Central banks around the world seem themselves to be moving in this same direction, with greater local, citizen-level engagement. Other central banks to have recently launched community-based initiatives  include the US Federal Reserve’s “Fed Listens” events. These involve roundtables with the general public, involving local leaders, policy experts and academics from across the United States.64  61  https://www.bankofengland.co.uk/outreach Geertz (1998). Patel, Gibbon and Greenham (2018) and Haldane (2018b). 64 https://www.federalreserve.gov/monetarypolicy/review-of-monetary-policy-strategy-tools-and-communications-fed-listens-events.htm 62 63  46  All speeches are available online at www.bankofengland.co.uk/speeches  46  These initiatives are a good foundation for central banks, for constructing a Third Pillar. More of these types of local, citizen-based engagements may be needed in the years ahead, if policy institutions are to shrink the twin deficits and strengthen that Third Pillar. There is scope to decentralise more of central banks’ activities, giving them greater reach, voice and engagement locally. That would certainly get my personal vote. Conclusion  Our economies, like our politics, are local. Like the seashore, the more you magnify an economy, the greater its richness, complexity, self-similarity. Like our bodies, understanding our economic health means taking readings at many resolutions. It means understanding the moving body parts, and their interactions, in microscopic detail. It calls for new data, at a higher frequency and higher resolution, and new ways of stitching it together. It means making micro-to-macro a reality.

This, for example, can be done by refraining from rolling over short-term loans. The spillover effects of unexpected events may therefore be more substantial for bank loans than for securities debt. c)  A well developed debt securities market provides the financial system with two legs to stand on  Financial crises are normally related to the banking system. The crises have partly been the result of a very high concentration of risk in banks. In crisis situations, we have seen that financial institutions and securities markets can be complementary and prevent a credit crunch. One example is the crisis that followed the collapse of the US hedge fund LTCM in 1998. For a period during the crisis, there were substantial problems in the private bond market in the US. Financial institutions increased lending and prevented a more extensive credit crunch. Conversely, we have seen that when there have been problems in the banking sector, securities markets have replaced bank loans. BIS Review 48/2002  7  Changes are now taking place, which I think will contribute to strengthening the Norwegian bond market. Proposed legislation changes will for example provide for the sale of housing loans to a separate entity that finances the purchase by issuing bonds. The proposed legislative amendments would permit a wider range of issues in the bond market. In general, a larger number of issuers and investors would enhance liquidity in the secondary bond market. This could also directly or indirectly strengthen banks’ position.