Macro Musings with David Beckworth Aditi Sahasrabuddhe on the Role Central Banker Relationships Play in Economic Crises
Aug 18, 2025
Aditi Sahasrabuddhe, a political scientist at Brown University and author of Banker’s Trust, delves into the pivotal role of relationships among central bankers. She reveals how these connections shaped the economy in the 1920s and contributed to the Great Depression. Aditi highlights the 'Central Bank Club' and its impact on crisis management, referencing key figures like Benjamin Strong. The discussion extends to Japan's post-war recovery and emphasizes the ongoing importance of trust and collaboration in navigating today's economic challenges.
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Relationships Replace Data In Crisis
- Central bankers' personal relationships provide crucial information when economic indicators fail.
- Aditi Sahasrabuddhe argues these ties enable rapid cross-border liquidity decisions in moments of radical uncertainty.
Belgium Loan Denied Over Personal Trust
- Benjamin Strong refused to help Belgium when he distrusted its central bank governor's demeanor and political autonomy.
- That personal breach shows how governors' impressions could determine multi-million dollar lending decisions.
Crisis Elevates Social Capital Over Metrics
- Crisis magnify the relational nature of central banking because usual heuristics fail.
- Trust and familiarity substitute for data when lenders judge borrowers' credibility under extreme uncertainty.
