the central bank ’ s balance sheet as a result. this type of swap would ensure that the full authority and responsibility for fiscal matters remained with the treasury and congress. congress has mandated the goals of monetary policy to promote long - run price stability, maximum employment, and moderate long - term interest rates. asking monetary policy to take on the role of fiscal policy undermines the ability to achieve this congressional mandate. central banks and monetary policy are not and cannot be real solutions to the unsustainable fiscal paths many countries currently face. proponents who believe otherwise are skating on thin ice. the only real answer rests with the fiscal authorities and their ability to develop credible commitments to sustainable fiscal paths. it ’ s a difficult and painful task to be sure, but a monetary solution is a bridge to nowhere at best, and the road to perdition at worst – a world of rising and costly inflation. once again, i want to thank everyone for coming today. i am confident that it will be a fascinating program. so now that i ’ ve told you what i think, let ’ s get stared and hear from the real experts. bis central bankers ’ speeches

credit facilities to support particular asset classes, such as commercial paper and asset - backed securities, and in november 2008, the fed announced it would begin purchasing housing agency mortgage - backed securities and agency debt to increase the availability and reduce the cost of credit in the housing sector. these types of credit programs target particular market sectors and thereby alter the allocation of credit across markets, reducing funding costs for some sectors and likely raising costs for others. these programs departed from the usual way the fed implements monetary policy through buying and selling u. s. treasury securities, an activity that is generally neutral across markets. when the fed engages in targeted credit programs that seek to change the allocation of credit across markets, i believe it is engaging in fiscal policy. instead of the central bank engaging in this credit policy, the federal government could carry out these transactions by issuing treasury debt to support lending to the targeted markets or firms. in fact, the fiscal authorities frequently undertake such actions – think of “ green energy ” loans, small business loans, and subsidized home mortgages. such credit allocation decisions belong with the fiscal authorities, not the central bank. even the recent maturity extension program, or “ operation twist ” as it is sometimes called, involves selling short - term treasuries and buying longer - term treasuries – an action that could just as well have been conducted by the u. s. treasury. thomas sargent and neil wallace, “ some unpleasant monetarist arithmetic ”, federal reserve bank of minneapolis quarterly review, 5 ( fall 1981 ), pp. 1 – 17. bis central bankers ’ speeches once a central bank ventures into conducting fiscal policy, it may find itself under increasing pressure from the private sector, financial markets, or the government to use its balance sheet to substitute for other fiscal decisions. this pressure can threaten the central bank ’ s independence in conducting monetary policy and thereby undermine monetary policy ’ s effectiveness in achieving price stability. i have long argued for a bright line between monetary policy and fiscal policy, for the independence of the central bank, and for the central bank to have clear and transparent objectives. decisions to grant subsidies to particular market segments should rest with the fiscal authorities – in the u. s., this means the congress and the treasury department – and not with the central bank. should the fiscal authority ask the central bank to engage in lending outside of its normal operations, the fiscal authority should be willing to exchange government securities for the nongovernment assets that would accumulate on