a wire transfer? articles 3, 4 and 4a of the uniform commercial code ( “ ucc ” ) govern the above circumstances, but have nothing to say on internet payments. currently, private contract law governs ; agreements between each of the parties in an on - line transaction should be very carefully drafted and reviewed. still, if internet banking and commercial transactions were to grow in volume and complexity, it is quite possible that private contract law could evolve into a specialized commercial law of cyberspace, and eventually be codified into parts of the ucc. on a less theoretical note, i should mention that a multi - national task force on the security of electronic money, established by the committee on payment and settlement systems and the group of computer experts of the group of ten central bank governors, and chaired by israel sendrovic of the federal reserve bank of new york, issued a report on its findings entitled “ security of electronic money ” in august 1996. this task force examined primarily consumer - oriented stored - value payment products by, among other activities, surveying the leading global suppliers of both card - based and software - based stored - value systems, and concluded that the technical security measures of these systems are being designed to achieve an adequate level of security relative to other forms of common retail payment, assuming they are implemented appropriately. i recommend the report to anyone interested in a general discussion about security issues and stored - value systems, internet - based or not. moving away from consumer banking and the internet, and looking perhaps not - so - distantly into the future, i have also had occasion to question what the repercussions are for large - value payments transfer systems, such as fedwire, with the emergence of a different, much more secure internet. generally speaking, the internet today is a “ somewhat ” secure environment in which to conduct banking and financial service activity. the current level of security is not adequate for large - value payments. some internet - based payment products are becoming more secure, but only after the creators of these products have spent a great deal of time, effort and resources making their products secure. consistent fast transmission and processing are also essential for large - value payments. the internet today has no authorized, universal means of prioritizing specific electronic messages from other messages. faster and better hardware helps, certainly, but offers no guarantee. one of my responsibilities is to serve as the product director of the wholesale payments product office of the twelve federal reserve banks. this includes the fedwire transfer of

can debate whether the bank ’ s monetary conditions index is correctly calibrated, whether a 2 per cent fall in the exchange rate is equivalent to a 100 basis point movement in 90 day interest rates. one can debate whether the bank ’ s trade - weighted index correctly measures movements in the new zealand dollar. one can debate whether the 90 - day interest rate correctly measures movements in new zealand interest rates. and i am familiar with all of that debate. ( we dealt with several of these issues in the march 1998 economic projections, and in my speaking notes for journalists in releasing that document. ) but if we accept, as i believe we must, that in a small, open economy monetary policy works to affect the real economy and, in that way, inflation through both interest rates and the exchange rate, then i don ’ t have the slightest doubt that overall monetary conditions have eased in new zealand in recent months, and indeed have eased quite considerably. that easing has taken the form of a sharp fall in the exchange rate which has been partly offset by an increase in short - term interest rates ( the increase in longer - term interest rates has been much more moderate ). i have often conceded that the mci is not a perfect measure of monetary conditions. we will continue to seek ways to improve it. but as a rule - of - thumb to guide financial markets between quarterly projections it has proven enormously useful. it has assisted us through a very major rebalancing of monetary conditions at a time of great turbulence in financial markets internationally, with an absolute minimum of drama. yes, interest rates have gone up, but given our balance of payments deficit - or in other words, our huge appetite for borrowing and our national aversion to saving - that should not be a matter for surprise or regret. if as a nation we become less enthusiastic about borrowing or more enthusiastic about saving, we can expect interest rates to decline to the levels which would seem to be justified by our low inflation. in conclusion, i think it is important that we all look at recent events objectively. right now, the new zealand economy is having to adapt to a complex set of circumstances, including an increase in government expenditure, a reduction in taxation, a changing housing market, and, coming rapidly over the horizon, the negative implications of the asian financial crisis. yet what we see is adjustment to these new circumstances, taking place within existing structures, without great drama. monetary policy, with its single focus on price stability and