daily starbucks ) and as a store of value ( making sure you can still afford a starbucks in old age ). historically, those two functions have been in conflict ; … broadly speaking, the money expanders have been debtors and the money restricters have been creditors. ” as my last speech here at the omfif was motivated by the anniversary of the bretton woods collapse, i am particularly fond of this observation : “ over history, creditors have tended to impose systems that control the supply of money – the gold standard, the bretton woods system of fixed exchange rates, the euro – that prevent borrowers from repaying their debts in debased currencies. the strain of keeping up this discipline is intense in democracies where more people are debtors. the gold standard broke down in the 1930s, bretton woods in the 1970s and the euro is struggling today, as is what might be called the post - bretton woods system of independent central banks and inflation targets. ” 4. and now a few humble observations of my own : bis central bankers ’ speeches a. beginning with the fiscal solutions story, this crisis is a deep crisis of the market economy and of financial systems as managed, regulated, and supervised in just a minority of market economies, most of which can now be found in the eu. the usa might have contained the source of the fire, but for three years it has not played a major role in the eurozone and its main role has turned out to be a stabilizing one. thanks mainly to fed swaps, eu savers and investors do not have to worry about the general liquidity position of the eurozone. i almost pray that forthcoming political events in the u. s. do not alter this situation. b. the solution to this crisis involves controlled de - leveraging and the restoration of european and eurozone competitiveness in the developed world. the need for deleveraging is clear, but the restoration of competitiveness in europe is also a must, despite the fact that the ca of the eurozone and / or the eu is roughly balanced. otherwise, the eu will not be able to restore the real growth rates necessary to stabilize eurozone sovereigns in the context of the chief mandate of the ecb, i. e., in a non - inflationary context. i am afraid this may involve quite a few of my fellow european citizens engaging in a bit of metaphorical trench - digging. hopefully, they will also try

the single dgs are where the political clashes will inevitably happen. two reasons for that : 1. first, this is where the money enters. one has to realize that the incentives of the various countries and pan - european institutions are different. “ northern ” countries want to cut the banking sectors of “ southern countries ” free from local politicians, but at no additional cost. ” southern countries ” want money. and many pan - european institutions and politicians across the board support anything heading towards a european political union. different incentives mean different positions in negotiations. bis central bankers ’ speeches 2. second, some eu bodies are obsessed with the “ all eu countries must be same ” approach. while there may be some point to this, why insist on it in the case of the single resolution system, for instance, if it has been negotiated that the ssm only applies to euro - area countries plus volunteers? one can hardly expect non - euro area countries not participating in the ssm to jump at the single resolution system if it means sharing the burden with those inside the banking union without the same treatment in the area of a fiscal back - stop. at the same time, would you join the ssm if you did not have a clue how the single resolution rules were going to work? the cnb ’ s position was : let ’ s discuss the whole thing ( bu ) in one shot as a one compact and coherent package where the balance between powers, duties, responsibilities and money always remains assured. and negotiate everything as a single animal, so that illogical inconsistencies are not being produced all along. sure, that would take much more time, but the final outcome might look better and we would not build up the house from the roof down. we are debating the supervisory part first, while burden - sharing ( money ) is being left for the future. the sequence of steps should ideally be exactly the opposite one. why? my observation is that the way the various bail - outs and the ssm have been negotiated so far shows that the readiness and willingness even among euro - area countries to share money is declining over time. and this is exactly the opposite of what should have been happening if a functioning banking and contingent fiscal union had been emerging. so we are risking creating a half - baked bu which will not necessarily be ready for future bad times. and it is also a partial answer to the question of potential participation of some non - euro countries in the ssm. simply, it is too