particularly interesting strand of the debate about excessive risk - taking concerns the interaction of monetary policy and perceptions of risk in financial markets. some analysts are concerned that several aspects of the conduct of monetary policy in the united states have induced market participants to reduce their expectations about risk too far, setting up the financial markets and the economy for an unpleasant and possibly destabilizing surprise. in this view, the low short - term interest rates that policymakers have thought were required over the past few years to meet macroeconomic objectives are said to have encouraged reaching for yield settling for risk compensation that the investors themselves view as probably inadequate but which they feel compelled to accept, perhaps to achieve targeted levels of real or nominal returns. the tendency of policy to react strongly to sharp declines in key asset prices, and thereby limiting the extent of the decreases, has been thought to induce risk - taking by imparting an asymmetry to asset price movements. finally, a concern is that the fairly new practice of telling the public about our expectations for the path of the federal funds rate may have given market participants a false sense of security about the future path of policy. these practices have been the result of a monetary policy focused on price and economic stability over the intermediate term interacting with the particular characteristics of the economy. the global decline of inflation and spending induced a global reduction in interest rates to unusually low levels in recent years. those low rates were, in fact, intended to stimulate risk - taking and investment when private agents pulled back. the tendency for asset prices to fall more quickly than they rise has largely produced the more rapid and noticeable response of stabilizing monetary policy to declines than to increases. and the importance for economic performance of more - accurate expectations about monetary policy, along with the unusually low policy rates, led the federal open market committee to undertake a more extended discussion of its policy expectations. to the extent that these policy strategies reduce the amplitude of fluctuations in output and prices and contain financial crises, risks are genuinely lower, and that development should be reflected in the prices of assets. to the extent that the central bank can convey something useful about its intentions, markets that take account of these intentions will be priced more accurately. the risk is that private agents overestimate the ability or willingness of central banks to damp volatility in asset prices or the economy, or that they fail to appreciate that future policy actions depend on an imperfectly predictable economic outlook. but developments should have partially alleviated some of these concerns. investors

of a country having made significant changes to accomplish real employment goals. in the mid - 1990s, germany ’ s trade deficit was similar to that of the united states. since then, germany has moved away from trade deficits to surging surpluses, while the united states has continued to run large trade deficits. complementing this shift, german levels of employment have made great strides, and its unemployment rate has touched its lowest point in nearly 20 years. i am not suggesting that the united states attempt to be germany or singapore, two countries that differ from us in many ways. i am also not advocating that we suddenly strive to achieve a large u. s. trade surplus. this might only create other global imbalances and distortions. however, adjustments in our economy are necessary, and other countries have shown it can be done. perhaps the most immediate, and obvious, observation is the simplest : we must change our national savings rate. to rebalance the u. s. trade position from deficit to balance requires that the sum of private and public savings match domestic investment. in other words, a country must not produce less than it consumes if it wishes to balance its trade position with the rest of the world. during the 2000s, germany ’ s personal savings rate increased and is currently about double the u. s. rate. german households paid down debt and avoided heavily relying on debt, in contrast to the united states and so many other countries ’ households. the personal savings rate in the united states has modestly increased since the start of the recession, which is an important positive trend. unfortunately, this improvement has been more than offset by the dramatic deterioration in public saving reflected in the nation ’ s fiscal deficits. though a significant amount of the recent deterioration in public finances is related to the u. s. financial crisis, the fact remains that our national savings crisis has been under way for nearly three decades. since the early 1980s, our nation has consistently chosen to bis central bankers ’ speeches spend rather than save, as witnessed by the long - term decline in our private savings rate and our tendency toward fiscal deficits. most importantly, when we look across the more developed countries, we see that those with higher national savings rates tend to have smaller trade deficits and higher domestic production per person. germany has also benefitted from managing unit labor costs in a manner that keeps its labor force globally competitive. over the last decade, the german economy experienced relatively modest wage increases and important productivity gains