achieve that. But to pretend that there's this sort of, it's like off on a hill somewhere is just not the correct description of monetary policy. It has a huge influence on our lives. We should direct it the way we want to. And again, just to again repeat Karen's point and celebrate it, this is a challenge for communication. How do we convince that, you know, what Viola is doing with like Obama solutions or what we're proposing with digital currencies to really build the case so that you win in people from different constituencies and build the base of support for that. You need to make people see what's possible and to build that constituency. So communication is essential. And for us, it's not just trying to avoid the politicization of policy. It's also reducing the punitive effects and impact that occurs when something brand new crops up in the private sector because a group has innovated to solve a problem. And they're really just looking at this one problem right here right now because they've either come across a challenge that's affected them or there is an indication that monetizing this particular solution to solve this problem would be good. It will throw off employment and all the rest of that. But to interlock those types of ideologies is something that I think many central banks in Africa have a hard time doing. Again, because of the lack of visibility and also because the everyday individual has very little idea what some of these regulations and policies are about and doesn't have a voice to say, you know what, not in my backyard or this doesn't affect me or this is the truth of my problem. So by making the banks the forearm to wield the will of the central banks it accidentally politicizes banks as well. After all, these are human beings working there and why on earth would they depart from, as you said serving those individuals who are the safest there is absolutely no incentive to change what you're doing if you think it works. So by expanding the spectrum and changing what it means to be successful financially and trying to embed that with some sort of social measurement for how well groups are doing could have a counter to the effects of politicizing regulation or making things punitive because you just don't understand. We see this in emerging markets all the time. Something new happens, stop it. Something new happens, regulate it. Something new happens, tax the nonsense out of it. Something new happens, ban it until we can understand it more. But there isn't actually a new division within these groups that is responsible for driving understanding and saying here's the best way to engage that. So we battle with this every single day but being punitive and being political seems to go hand in hand in emerging markets whether it's a lack of data or understanding for these types of instruments. I think maybe we need to create a communication team. I think we could do a pretty good job of getting people around to these issues. I wanna read one of the questions because I think it's a great one that we could all take up. President-elect Biden supports expanding the Federal Reserve mandate to include targeting persistent racial gaps in job wages and wealth. Do you agree with the proposed expansion of the mandate? And if so, what new tools would the Fed need? Julia, I'm guessing you can jump in here but I'd love everyone to take that one. Yeah, I mean, I do support it. I think, to Karen's point, which I think she made very well, metrics matter and how that you judge your success that you're meeting your mandates needs to rethink. If the Fed's already been embarking on that road, so I think that we need to keep going in that direction. So I do support thinking about that and revisiting that and possibly changing that. I don't think that the Fed can achieve what it wants to achieve with its current toolkit. And so I think we could think about, well, is there a congressional administration, Federal Reserve working group that could be formulated to really do the blue sky thinking? So they've done a policy review, it was internal. Can they broaden it out, maybe include private sector and community groups as well in that process? And think about the toolkit and revisit the toolkit. That could include proposals like ours for digital currency. It could also include rethinking how supervisory policy is conducted and executed. And the Fed again has already been doing that with some revisiting of the Community Reinvestment Act, but I think Karen got to that too. There's a lot of power in the system of oversight and supervision and how that that's operationally conducted could use a rethink as well. The institutions to Viola's point, they get a banking license, that's a great responsibility. What do they need to, you know, to what metrics do they need to meet and what kind of behavior do they need to engage in to serve the public interest while being profitable and innovative and so on. So there's a balance there, but I think there's a number of ways, but yes, bottom line, I'm supportive. Well, this is why this conference and this conversation is so important. We're really talking about what is the future role because we've literally had a line in the sand has happened in the human race. COVID happened, everything changed. Absolutely everything. And many banks were found wanting and central bank policy responses to something so not quite as effective as they should have been. So I love what you're saying, Julia, about the toolkit. Avambas often thought about what would that look like and for us, it was then how to create a dashboard that would link and connect all of the digital engagement and those assets to see them moving in real time or even on a batch basis to give decision support to the banks that is AI focused and built because there are lots of things that traditional banks and their previous policy enactment did not take into account. I said at the beginning of this conversation that many of the systems that Africans live within are created from the outside. They're not made by Africans for Africans for African use. So therefore the data and the lens that all of that information comes through is already biased and skewed, undercounted in and incorrect to begin with. That toolkit, that dashboard needs to be altered to show