in the media in general – falling interest rates and low interest rates are considered to be positive while high interest rates have a negative image. this is the typical viewpoint of the borrower. however, there is also a creditor side to the story, even though it plays a far smaller role in the debate. perhaps this is because many people's assets are mainly placed collectively in pension schemes, so that the relationship between interest - rate level and yield is less apparent to the individual. we nonetheless see increasing focus on yields and concern about the low bond yield. many investors still remember the far higher bond yield ten years ago, and the low interest rate has undoubtedly stimulated interest in shares and real assets. today a 10 - year government bond yields 3. 5 per cent interest. with inflation below 1. 5 per cent this is still a positive real rate of return. but for tax - liable investors the real bond yield after tax will seem very low. almost 25 years in the financial sector have taught me that it is vital to emphasise the relationship between yield and risk. apart from utilising asymmetrical tax rules, a borrower or financial investor does not have much opportunity to make a profit without assuming a risk. nobody knows how exchange rates, share prices, interest rates or even house prices will develop. but many do have a firm opinion on this. so we currently see a growing interest in various more exotic investment products with yields based on exchange rates, share prices, etc. we have had products of these types for many years, but the new aspect is that they are now also marketed to private individuals with relatively modest investment portfolios and no particular financial insight. investors may naturally speculate if they wish to, but it is important that they are aware that this is what they are doing. from time to time tales of disaster in the financial press serve to demonstrate that investors have not always understood that in today's markets an annual yield of 10 - 12 per cent is unattainable without taking on a large risk. it is therefore essential that professional advisers take great pains to point out the risks and the opportunities to diversify risk by not putting all one's eggs in the same basket.

nils bernstein : recent economic and financial developments in denmark speech by mr nils bernstein, governor of the national bank of denmark, at the annual meeting of the danish bankers association, copenhagen, 30 november 2005. * * * i appreciate the friendly welcome that i have been given by the banking industry and thank you for this invitation to speak today. let me start by stating that i intend to continue the line set by my predecessor in relation to monetary and foreign - exchange policy. this policy has served denmark well. i have been around for so long that i remember the time when we used exchange - rate adjustments actively to solve our structural problems. as we know, this led to double - digit inflation rates and interest rates exceeding 20 per cent. in the end, it became plain to all that this policy was not sustainable. today, there is only seldom focus on the fixed - exchange - rate policy. outside denmark, it is in a way viewed as outdated. nevertheless, this policy has been important for denmark. it has had broad political support and contributed to very low inflation ; in practice so low that ordinary people hardly think about it any longer. in the last 15 years annual price increases have been kept at around 2 per cent on average, and retail prices have remained completely stable in recent years. this safeguard of real wages is to everyone's benefit each and every day. for the corporate sector it is easier to plan ahead when the exchange rate vis - a - vis the euro is stable. the foundation for their investments does not suddenly change due to changes in the exchange rate. companies know that it is primarily up to them to meet future demands by developing products and human resources. the lower rate of inflation is not an isolated danish phenomenon – it is seen worldwide. the increasing integration of asian countries into the global economy dampens prices and wages in the rest of the world. this is also reflected in long - term yields. since the global propensity to invest is lower than is normally the case, and since both central banks and pension funds are currently buying large portfolios of long - term bonds, long - term yields are at the lowest level in the post - war era.. these effects will diminish at some point – we do not know when – but when that does happen, interest rates will rise. * * * denmark's economic policy has had broad political support for a number of years. in fact, the danish " model " is increasingly seen as a role model for other countries