not, have provided important links between the federal reserve banks and the businesses and communities your institutions serve. we have reached out and listened to community bankers through their representation on our boards of directors and advisory councils, as well as through our ongoing contacts with individual firms and the business organizations you serve. the insights we gather from community bankers in our district help me as a policymaker bring main street perspectives to the national policy table each time the federal open market committee, or fomc, meets in washington. when such information from all the districts comes together at our meetings, it forms a rich mosaic of our economy that helps shape our monetary policy decisions. bis central bankers ’ speeches so, i want to thank nick difrancesco, president and ceo of the pacb, and dennis cirucci, your chairman, for inviting me here today. i also want to publicly thank dennis for serving so ably on our bank ’ s community depository institutions advisory council, or cdiac, and as our council ’ s representative to the board of governors. my last opportunity to address the pacb was in september 2007, a very different economic environment than we find ourselves in today. i used that speech seven years ago to discuss the federal reserve ’ s initial responses to growing financial instability in the housing sector. i explained that the fed ’ s role in promoting financial stability rather than its monetary policy responsibilities had prompted the short - term injection of some $ 68 billion in liquidity through open market operations in early august 2007, a mere 12 months after i joined the fed. that seems like a long time ago and much has transpired since then. at the time, the fomc had yet to lower the federal funds rate from its target of 5. 25 percent. weeks later, though, the fomc began to lower the federal funds rate target and then kept lowering it to essentially zero in december 2008, as the global financial crisis and the ensuing great recession enveloped economies around the world. the rate has been near zero for nearly six years now, and the fed has augmented its aggressive policy actions through large - scale asset purchases, now tallying in the trillions, rather than in the billions of dollars. today, i would like to give you my assessment of the u. s. economy and then share some thoughts about the stance of monetary policy. i should note that my views are my own and not necessarily those of the federal reserve board or my colleagues on the fomc, which will shortly

article iv ) surveillance, when assessing risks to both global and national financial systems. they also carry potentially important implications for how these dynamics might most effectively be managed from a macroprudential perspective ( discussed below ). ( b ) improvements to country debt structures ( and restructures ) debt flows are known to be a potent source of instability within the international monetary system. the instabilities they generate are exacerbated by frictions in the design of debt contracts. one such friction is that debt is an inherently pro - cyclical instrument. for example, bis central bankers ’ speeches a negative shock to a country ’ s income prospects will tend to raise debt sustainability concerns and hence borrowing costs, thereby worsening sustainability. another friction is that, once internationally - held debt becomes unsustainable, restructuring it is usually a messy process because of the lack of an internationally - agreed legal framework. in part for that reason, countries have tended to delay tackling unsustainable debt. but if debt is truly unsustainable, delay tends to further worsen debt dynamics, ultimately increasing costs for both debtors and creditors ( krugman ( 1988 ) ). these contractual frictions can make debt a fickle friend. they will tend to aggravate debt sustainability and debtor prevarication problems, thereby encouraging investors to withdraw credit at the first sign of trouble – so - called “ sudden stops ” ( calvo ( 1998 ) ). these frictions are well - illustrated by historical sovereign debt restructuring experience, most recently in emerging market economies such as argentina. yet it is widely accepted that there are straightforward contractual solutions to these debt problems. one is to issue debt instruments whose contractual features reduce pro - cyclicality, such as gdp - linked bonds. their repayment profile adjusts with a country ’ s ability to pay, thereby acting counter - cyclically and quasi - automatically to defuse repayment risk ( shiller ( 1993 and 2003 ), barr et al ( 2014 ) ). the impact of such instruments on debt dynamics could be significant. a recent bank of england study considered the debt - to - income ratios of the g7 countries, given shocks to growth and real interest rates, comparing conventional and gdp - linked debt. the latter cut the variability of g7 debt - to - income ratios in half. yet despite their attraction, no more than a handful of countries internationally have so far issued gdp - linked debt instruments. contingent convertible ( “ coco ” )