to suggest that a person ’ s appreciation increases in parallel with the knowledge he or she has about the way in which these two factors interact. a number of studies indicate that economic education has – to put it diplomatically – some room for improvement. the bundesbank has therefore expanded its economic education programmes in recent years. by using educational materials and organising various types of events, we want to improve to the best of our ability the general public ’ s understanding of monetary and foreign exchange policy issues. for example, our regional offices provide teacher training, visit school groups and organise public lectures under the motto “ forum bundesbank ”. the feedback that we have received on these initiatives has been very positive. bis central bankers ’ speeches i myself meet once a year with teachers and once with pupils. time and time again, i see when young people visit the bundesbank that they are very interested in our work and ask intelligent questions. we should, of course, be aware that the impact that such measures can have is limited in terms of both breadth and depth. such was the account recently given by the senior business editor of the frankfurter allgemeine zeitung concerning her own offspring : “ it is a positive thing that [ the bundesbank ] goes into schools to raise awareness about monetary stability and to provide insights into the secrets of interest rate policy. it really is never too early to start tackling such topics in times such as these. however, it should be under no illusions as to the success of its efforts. my child took precisely one term away from the talk given by a bundesbank representative to a year 12 class : marginal lending facility. ” incidentally, this technical term is even on the sixth form curriculum in bavaria. that being said, it is also clear that the jargon that we have become accustomed to as central bankers should not detract from the essentials. the principle of liability as a guide but it is not just vocabulary that detracts from the essentials. nowadays, economists ’ reasoning is highly mathematical and model - oriented, which often makes it difficult for noneconomists to comprehend. however, institutional rules and regulations have also become so complex nowadays that often only a few experts are able to fully understand them. consider the federal financial equalisation system, for example. addressing this subject, peer steinbruck once said, “ there are only three people that really understood this concept. the first is dead. the second is in a mental asylum.

the country experiencing outright declines in home values. in response to weak demand and bloated inventories, homebuilders have sharply curtailed new construction. the decline in residential investment directly subtracted about 3 / 4 percentage point from the average pace of u. s. economic growth over the past year and a half. in its regular reports to congress, most recently in july, the federal reserve board has highlighted as a downside risk the possibility that housing weakness might spill over to other parts of the economy – for example, by acting as a restraint on consumer spending. thus far, however, direct evidence of such spillovers onto the broader economy has been limited. the housing correction has taken a more visible toll on the financial markets. in particular, since early this year, investors have become increasingly concerned about the credit quality of mortgages, especially subprime mortgages. the rate of serious delinquencies has risen notably for subprime mortgages with adjustable rates, reaching nearly 16 percent in august, roughly triple the recent low in mid - 2005. 1 subprime mortgages originated in late 2005 and 2006 have performed especially poorly, in part because of a deterioration in underwriting standards. moreover, many recent - vintage subprime loans will experience their first interestrate resets in coming quarters. with the softness in house prices likely to make refinancing more difficult, delinquencies on these mortgages are expected to rise further. at one time, most mortgages were originated by depository institutions and held on their balance sheets. today, however, mortgages are often bundled together into mortgagebacked securities or structured credit products, rated by credit rating agencies, and then sold to investors. as mortgage losses have mounted, investors have questioned the reliability of the credit ratings, especially those of structured products. since many investors had not performed independent evaluations of these often - complex instruments, the loss of confidence in the credit ratings led to a sharp decline in the willingness of investors to purchase these products. liquidity dried up, prices fell, and spreads widened. since july, few securities backed by subprime mortgages have been issued. investors'reluctance to buy has not been confined to securities related to subprime mortgages. notably, the secondary market for private - label securities backed by prime jumbo mortgages has also contracted, and issuance of such securities has dwindled. 2 even though default rates on such mortgages have remained very low,