##do ” or “ economic utopia, ” where a middle - class londoner could easily “ order by telephone... the various product of the whole earth, ” “ adventure his wealth... in any quarter of the world, ” and “ secure... cheap and comfortable means of transit to any country. ” furthermore, this state of affairs was regarded “ as normal, certain and permanent, except in the direction of further improvement. ” whenever i read this passage, i am always struck by the power of globalization in bringing about economic prosperity, the ephemeral quality of such achievement in the light of the two world wars, and the parallel with our experiences leading to the great financial crisis. keynes, john maynard, the economic consequences of the peace, 1919. bis central bankers ’ speeches i. the changing economy and central banking in our current discourse on economic policy, or more broadly the whole economy, no one would doubt the critical stabilizing role played by central banks. nevertheless, economic history after the second world war reveals that such a view is quite a recent product. the enhanced role of central banks came into being on the back of three important changes. firstly, there is now a clear division of labor between monetary and fiscal policies. to our eyes, such an arrangement seems too obvious, but during the war, in many countries including the united states and japan, monetary policy was subordinated to fiscal policy. central banks were doing all they could to finance the war effort, and there was no room for independent monetary policy. in fact, monetary policy continued to be constrained for some time after the war. for example, in the united states, the fed was freed, in 1951, from the obligation to maintain long - term interest rates below a level set by the treasury, after arriving at the so - called “ accord ” between the treasury and the fed. 2 secondly, there is no longer any doubt about the role of monetary policy. it is widely accepted that monetary policy should be an important stabilizing force for the macroeconomy. during the 1960s and as late as the first half of 1970s, an influential school of thought, now more or less discredited, held that a slightly higher inflation was a necessary evil for achieving stronger growth and fuller employment. as monetary conditions were relaxed and tightened discretionarily with such a bias over a number of business cycles, inflation, both actual and expected, began to creep up quite noticeably. it became evident that higher inflation

, the proposed rules would address the following : • creditors would be required to provide consumers a reasonable amount of time to make payments before they are considered late. • as a general rule, for accounts having multiple interest rates for different balances, creditors would be prohibited from maximizing interest charges by applying payments exceeding the minimum to the lowest rate balance first. • creditors would no longer be permitted to increase the interest rate on existing account balances at any time for any reason. instead, card issuers could only apply a higher rate to the existing balance under limited circumstances, such as when a consumer has been delinquent for 30 days. of course, creditors could still increase the rate on new transactions and could offer variable - rate cards that have the rate on existing balances adjust based on changes to an index. • creditors could no longer accrue finance charges using the two - cycle balance computation method. the rules also prohibit a practice associated with the issuance of some subprime credit cards, in which most of the credit limit is used for security deposits and high fees imposed at account opening before the consumer actually receives the card. in addition to rules for credit cards, our proposal also addresses potentially abusive practices in connection with banks'payment of overdrafts to ensure that consumers have a choice of obtaining overdraft protection and receive information related to its service and costs. conclusion a robust, innovative, and competitive consumer finance market is crucial to a healthy economy and, as i described earlier, can provide significant benefits to consumers. such a market works most effectively and brings the greatest benefits when consumers are wellinformed and are not subject to abusive practices. the federal reserve is working diligently to best use its authorities to provide both creditors and consumers with rules that strike the right balance between ensuring that consumers receive useful information at an appropriate time and restricting certain practices, while at the same time minimizing the risk of unintended consequences and the imposition of unnecessary costs that could reduce the benefits of a vital consumer finance marketplace.