You see, there is really no point in using words in vain. What do people gain from spiteful personal attacks on other people? I wish to refer to one of the aspects of the Noble Eightfold Path as laid out by Lord Buddha that describes the way to end suffering. That is the how to use words or to speak.

“Right speech is the first principle of ethical conduct in the eightfold path. Ethical conduct is viewed as a guideline to moral discipline, which supports the other principles of the path. This aspect is not self-sufficient, however, essential, because mental purification can only be achieved through the cultivation of ethical conduct. The importance of speech in the context of Buddhist ethics is obvious: words can break or save lives, make enemies or friends, start war or create peace. Buddha explained right speech as follows:
1. to abstain from false speech, especially not to tell deliberate lies and not to speak deceitfully,
2. to abstain from slanderous speech and not to use words maliciously against others,
3. to abstain from harsh words that offend or hurt others, and 4.
to abstain from idle chatter that lacks purpose or depth. Positively phrased, this means to tell the truth, to speak friendly, warm, and gently and to talk only when necessary.” www.thebigview.com/buddhism/eightfoldpath.html

I do not comment on technical points raised by the Fuss Budget. Let the interested audience read both sides of technical arguments and make an educated decision on who is right and who is wrong.

I do not agree with the Fuss Budget’s claim that central bank’s do not self-confess. Modern monetary policy strategies developed by central banks is a result of learning from past mistakes and confessing what went wrong in the past and adopting to new circumstances and new strategies. This is true for Central Bank of Sri Lanka as well. If one reads Box Articles I referred and related literature published by the Central Bank, one can clearly see how monetary policy making has been evolving over a long-period of time.

The recent monetary policy strategy was formed well before Dr Harsha de Silva came into this debate. He was involved only after he was unofficially appointed as an Economic Advisor to the opposition. It was his political interest which drew him into this debate but he was trying to be seen as an independent analyst. This was very clear in his articles where half of his writings attack individual persons involved in policy making rather than policies themselves. This is similar to some politicians in our part of the world attacking media institutions and journalists when politicians are criticized rather than countering arguments or defending their actions. Policy intellectuals wouldn’t do this.

This is where I drew a parallel between a policy intellectual and politician. This was the difference between Dr Harsha De Silva and other policy intellectuals who criticizes central bank policies on regular basis. I must say lately he was making some attempts to reduce attacks on individuals. Now of course, he doesn’t need to do so because everyone now knows the fact that he is a politician. Still I hope he is educated enough to take my criticism as constructive criticism of his past and will prove he will be a different Dr Silva in the Parliament. Time and his future actions will reveal his level of intellectuality. I again wish him all success.

However,from what you say, there is no difference of opinion between you and me.

You have very correctly laid down the scientific approach which is valid for any science, whether it is natural science or social science.

Anyone who adopts the scientific approach which you have described for arriving at decisions is a scientist. This was amply demonstrated by Robert Pirsig in his path breaking novel, Zen and the Art of Motorcycle Maintenance, which was an inquiry into the methodology of science and its value system.

The basic feature of science which tries of find 'a truth'rather than 'the truth' is the refutability of the truths postulated. What I said was that Harsha's criticism should therefore not be taken as an offence and he has simply done his duty as a person upholding the traditions of science.

In debates, we get battered and bruised, but we should not take it as a personal attack and hold a grudge against the debater.

In Argumentative Indian, Amartya Sen has beautifully summarised this when he talked about a tolerant society: 'It was indeed a Buddhist emperor of India, Ashoka, who in the third century BCE, not only outlined the need for toleration and the richness of heterodoxy, but also laid down what are perhaps the oldest rules for conducting debates and disputations with the opponents being 'duly honoured in every way on all occasions'. pp xii to xiii I may not agree with Harsha, but I respect his right to disagree and I, following the etiquette and decorum established by Emperor Ashoka, will 'duly honour him'in every way.

At least we need to encourage people to send professionals/intellectuals to parliament rather than sending all sort of goons, Since majority of people stick to the village level politics, it is very difficult, hence at least we need to encourage leaders of parties appoint intellectuals through the national list.

Harsha's role in the last few years was to bring home to this essential requirement of a science by questioning the hard held views by some. It in fact generated a free discussion, opportunity for people to clarify and respond and above all, new wisdom for readers who followed the great debate.