what's really happening. Give you a classic example. There is no external system outside of Africa's borders other than what I think Avambas built that takes into account the fact that in our culture we have polygamy. It is economically impactful both in a very good way and a not so good way. But can you tell me whether or not there are any banks or central bank regulations that take into account the benefits and how that can be utilized in their economy? No, there isn't. Why? Because we don't deal with Africans as Africans ought to be. And that's political. That's the epitome of the exclusion. In fact, I can safely say majority of the African continent's population is excluded from being counted as they really are. We are instead proxies of what we're supposed to be. You cannot proceed in that way, not in a post COVID world, not when real numbers need to be taken into account for things like economic stimulus, how to disseminate additional capital to help families get through. What if that family is so multi-generational and the entire family tree doesn't even look like a tree? It's family spaghetti. I'm talking about my own family. In particular, I have Cameroonian parents. How do you disseminate and understand and apply data in emerging markets where culture is not in sync and is not lined up with the way policies have been originated from goodness knows how many years ago? We may just need to take that line in the sand and start all over again by building and then retiring whatever is grandfathered and is no longer part of what the future needs. And I think one of the first things that we can do that is to put departments of digital transformation, put departments of youth, put more emphasis on the different people that we're dealing with and the fact that we need to count and look at data for people in a very different way with brand new tools. And that needs to be a private public partnership. Can I hop in behind Viola for a second on that question? You know, I guess if I were taking a more international approach to the question around should we have targeting of racial wealth gaps? I mean, in the US, the racial wealth gap is really stark and it's so institutionalized. It's almost impossible to imagine it ever closing to be honest with you. So maybe that is a lens through which we should think about it here. But globally, I think central banks just need to be far broader in how they think about engaging the entire population. And in some cases, it may not be a race distinction. It may be a gender distinction. It may be a religious minority distinction. It might be just age. Either people who are in their second or third act of their career but can't quite get included or people who are very young and are having trouble getting started. And I, so I would actually broaden it. I wouldn't so much target a particular group, but I would challenge central banks to be far broader in how they assess themselves on their performance and say, did we really, really benefit as much as possible, you know, a broad set of our population, whatever that is. And if they can't say yes, then they haven't checked the box. Catherine, there's a really great question here. Question number seven about is financial services and technology increasingly cross paths? Is there a talent gap at central banks? And the answer is absolutely. First of all, central banks and banks are looking at traditional finance tools and are set up to operate with risk aversion almost. And the individuals and even the type of human being they tend to employ in our part war are all very similar. It's usually men. It's recently that I'm loving seeing more and more women in charge of branches, divisions and areas like that. They have a very different approach to how banking is done. But then most definitely is a talent gap. Africa had a brain drain that happened quite many, many years ago. And as the diaspora engaged in their careers and are tied into the economic systems of the West with their pensions attached to the physicality and the geographies of where they are, there is really no incentive for them to go back and to work with groups like central banks. Plus the way central banks hire and work is heavily managed by ministries of finance who are even more risk averse than the high street banks themselves. So you end up with a talent gap that is also exacerbated by the fact that innovation outstrips regulation. So by the time many central banks can catch up with what does this mean to us, the gap for talent has increased even more so. And where there's a talent gap, the digital divide, there is also a service delivery gap. And then that breaks down into further fissures whereby you have a gap in knowledge and understanding amongst the general population which makes it very difficult for them to operate in a cohesive group. So you can't neatly tie them, ring fence them and understand them in blocks. In fact, we're getting to the point that I think banking services will end up having to use AI to curate specific services for individuals at a really fast pace. And that is gonna probably make it even harder for financial services and technology to dovetail the right way to serve individuals and everybody included in the ways that we're talking about. I'm gonna jump in with another great question that is up there. By the way, in terms of talent leaving central banks, I think we have a panel full of one central bankers. So one of the questions is in a prior session, Paul Tucker noted that since central bankers are unelected and initiatives they take in address things like inclusion, climate change, et cetera, what do you think the sweet spot is for central banks action? So can unelected officials in central banks push on some of these ideas, climate change, inclusion? How far is too far? I think we all kind of agreed that they ought to do more, but how much more? So I can kick that off. I mean, I think clearly there's a tension there. Central banks are not like dropping from the sky. They are appointed and confirmed through a democratic process. So it's not like, again, we set up these structures through the political process to take on certain responsibilities. So I don't always fully agree with this notion that these unelected officials making unilateral decisions. Central bankers