have enabled them to take advantage of a rapid pace of technological change to make our capital stock more productive and profitable. i will argue that the process of recognizing this greater value has produced capital gains in equity markets that have lowered the cost of investment in new plant and equipment and spurred consumption. but, while asset values are very important to the economy and so must be carefully monitored and assessed by the federal reserve, they are not themselves a target of monetary policy. we need to react to changes in financial markets, as we did this fall, but our objective is the maximum sustainable growth of the us economy, not particular levels of asset prices. as i have testified before the congress many times, i believe, at root, the remarkable generation of capital gains of recent years has resulted from the dramatic fall in inflation expectations and – 2 – associated risk premiums, and broad advances in a wide variety of technologies that produced critical synergies in the 1990s. capital investment, especially in high - tech equipment, has accelerated dramatically since 1993, presumably reflecting a perception on the part of businesses that the application of these emerging technological synergies would engender a significant increase in rates of return on new investment. indeed, some calculations support that perception. they suggest that the rate of return on capital facilities put in place during recent years has, in fact, moved up markedly. in part this may result from improved capital productivity – that is, the efficiency of the capital stock. in addition, we may be witnessing some payoffs from improved organizational and managerial efficiencies of us businesses and from the greater education – in school and on the job – that us workers have acquired to keep pace with the new technology. all these factors have been reflected in an acceleration of labor productivity growth. parenthetically, improved productivity probably explains why the american economy has done so well despite our oft - cited subnormal national saving rate. the profitability of investment here has attracted saving from abroad, an attraction that has enabled us to finance a current account deficit while maintaining a strong dollar. clearly, we use both domestic saving and imported financial capital in a highly efficient manner, apparently more efficiently than many, if not most, other major industrial countries. while discussions of consumer spending often continue to emphasize current income from labor and capital as the prime sources of funds, during the 1990s, capital gains, which reflect the valuation of expected future incomes, have taken on a more prominent role in driving our economy. the steep uptrend

, which could then be used with data from future surveys to track and analyze electronic banking. so, in an effort to establish some benchmarks, let me summarize briefly what reality appeared to be in 1995. our survey results indicated that, in 1995, use of an electronic technology to transact at a financial institution was common, but hardly the dominant form of conducting business. ignoring credit cards, which were widely used, the most commonly used instrument was direct deposit, a relatively old and well - established electronic technology. while an estimated 50 percent of households used direct deposit, this usage rate paled compared to that of the most commonly used means for transacting at a financial institution. the most common means was the “ in - person ” visit, employed by 87 percent of households. indeed, the second most popular technology was the mail, used by an estimated 57 percent of households. other electronic technologies, including even the telephone and atms, were employed by substantially smaller portions of the population. stored - value cards did not even show up in numbers sufficient to estimate reliably a national percentage, and use of the computer for transacting at a financial institution was scarcely out of its diapers as far as being a technology that households actually used. still, some form of electronic technology was utilized by almost 70 percent of american households, even excluding credit cards from the calculation. perhaps the most interesting and important results from our 1995 survey concerned the importance of education, income, financial assets, and age for the use of electronic banking products by us households. indeed, when trying to describe who used electronic banking it seemed difficult to underestimate the importance of education, even after controlling for factors such as income and age. an important break point appeared to be achieving at least a college degree, a level of education held by the heads of less than one - third of households. households with annual incomes below $ 25, 000 were particularly unlikely to use electronics, and households with annual incomes above $ 50, 000 appeared relatively likely to do so. in addition, households with heads under the age of 35 were considerably more likely to use atms, debit cards, and the computer. the only use of electronic technology that increased with age was direct deposit, a reflection of the importance of the direct deposit of social security payments. on balance, these results suggested that, in 1995, the potential market for relatively new electronic banking products was highly specialized. since 1995 the world of electronic banking has certainly changed.