public sector has had to take the lead in creating changes that are beneficial to society. fourthly, network and scale effects are important factors to consider within payments. they generate barriers to entry, but also leave room for efficiency gains. though not new, both effects may have been accentuated by the digitalisation of payments. after the historical walkthrough, i will explain those observations further and put them into the context of our current work on developing the payment infrastructure. finally, i will say a few words about the riksbank ’ s e - krona project and our involvement in international work to improve cross - border payments. those initiatives are targeted more at end - users of payment services. yet, both can equally well be related to the lessons just highlighted. 2 the history of payments – fasten your seatbelts! with the brief time i have at my disposal now, a tour through the history of payments must be limited to picking out a few main developments. however, for those with more time to spend, i can certainly recommend this subject for further study. in addition to useful insights into how we got to where we are now, i dare to say that it is packed with drama unfolding around great historical events. i will cover a few of them here. from barter to money in the beginning, there was nothing! well, in fact there was, but that ‘ nothing ’ was pure barter. to acquire a good or service not produced by yourself, you needed to come up with a good or service that the seller wanted to have. when people started to specialise in what they produced, it was a great move forward for mankind - but to trade with each other was difficult. barter, then, needed to develop. what happened is that one leg of the trade increasingly took the form of a money - like asset. by that i mean something which ( i ) is countable or measurable, ( ii ) has value as it is accepted by most people and ( iii ) can be stored by the seller for later purchases. early on, various assets performed this role. in the end, however, precious metals like gold and silver came to dominate as means of payment. paying for goods and services with gold or silver was not ideal, though, due to the process of weighing required. the solution to this was coins, as the people in lydia discovered around 650 b. c. coins smoothed the check - out, so to speak, and you can

figure 6. d, is calculated in the same way as in the figures i presented earlier. figure 6. c shows the mean squared gap. a lower mean squared gap for inflation entails a better acquisition of the inflation target ; that is a better stabilisation of inflation around the inflation target. a lower mean squared gap for resource utilisation entails a better stabilisation of resource utilisation around a normal level. consequently, the closer a point lies to origo, or “ south - west ” in the figure, the smaller are the total deviations of inflation from the inflation target and of resource utilisation from a normal level. from figure 6. c, it can be seen that the lower repo - rate path from the alternative scenario in the monetary policy report of october 2009 was closer to origo in both dimensions when inflation is measured in terms of the cpif. it thus stabilises both inflation and resource utilisation better. the mean squared gap for inflation measures the gap between the inflation forecast and the inflation target or, more precisely, the mean squared deviation between the inflation forecast and the inflation target during the forecast period. the mean squared gap for resource utilisation, measured as the output gap, measures the deviation between the forecast for resource utilisation and normal resource utilisation – more precisely, as the average squared gap during the forecast period. for more discussion of this see lars e. o. svensson, “ evaluating monetary policy, ” forthcoming in koenig, evan, and robert leeson, eds., from the great moderation to the great deviation : a round - trip journey based on the work of john b. taylor ( revision and update of a speech at uppsala university on 13 march 2009 ). one may ask why the focus should be on the cpif and not the cpi. in a situation in which extensive repo - rate changes have very large direct effects on the cpi, i consider it to be more appropriate to focus on stabilising the cpif around the inflation target, instead of the cpi. however, the assessment of the majority of the executive board was that the lower repo - rate path was not appropriate. at the monetary policy meetings held during the course of the year, the view of several members of the executive board was that the effects of the very low repo - rate levels on the economy and the financial markets were uncertain and that there was therefore reason to be cautious about reducing the