speech the song remains the same june 01, 2022 john c. williams, president and chief executive officer remarks at the new york fed and columbia sipa monetary policy implementation workshop, new york city as prepared for delivery good morning, everyone. i'd like to give my thanks to columbia university's school of international and public affairs for partnering with the new york fed once again and for hosting us today. it's wonderful to be here and to see so many colleagues who have traveled from near and far to attend this workshop. we'll have many important conversations over the next two days. to kick us off, i'm going to share some observations on the digital transformation of money and payments. i'll also discuss the potential implications for monetary policy implementation and for central banks more broadly. before i begin, i must give the standard fed disclaimer that the views i express here are my own and do not necessarily reflect those of the federal open market committee ( fomc ) or anyone else in the federal reserve system. i will get to payments technology in a minute. but first allow me to take you back to the year 1877. you're amazed at the sound of music coming out of a new inventiona€ ” the phonograph. fast - forward a century, and you're listening to your favorite band on a cassette tape. in the 1980s, it's a cd. in the 2000s, you're scrolling through the greatest hits on your ipod. and today, perhaps even on your way here, you listened to a streaming service on your phone or watch using voice commands. there's been much innovation over the years, and many improvements in terms of convenience and costs, but at the most basic level we are still doing the same thing : enjoying music. it's how we're doing it that's changed. the same is true with money and payments. both are fundamentally changing through technological transformations. as happened with the delivery of music, the pace of technological advancement is accelerating, and it's clearing the way to do things faster or more efficiently. on top of that, the development of digital currencies has boomed. this includes cryptocurrencies that are not fully backed by other assets. it also includes stablecoins that are fully backed by safe and liquid assets, and central bank digital currencies ( cbdc ). both stablecoins and cbdc that are fully backed by safe assets have the

following accounting identity : the public sector balance + the private sector balance = the current account balance right now the identity holds as roughly : – 10 percent of gdp public sector balance + 7 percent of gdp private sector balance = – 3 percent of gdp current account balance. 5 if the public sector balance must over time move from around – 10 percent to around – 3 percent to stabilize the federal debt - to - gdp ratio at tolerable levels, then the private sector balance and the current account balance must move by roughly 7 percentage points of gdp to take up the slack. assuming that the consumption share of gdp still needs to fall over the medium term, the adjustment in the u. s. private balance will have to occur primarily in terms of rising residential or business fixed investment. there does seem to be room for business investment to expand significantly when firms become more confident in the economic outlook, provided that the united states remains a competitive location for investment. but residential investment is unlikely to climb very much for some time given the chronic overhang of unsold homes. if these two sectors cannot take up all the slack created by necessary fiscal retrenchment in the years ahead – as seems likely – then the u. s. trade balance will need to improve as well. this implies that emes will no longer be able to rely on expanding u. s. demand as a key driver of their own economic growth. of course, this is not just an issue of u. s. and eme adjustment. adjustments will be required in other industrialized countries, too – and not just the deficit countries. there has to be recognition on all sides that global rebalancing in terms of the composition of activity and growth and in terms of global capital flows is necessary. fortunately, this is not a zero - sum game : it is in the interests of all sides. however, it is still very difficult to accomplish because it is not in the short - term interests of some interest groups in many nations. this means that there are likely to be considerable political obstacles to adjustment in many parts of the global economy. in this process, the united states needs to show leadership in contributing to a smooth adjustment. in this regard, i think there are a number of actions that the united states can take – unilaterally and in its own interest – that will make this rebalancing process easier and less prone to disruption. as discussed earlier, no issue is more important than a credible commitment for getting our