do come through the political process and are tasked with certain things and generally take those responsibilities very seriously. So I think there is scope. There's no fine bright line as to how far you can go or how much you can push it. But I think what we've seen, for example, what we've seen in the Fed very recently is that kind of push pull with a crisis. We have a crisis. Here's some capital central bank. You go out and innovate and lend to some sectors. Okay, we're gonna do that. Now there's a little bit of a discussion about should we keep reauthorizing those lending facilities? Do we still need them? So the political processes has always been part of central banking. And there's always this role of here, technocrat, go innovate and tackle some things and we'll let you know when you're going too far and then you'll have to come back and answer to us and testify before us. So I think that's part of the structure of central banking. It's set up to do things that the political process is to sort of necessarily short sighted to think about. So let the Fed and other central banks think about how to tackle and address climate change and bring it into an integrated into the financial system and then testify before your respective political bodies and see how that goes and iterate from there. So I kind of disagree with that notion of central bankers often an ivory tower on the hill. I'd say that they're completely accountable to, as Julia, I'm repeating Julia here, I would agree. I think they're completely accountable to a lot of directly elected officials. There is a very transparent path of communication about what they're doing and what they're planning to do. And I don't think there would be anything that's not clear and open. And finally, to the extent that most central bankers still are one gender and one race, I don't think we're at the risk of going too far in one direction suddenly. I'd like to see us keep moving towards thinking about climate change. And from a perspective of risks, it's absolutely appropriate that we'd be thinking about climate change and cyber risk and creating an economy that benefits all people, all ages, all genders, all races. And I don't think we're anywhere near the boundary where that becomes unacceptable to be inclusive. And by the way, I feel as though central bankers often, and I include myself in here too, are really cautious about wanting to pick winners and losers. I understand that and you wanna be neutral. However, it happens anyway. The thumb is somewhere on the scale. So I acknowledge the validity of the question, but I don't think we're at risk of being too far there. And I think there's a lot of accountability in the system. We are at risk of having to end this wonderful conversation. But I thought I would give each of you a chance to just kind of say one or two last words. I think it says something about who's on this panel. We've all agreed with each other largely and supported each other's ideas, which is fabulous. But I'm just gonna go around, Julia, Karen, Viola, and if you want to add any last thoughts before we sign off, this is your chance. All right, I guess we're going in order. So one, I just wanna say what a pleasure, this panel, I have learned from all of you and will hope to continue to do so. And I would just sort of echo what Karen just said. We need to reframe these discussions and these goals. And it feels to me sometimes when people say, oh, are we going too far? We just got started. So let's keep going. I completely wholeheartedly agree with that. And let's explore these frontiers. Let's have these conversations out in the open. Let's talk about it to the elected political officials. Let's do some more blue sky thinking because it's not like the central bank's been neutral at all. And so let's reframe the whole conversation. I'd just say also, thank you for having me here. If I could, I'm actually gonna celebrate something that my co-panelist said, I think I repeated myself like 18 times. I made my point about inclusion. I strongly encourage us as ex-central bankers, ardent fans of the central banks globally to continue to push ourselves in the direction of innovation. I do think that actually regulation begets innovation. And I think we need to adopt it and embrace it. It's happening extremely quickly. Central banks are typically slow to move. So if I was gonna say one other thing besides inclusion, it would be start to get as familiar as possible to Viola's point, to Julia's proposal with Simon Potter about how we can use these technologies in a way that's meaningful for each of our central bank populations because they're here. And if the central banks don't do something, the private sector will create something that is maybe too narrow and doesn't have the trust and scale that we need. I think my final word is a big thank you to everyone. And it was a real pleasure to be so stimulated by the things that you had to say, but in discussing final thoughts, especially for the African continent. And actually globally, what we're seeing is a confluence and a joining of groups and entities and functions that we never saw in the same place before. I would like to believe that the central bank is moving into a place whereby from a horizontal standpoint, their decisions, their policies, their regulations, their stimulus is affecting numerous sectors and to be able to embrace the digital world so that they can take a look at those businesses and individuals, the entrepreneurs who are humans as well as businesses and put trade as an area by which to understand the African economy. And for us, and this is something that maybe you're not aware of, Africa is just, they signed the African Continental Free Trade Agreement. This will be one of the largest trading blocks the world has ever seen. The central bank's role in that is going to change and it is going to have to engage identity, digital currency, remittances, the diaspora, its role in the world and the table that will be built for everybody to be able to do business with each other on a cross-border basis. And when that happens, there'll be a very different type of African wielding a bunch of cash in their pockets making demands from the financial sector to provide something more than just inclusion. And when that