Sometimes, such opposition may not be to the liking of those who are involved in the debate and it may also cause personal pain for them. But it is the nature of science and we all have to accept that such attempts at refuting one's ideas is the foundation of the development of science. Professor Herbert Grubel of Simon Fraser University once summarised this bitter reality in a reference to a good seminar: 'A seminar is not a success unless the speaker limps out of the seminar room fully battered and bruised all over his body as result of the onslaught delivered on him by his opponents' So, do not expect the truths one has postulated 'go unchallenged'.

It is natural for a central bank to defend its position and no one would expect any less - especially if they are genuinely trying to control inflation. No one would expect them to self-confess anyway. Even Bernanke does not.

Almost the same criticisms that Harsha levelled against the central bank were levelled against the Bank of England by David Ricardo in the early 1800s. (Gold plus notes vs Fx reserves plus T-bills) They did not self-confess either.

Harsha was not wrong at all. The rise in domestic assets and no inflation can be easily explained.

During a balance of payments crisis essentially there is a 'run' on the central bank triggering a deflationary collapse despite the switching of a domestic asset to a foreign asset. The rising (non-tradeable) domestic assets did not cause inflation because partial sterilization (less than 100 percent) caused liquidity shortages and high interest rates and essentially killed bank credit blunting the transmission mechanism of the central bank.

This does not prove Harsha (or Milton Friedman or David Ricardo) wrong but essentially re-inforces ideas explained in-depth by people like Friedrich Hayek and also the founder of Sri Lanka's central bank John Exter.

And also rising foreign assets or tradeable domestic assets could also push inflation up (if the anchor currency central bank - the Fed - is generating inflation. Neither the California gold rush nor the great depression would disprove either Ricardo or Friedman.

It is also noteworthy that the 'run' on Sri Lanka's central bank was also triggered by the activities of the anchor central bank, the Fed.

Great economists of the caliber of Adam Smith,Alfred Marshal,John Keynes, Irving Fisher and even Karl Marx has been challenged and sometimes proven wrong.But they remain in our minds as intellectuals who contributed to the betterment of our society.With the caliber of the rest who has entered the parliament we should be happy we have few intellectuals who could at least contribute something meaningful for the benefit of the society than howling for the unfortunately illiterate gallery who has no idea of modern day economics!!or economic prosperity.

All economists familiar with Sri Lanka’s inflation disagree with the ideas expressed in the first paragraph of this article. It is already well known and well proven that Dr Harsha de Silva’s theory about money printing is based on a spurious relationship between T-bill holdings of the Central Bank and old Colombo Consumer’s Price Index. When he first published his favorite chart of these two variables in Daily Mirror, one of the junior economists attached to the Economic Research Department of the Central Bank challenged his theory and clearly highlighted technical flaws in his arguments in a subsequent article.

In response, Dr Silva was very angry because his poor knowledge in monetary policy was exposed to the general public by a junior central banker. Everyone who followed this debate through a series of subsequent articles may very well remember the fact that Dr Silva’s responses to this officer were very unprofessional as he started to mount personal attacks not only on this officer and but also on several other senior central bankers including the Governor Cabraal. Such articles clearly indicated his bias towards one political regime, which is perfectly alright if he declared his conflict of interest without misleading the public as an independent analyst.

As claimed by Professor Samarajiva, the Central Bank never corrected policies in response to Dr Harsha De Silva’s arguments instead some junior officers proved that Dr Silva’s theory was technically flawed. I kindly request Professor Samarajiva or anyone else interested in this subject to update the chart published by Dr Silva for an extended period. It will simply show how wrong his arguments are.

Since Dr Silva was trying to mislead general public about money printing and inflation in his articles and interviews, Central Bank published a Box Article in its Annual Report 2007 which clearly explains the process, implications and fundamentals (Box Article 16 in Annual Report 2007). The Box Articles 1 and 17 in the same Annual Report also explain the Central Bank’s explanation and strategies on inflation management. The current low inflation clearly proves the fact that the Bank’s strategy is correct and Dr Silva’s has utterly failed not only in his analysis of inflation but also his other predictions on exchange rate and external reserves.

However, I appreciate his courage to talk about any subject whether he is an expert or not about it and the fact that he is fearless to expose his poor knowledge on certain subjects knowingly or unknowingly. This is a very useful feature for a politician to be successful. I wish him all success in his new career. In fact, there was no strong mouthpiece in the opposition to counter another Dr Silva. He will be a perfect match and hope to see fireworks between Dr Silvas.

P. Nandalal Weerasinghe
Former Chief Economist and Director of Economic Research of the Central Bank of Sri Lanka

Unfortunately he will be sitting in the opposition along with his buddy ranil the greatest manipulator and loser of all time for a very long time.

There may be quite a number of arguments against his thinking