than in a market - based system, as illustrated by wealth effects, for example. therefore with regard to the purchase of government bonds, measures which are obvious in one place could be the last resort at best for us – for instance when there is the threat of deflation, but only if the cost - benefit analysis is favourable. as you see, there are more questions than answers at the moment. in my view, a consideration of the costs and benefits, and the opportunities and risks of a broad purchase programme of government bonds does not give a positive outcome at the current time. concluding remarks owing to my position, i have limited myself today to talking about innovations in monetary policy. at this point we should look first at the effect of our recent measures and of the asset quality review and the stress test on bank lending. innovations in other political areas are also necessary, if not even more so. the reasons for weak growth and funding shortfalls primarily lie elsewhere, not in a lack of central bank liquidity, to say nothing of capital markets. innovative political approaches are called for when it comes to increasing growth potential in the euro area, strengthening economic adjustment efforts and making budget consolidation compatible with growth and employment. but let me conclude by returning to the original question : how innovative may the ecb ’ s monetary policy be? as innovative as necessary and as effective as possible. this requires careful consideration. the risks and side effects must always be taken into account. for me, given the current situation, the hurdles for further measures are very high, especially for broad purchase programmes. the interest and spreads for many debt instruments are already very low : the risk of market distortions cannot be dismissed. the deciding factor for all programmes is their effectiveness for the real economy and ultimately for price stability, which is what we – the ecb as the central bank for the whole euro area – must be judged on. innovation is not therefore a taboo, but neither can it be an end in itself. i look forward to our discussion. bis central bankers ’ speeches

belief based on authority ” both in the public perception of central banks and of central bankers. 2. trust : the role of money and the value of price stability one does not have to look very far in order to find a link between faith and money. in fact, every onedollar bill bears the inscription “ in god we trust ”. the euro will be more secular in this respect. in the case of sterling, the pound notes feature a “ promise to pay the bearer ” of the note the amount stated. this points to the very nature of money as being built on trust, on a promise. trust is crucial for money to function as a medium of exchange, as a store of value and as a stable unit of account. using economic terminology, money - or rather the trust that underpins the use of money - has public good characteristics or confers positive network externalities on all participants in the economy. in this way money economises significantly on the costs of transactions that would be present in a pure barter economy. if you look more closely at the dollar bill, you will find a further inscription which states “ this note is legal tender for all debt, public and private ”. this imposes an obligation to accept the note in the settlement of contracts and highlights the fact that money derives its value - whether imposed by a legal tender requirement or not - from the willingness of other economic agents to accept it to settle transactions. each agent will only accept money, if he can be confident that it will in turn be accepted by other agents in future transactions. thus money is a social achievement as has long been recognised by economists for example by menger. money is a question of trust, its use requires trust and it reflects trust. this is especially true in the case of fiat money, i. e. the use of printed paper - which has no intrinsic worth - as a medium of exchange and as a store of value. yet even commodity money requires trust and a well - founded expectation that it will be accepted for a wide range of transactions. milton friedman, in his book money mischief ( 1992 ), reports the well - known story of the monetary system of a small island in micronesia which at the end of the 19th century used stone wheels as a medium of exchange and as a store of wealth. he recounts an episode when the colonial government imposed “ fees ” on disobedient district chiefs simply by painting black crosses on these stone wheels. this miraculously and promptly