On the green field, the football legends achievement is famous all over the world. But few people know that he made a big mark in the history of global central banks because of the speech made by a heavyweight fan.
Back in 2005, Mervyn King, then governor of the Bank of England, in a speech, compared Maradonas two brilliant goals in the quarter finals of the 1986 World Cup in Mexico with the central banks policy, and put forward the Maradona theory of interest rates..
At that time, Maradona, then the captain of Argentinas national team, was astonished. First, he used the hand of God to put the ball into the goal of the English team, and with his advantage of being short and concealed, he escaped the eyes of the referee, and the ball was judged to be valid.
Only a few minutes later, Maradona scored the most wonderful goal in the history of the World Cup - century goal.
He was alone with the ball, his own half of the long-distance attack of 50 or 60 meters, one after another by five English defenders, and finally crossed the goalkeepers defense, the ball into.
Its the most incredible image of Maradona on camera. How can a man who runs in a straight line on the court pass five players? Mervyn King said in his speech
In the eyes of the then central bank governor, the answer is simple: Englands defenders reacted to Maradonas actions. It is because they want Maradona to move left or right that Maradona can go straight
Market interest rates will change according to market expectations of central bank behavior. Historically, the Bank of England and other central banks have experienced such a period: the central bank did not adjust the official interest rate significantly, but it had an impact on the economic trend.
Monetary policy (like Maradona in a straight line to his goal). How can this be done?
The reason is that financial markets have a preconceived expectation that interest rates will not stay the same all the time, and they expect interest rates to either rise or fall.
In some cases, this psychological expectation is sufficient to stabilize private sector consumption, while official interest rates have barely changed over the same period.
However, Mervyn King also said that Maradona could not hope that someone would give him a straight line to win in all competitions, so monetary policy could not simply keep the official interest rate unchanged to achieve the inflation target.
As for the hand of God, Mervyn King regards it as an old mysterious routine in the work of the central bank, which is unexpected, inconsistent and against the rules.
Since Bailey, the current governor, softened his attitude towards negative interest rates for the first time, the Bank of England has been talking about it so much that some investors have begun to believe that it will cut interest rates in the near future. But looking back on Mervyn Kings Maradona moment, analysts have said that creating expectations of interest rate cuts in the absence of an actual rate cut may be exactly what the Bank of England wants to achieve. Steven major, global head of HSBC fixed income, said in an interview that the Maradona effect has been successfully used in the past, but this time we must be careful because this is the story of the wolf coming. If we repeat it too many times, no one will listen to it.. Source: Wall Street, editor in charge: Chen Hequn_ NB12679
Since Bailey, the current governor, softened his attitude towards negative interest rates for the first time, the Bank of England has been talking about it so much that some investors have begun to believe that it will cut interest rates in the near future.
Steven major, global head of HSBC fixed income, said in an interview that the Maradona effect has been successfully used in the past, but this time we must be careful because this is the story of the wolf coming. If we repeat it too many times, no one will listen to it..