GoldMoney’s Alasdair Macleod interviews Vice-Governor Hampl of the Czech National Bank. They discuss the nature of the Czech economy, which is savings-driven, the Republic being a nation of small savers. This gives it an economy that has more in common with Germany than the rest of Europe. The economy enjoys a low-inflation environment, with a free-market approach. Since 1989, the economy has been driven by economic agents wishing to rebuild their wealth, and this has helped the Republic develop its economy more rapidly than its neighbours.
The Czech National Bank feels it is not under pressure to reflate, because both the public and the government are wary of the destructive effect on savings. With current economic uncertainties in Europe, the economy has turned down as saving has intensified; but unlike other governments, the Czechs are not being panicked into reflation.
Joining the euro is not on the agenda, being out of the question at the moment, nor does Mr Hampl personally expect the Republic to enter the eurozone. Meanwhile, Mr Hampl says that the Czech banking system is stable and well-capitalised, with little cross-border loan exposure; and even though some of the banks are foreign-owned, they are effectively ring-fenced from problems their parents may or may not have. Hampl described Czech banks as cash-cows, whose loan exposure is comfortably covered by deposits.
On gold, My Hampl was less forthcoming, saying the purpose of the bank’s assets is to be available as a reserve in case of currency volatility. But interestingly, the Bank has diversified its portfolio into Australian dollars, Swedish kroner and Canadian dollars.
Altogether, this is a must-listen-to interview with a central banker successfully managing his country’s money with a view to staying out of trouble.
This podcast was recorded on 10 October 2012.