Philadelphia Reflections

Central Bankers Refine the Art of Diplomacy

Nancy Wentzler, Deputy Controller of the U.S. Currency, recently dramatized the arcane world of international currency exchange for the Global Interdependence Center's 25th annual Monetary and Trade Conference, held this year at Drexel University. For the most part, controlling currency operates flawlessly as far as the rest of us can tell. But every few years a sudden banking crisis pops up somewhere, pressuring a lot of bureaucrats in many countries to act quickly without a fire drill. Displaying panic could spread into world financial collapse, but so could acting too slowly. There's often a need for that most conflicting of all predicaments, the clear need to act outside of established channels. Hedge funds and private equity funds greatly increase the pace of banking panics, and if panic-stricken, can now send multi-billions from one place to another in fractions of a moment. In that same moment, everybody involved is in a meeting, or else frantically calling somebody. Even if the right person is identified, located, and takes the call, there is natural hesitation to take risky advice from a stranger without an identifiable track record. Protocol-driven supervisory bureaucracies may be suddenly forced to contend with professional traders whose whole life consists of calls roughly like this: "Hi, Joe, this is Bill. Buy me a gazillion shares of XYC at the market." To which Joe's answer commonly would be, "You got it. Thanks for the order, Bill. 'Bye. "

Benjamin Franklin at the French Court

The potential for sudden fires calls out for fire drills. It also calls for the prior establishment of social networking among those who may have to depend on each other in a crunch. Whether by repeatedly dealing with each other or by social gatherings, or even just by immersing in trade gossip, it must somehow become possible for them to make a quick assessment of the person on the other end of the phone. Is the sound or flighty, can he be depended on to keep his word, or will he take for the hills.

Well, it sounds like a diplomatic corps, doesn't it? For the briefest of moments, one person represents the views of his country. The rest of his life is spent preparing for that moment. The most familiar American example is Benjamin Franklin, for eight years our ambassador to France. Franklin received heavy criticism for spending American money on social functions in Paris. John Adams, in particular, was outraged to see Franklin engaged in a constant series of dinners, balls, Royal parties, and salons; he was obviously having the time of his life, year after year. After all, he really only accomplished two tangible things -- he signed the Alliance with France which effectively won the war, and he signed the Treaty of Paris where Britain agreed to stop fighting.

Originally published: Monday, April 16, 2007; most-recently modified: Friday, September 20, 2019