. measures to prevent future crises dealing with the imminent challenges of the current crisis, however, should not let us lose sight of the efforts to prevent future crises. even when proper fiscal consolidation has brought public debt back to sustainable levels, this alone offers no guarantee against fiscal policy getting off track again in the future. history tells us that maintaining sound public finances is a notoriously difficult task. against this backdrop, auerbach has discussed the usefulness of an independent fiscal entity which would to a certain degree mirror the independent role of central banks. it is also reminiscent of a proposal made by leeper for an “ office of independent thinking ”. long - term government commitments are usually not a topic of public debate, and if they are, the discussion is often not based on sound facts or analysis. thus, better information and a debate at a higher level would allow the public to make an informed judgment and put pressure on politicians. alas, i am somewhat sceptical of this proposal – both in terms of political viability and with regard to the extent that the budget authority of elected parliaments can legitimately be bis central bankers ’ speeches constrained to such an extent. the independence of monetary policy from the immediate influence of parliament and government seems to be rather the exception that proves the rule than a suitable recipe for reining in other fields of economic policy, in particular fiscal policy. in my view, however, the financial markets are fundamentally better at exerting discipline on policy makers. investors are less subject to the problems of moral hazard and time inconsistency that we usually run into when relying on policymakers to ensure fiscal soundness. this confidence in financial markets may come as a surprise, given their recent track record in identifying risks early on. to act as more reliable correctives for fiscal policy, market participants have to assess risks timely and correctly and factor them into their investment decisions. the experience of the crisis has already led to a fundamental assessment of risks associated with various assets. to ensure that markets effectively discipline fiscal policy it is equally important that investors themselves can expect to bear the consequences of their investment decisions, that is to say, both profits and losses. this requires a stronger institutional framework and an overhaul of financial market regulation which is currently under way. relevant aspects have been discussed in some papers presented at this conference. cooper and kempf as well as cukierman and izhakian, for instance, have discussed the problem of bailouts with regard to their potential costs and benefits

some time now, but they have been attracting renewed interest in the current low yield environment. let ’ s not forget that there are also other players with more explicit links to volatility. these include commodity trading advisors ( ctas ) with momentum - driven strategies ; 2 / 5 bis central bankers'speeches funds that have volatility targets or ( so - called ) volatility caps and risk parity funds. many of their approaches rely on systematic investment strategies. these strategies promise outperformance or superior risk management by eliminating human bias. they largely lean on automated market data analysis. but they also imply correlated investments. when volatilities are low, the strategies systematically increase riskier investment positions, and vice versa. here too, procyclical influence on market liquidity is a central concern. one factor which many, if not all, of these developments have in common is the relentless drive towards digitalisation. big data, machine learning and artificial intelligence have become indispensable for many market participants in the fields of forecasting, investment management and trade execution. so in a nut shell, we see a lot of changes in the market. these changes will alter the information that is being sent to us. the overall question is how are we going to interpret these signals? just think about traditional benchmark rates and also the shape of the yield curve. no matter which yardstick is taken : a superficial reading may suggest that the us yield curve is sending strong warning signs about growth and inflation expectations. in the same vein, the economic outlook implied by the bund curve seems to look only marginally better. for all the concerns which the yield curves continue to attract, there are many voices pointing to special factors which dilute the reliability of this indicator. increasing demand for high quality assets seems to play an important role – be it from largescale institutional investors, market participants in need of collateral, or banks aiming to satisfy regulatory requirements. the dampening impact of monetary policy on term premia is often mentioned as an influence factor as well. i will come back to this point shortly. turning to other segments, reliability concerns have also cropped up surrounding market - based inflation expectation indicators such as inflation swaps. i will not go into an in - depth analysis, the jury is still out on what has been driving down longerterm market indicators. all the related issues are being continually reassessed by the eurosystem1. another challenge is to correctly interpret vol