Wolfgang Schäuble likes to needle his colleagues by saying he has little real power: the German finance minister argues his voice is rarely heard in a cabinet of ministers with big spending plans. And yet, Mr. Schäuble and many of his counterparts around the world are actually far more powerful than any of their predecessors.
The Finance Ministry recently hosted a low-key meeting of big-time financial experts in Berlin. The group, a kind of shadow economic government run by Mr. Schäuble, acts as a national supervisory board. It is charged with preventing the next financial crisis and has been given sweeping powers to restrict lending to consumers and companies – effectively slowing down the economy if needed.
The German experts are part of a growing international network designed to make the global economy more resilient. In fact, nearly all industrial nations have created similar boards to guard against financial excesses. The Financial Stability Board is the international organization overseeing these national groups.
For Mr. Schäuble’s group, its time in the spotlight may have arrived: record stock market closings and rising housing prices in many rich countries mean many governments are considering using their newfound powers for the first time. The Bank of England was among the first to act when earlier this month it restricted the amount of risky loans banks can make to British homeowners.
And so the world may soon bear witness to a brand new economic experiment. If all goes well, regulators could deal a decisive blow to over-speculation in the market place. But just like any other new experiment, there is a danger of it spiraling out of control.