that are unlikely to change. the biggest problems are institutional, political, and – perhaps most of all – societal : they centre on fiscal policy decisions, collective bargaining agreements, and overall societal consensus. these we can change. the marvellous thing about icelanders is that we have never let trivial matters like population undermine our steadfast belief that we can stand shoulder - to - shoulder with other countries in everything that we endeavour to do – if we only take the matter seriously enough. this is the attitude that we should take towards economic policy. in this context, i agree with icelandic independence leader jon sigurðsson when he warned about icelandic individualism, saying, “ many tend to think of iceland as being alone in the world and deny that other countries ’ experience matters. ” it is never stressed often enough or loudly enough that monetary policy is social welfare policy. economic volatility generally leads to unexpected changes in people ’ s personal situation – particularly for people with low income. the cost of inflation is more onerous for low - income people and causes purchasing power to fluctuate. successful economic policy reduces the level of uncertainty in people ’ s everyday lives, and price stability delivers increased purchasing power and a predictable housing market. economic 3 / 4 bis central bankers'speeches stability is a normal and appropriate thing for people to demand – and the principal objective of the central bank of iceland. successful monetary policy is therefore extremely important for general well - being and reduces the likelihood of poverty, while economic policy mistakes are costly, not least for those with the lowest income. increased credibility of monetary policy leads to lower interest rates, thereby improving debtors ’ situation. it is therefore of vital importance that we agree as a society to maintain economic stability through thick and thin. honoured guests : influenza epidemics are nothing new. in the past 500 years or so, there have been about two to three influenza pandemics per century. it is likely that no one remembers the asian flu of 1957 or the hong kong flu of 1968 any longer. but these were deadly pandemics that took place in the twentieth century, even though they paled in comparison with the spanish flu, which killed between 21 million and 50 million people worldwide. what is unique about covid - 19 is not the illness itself but the response to it. the disease control measures adopted around the world are unparalleled. they come at an enormous economic cost and could easily bring with them a deep, but hopefully short - lived, economic

policy how to deal with market dysfunction in periods when the optimal policy response differs from that required for monetary policy purposes operations were ad hoc or discretionary whether more permanent standing facilities might better shape expectations effectiveness – ‘ got in all the cracks ’ no explicit ‘ insurance premium ’ in facility pricing – risks fuelling moral hazard if expected to prevail in future whether to adopt bagehot pricing / terms : eg buying at below pre - stress prices but above stress prices and / or pricing / haircuts took risk off private sector balance sheets added risk to public sector balance sheets how to judge appropriate risk sharing, and set bounds on public sector exposure ability to ‘ go big and go fast ’ necessary in the face of the covid pandemic the first is that central banks are likely to face increasing calls to provide public liquidity insurance for instances of severe financial market dysfunction in the years ahead, as the reliance on those markets grows, vulnerabilities to liquidity shocks persist, and intermediation capacity remains constrained. clarity will be required as to whether, and if so how, such activities fall within their formal remits. in some cases they may be able to use existing tools designed for monetary policy purposes, as they did in the covid crisis. but in others, those tools may prove poorly suited to the task, and new ways will be needed to achieve those ends, whether through outright purchase and sale operations, repo facilities or other means. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice second, central banks will need to decide which marketable assets should be in scope of any new tools. the most obvious candidate is government bonds, which lay at the epicentre of the dash for cash. for other, riskier, assets to qualify, a case would need to be made both that they are sufficiently core to monetary and financial stability, and that central banks can price and risk manage them effectively. it is notable that many central banks bought a range of assets beyond government bonds during the 2008 - 9 and covid crises, including corporate bonds and commercial paper. third, central banks will need to reflect on whether the use of their balance sheets to address market dysfunction should remain primarily discretionary, or whether at least aspects of that role should be formalised into standing facilities, the terms of which are known in advance. the case in favour of such an approach is that a known