Grasping the nettles

As the Introduction to the 1997 Final Report of Australia’s Financial System Inquiry (Commonwealth of Australia, 1997) put it, “The stability, integrity and efficiency of the financial system are critical to the performance of the entire economy. [...] This Commentary aims at bridging some of the gaps in understanding about the role of the financial system that seem to separate policymakers from the public at large, in the hope of creating a greater sense of urgency than now exists about certain pressing problems that beset the system. [...] It will suffice to remind readers of the debates that accompanied the great inflation of the 1970s and ‘80s and its conquest in the 1990s, and their role in re-establishing widespread understanding of the harm that even moderate inflation can do in a complex modern economy. [...] In the absence of a supra-national money, such as perhaps was gold in the years before the First World War, the means of exchange and unit of account used within today’s system is mainly the US dollar, with some competition, mainly regional, from the yen, the euro, sterling, and the Swiss franc. [...] Unfortunately, these guidelines go beyond the remit of the two agencies — the Competition Bureau and the Office of the Superintendent of Financial Institutions (OSFI) — that would normally advise on the economic desirability of mergers, and introduce an explicitly political component into the approval process.