such as extreme weather in parts of the world – and on the demand side, including the well - documented, rapidly growing food demands of emerging economies. in addition to anticipated strong future demand for agricultural commodities, there is another factor affecting these prices : exceptionally low interest rates. as a bank regulator in the 1980s, responsible for financial institutions in nebraska, kansas, oklahoma, missouri, wyoming, colorado and new mexico, i witnessed the devastating effects of easy credit and leverage in agriculture, real estate and energy. we closed or assisted nearly 350 banks in our region alone. with interest rates near zero and with additional massive liquidity poured into our economy, all interest rates are affected. therefore, asset values of every kind are also being affected, bis central bankers ’ speeches including land values in iowa. loans for land are available at rates well below historical levels – in some instances, 400 basis points below historical averages. the effect on land assets, like any asset, is to artificially boost its value. and there is ample experience that tells us that if rates were to rise quickly, this would affect world demand for commodities and raise the cost of capital on land almost instantly. when – not if – the adjustment occurs, we will see a dramatic drop in values. in the meantime, if operators and speculators have incurred large amounts of debt, then a new crisis will emerge. finally, we know that a crisis can affect more than one segment of the economy. it nearly always affects the broad economy and employment. shortcuts don ’ t work. we need to focus on the real economy. we need to focus on real reform. conclusion my point today is simply that as powerful as monetary policy is, it sometimes is not enough. it cannot ensure an economy that balances its savings and investing needs. it by itself cannot correct our current account deficit or enhance savings and investment. these will require important changes in our real economy. providing the right environment in which government can play its role in supporting business and the consumer to save, invest, manufacture and service national and global needs in the end will create real income and wealth. we need to focus on long - term, stable monetary policy and fiscal policy goals that support these broader goals. having seen the effects of financial crisis after financial crisis as shortterm policies beget short - term policies, we should know that an ever - present short - run focus, even if well intentioned, is the road to ruin. bis central bankers ’ speeches

policy interest rates remain zero, and the federal reserve ’ s balance sheet continues to expand even as the economy improves. with these actions, the fomc ’ s objectives have shifted from that of containing a global crisis to that of more quickly accelerating economic growth. its components focus on raising inflation expectations, increasing asset values and pushing up growth in aggregate demand, and, as stated in its september 2010 press release, employment. while i agree these are worthy goals, i am concerned that maintaining a crisisoriented policy as the tool to achieve them significantly changes the economic risks. past success in pursuing this form of policy is mixed at best. central banks and the long run a swiss central banker once advised me that the duty of a central banker is to take care of the long run so the short run can take care of itself. in the united states, this simple expression has been codified in its laws. the federal reserve act requires that, “ the … federal open market committee shall maintain long - run growth of the monetary and credit aggregates commensurate with the economy ’ s long - run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long - term interest rates. ” these mandates recognize that the factors of production come together in a systematic fashion across economies, sectors within economies and resource availability to create growth. the process is not simple nor does it occur quickly – which is the purpose of putting policy in the context of the long run. it is within this context that policy should acknowledge the improving economic trends and begin to withdraw some degree of accommodation. if this is not done, then the risk of introducing new imbalances and long - term inflationary pressures into an already fragile recovery increase significantly. short - run actions have consequences in the spring of 2003 there was worldwide concern that the u. s. economy was falling into a “ japanese - like ” malaise ; the recovery was stalling, deflation was likely to occur and unemployment was too high. this was the prevailing view despite the fact that the u. s. economy was growing at a 3. 2 percent annual rate and the global economy ’ s average growth was nearly 3. 6 percent. in addition, the fed funds policy rate was 1 ¼ percent. although most bis central bankers ’ speeches knew that such a low rate would support an expanding economy, in june 2003 it was lowered further to 1 percent and was left at that rate for nearly a year, as insurance