happens, I would like to see even us again, sitting down to say what advantage was taken this time in human history to ensure that every single individual was given a chance to have the democracy of opportunity and didn't just end up on another one of those cheesy posters that say, give Africans 25 cents a day because that's not how inclusion works. Let's think in terms of what you said, go in past the point where people all talk about wealth for themselves and their families and not just getting by. So that's my final thought. All right, that's a great final point. So I hope that we all have a chance to be on a panel again. Thank you all for a really stimulating conversation and hope to see you all soon. Bye bye. Thank you. Thank you. Hi everybody. Great to see you. I hope you've been enjoying today's events. We had a terrific lineup of activities all day long for the first day of our central bank of the future conference. And it's a pleasure to be back with you just to provide some framing for what we've heard today. Again, I'm Michael Barr and I'm the Dean of the Gerald R. Ford School of Public Policy at the University of Michigan. And you are here for our joint center on finance law and policy conference with the San Francisco Federal Reserve Bank. Today, at the beginning of the day, we had a very inspiring welcome and opening keynote remarks from the futurist Claire Nelson who inspired us, including with lyrics from Bob Marley and focused on the need urgently to make a difference on economic inclusion. We had a really fascinating panel on central bank responses to the COVID-19 pandemic. How did central banks respond? They provided credit, they expanded liquidity, they engaged in monetary policy and they worked through the payment system. Countries we learned did much better at delivering on the things that their congresses, their legislatures wanted them to do to aid the economy in situations where they had focused in advance on financial inclusion as a goal and had done the hard work to set up systems to get funds out, especially payment systems and account-based and non-account-based measures to promote financial services broadly in the economy. We learned that there were problems when the private sector channels couldn't deliver and what we might do to fix those, we learned about the importance of consumer protection and there was an engaging discussion about the appropriate line between monetary policy by the central bank and fiscal policy by the rest of the government, particularly looking at questions of accountability in a democracy. We had a wonderful keynote conversation over lunch with Mary Daley, hosted by Tracy Basinger to focus on inclusive economics and President Daley made clear that she thought a goal of the federal reserve system should be an inclusive economy and she particularly highlighted the need to focus as part of that on issues of racial justice and also issues of climate change. President Daley urged us to be fiercely impatient because the issues that we need to address are so urgent but also to be patient, recognizing that the tools we have at our disposal may require incremental change towards those goals. We then had a fascinating conversation that you just heard about monetary policy in an age of inequality. We heard that there are important new tools that central banks should consider such as direct accounts to provide funding to people in times of crisis. We learned about the importance of metrics and the concern that our metrics need to be explicitly taking into account the differential effects going in to a crisis, the differential effects in our economy generally. Our metrics need to help guide us to worry about those who are the least well off, not just the average effects of a monetary policy move or a fiscal policy move, but what are the effects on the people most vulnerable in our society? Panelists called for a ground up approach, a granular approach, an approach recognizing the heterogeneity of the people in our communities. And the panelists urge policy makers to really see and hear people from all different walks of life to be able to engage in policy based on who people actually are. And the panelists also called for a broad spread goal of empowering people to achieve the aims of financial inclusion. We also heard pretty clearly from the panelists their view that having a neutral central bank, having an analytical central bank, having a central bank like that means making the system work for everyone. And that the central bank's situation that some have seen where central banks are not taking into account the needs of everyone, not looking at the needs of racial minorities, not looking at the needs of low income populations is not a neutral central bank. And I think that's an important lesson for all of us. So it's been an exciting day, an interesting day. I've learned a lot already. I'm sure that all of you have as well. This is the conclusion of our streamed portion of today's activities. So those of you though who have registered in advance, we really want you to continue with the interactive sessions that are being offered today. The interactive sessions will begin in about 20 minutes, begin precisely at 1 p.m. Pacific time, 4 p.m. Eastern time. And those of you who registered will have a link that you can go to to get into the interactive sessions. I think they should be really, really interesting. We also, those of you who are not joining those interactive sessions, please join us again tomorrow. The YouTube links for tomorrow's activities are on the websites of the San Francisco Federal Reserve Bank and the website of the University of Michigan Center on Financial Law and Policy. There's a YouTube link for each day you can go. And I hope those of you who are able to join for part of today can join us as well tomorrow. Those of you who have seen the video I'm about to talk about know what I'm about to say, but there is a really exciting fun video that makes you want to dance about central banks and unusual feeling. So to help us transition for the day, we want to spotlight a communication innovation by the central bank of Jamaica. I'm going to guess this is the only central bank that has used reggae to explain monetary policy. May I present please the music video, Inflation Targeting.