as well as cowrie shells, cocoa beans, gold and, eventually, bank notes and coins. none of these objects, except for the gold and cocoa beans, has any meaningful inherent value. they are money because people accept them as money. for this to happen, money must do three things. first, money must serve as a medium of exchange : you pay tuition ; you receive an education in exchange. the alternative is bartering, but that is complicated and inefficient. second, money must serve as a store of value. when you work during the summer you need to be confident that every dollar you earn is still going to be worth a dollar when it comes time to pay your tuition. finally, money must serve as a unit of account, which you need in order to compare prices – like comparing the value of the new blackberry with other mobile devices on the market. the form of money we know best is bank notes. they were issued primarily by commercial banks in canada and the united states before those countries created central banks in the early 20th century. these privately - issued bank notes ultimately failed to provide what the economy needed and so central banks were given this responsibility. the bank of canada has been issuing bank notes since 1935. 1 the cash you have in your wallets perfectly meets the three criteria of money. it is accepted almost everywhere, there ’ s very little counterfeiting, and the issuer – the central bank – won ’ t go bankrupt. we also target inflation, which means that the internal value of money is predictable. since we started issuing bank notes, there has been a parade of non - cash options introduced to our payments system. they ’ ve been driven by technology and consumer demand for efficient ways to pay for things. in the 1970s, credit cards were leading edge – around the same time that pink floyd and led zeppelin dominated the music scene. in the 1990s, debit cards were the new big hit. the next leap in innovation was e - transfers and online banking services. payments are even quicker now with contactless credit and debit cards. last month, apple pay became the latest player in this game. so we ’ ve come a long way since cocoa beans. yet all these payment innovations can be used only if you have a bank account. the vast majority of canadians have access to banking services, but that ’ s not the case in many developing countries. that ’ s part of the reason why non - banks are coming up with innovative

t t mboweni : economic developments and monetary policy speech by mr t t mboweni, governor of the south african reserve bank, at a dinner of the south african institute of electrical engineers, rand club, johannesburg, 22 july 2004. * 1. * * introduction ladies and gentlemen, i thank you for the invitation to attend your dinner in these illustrious surroundings. it is indeed always an honour to attend a function at one of the oldest clubs in south africa, and even more so because of the role that it played in the history of our country. i appreciate having the opportunity to talk to your institute on this occasion because of your role in the development of our economy. as a topic for discussion i thought it may be useful to briefly look at recent economic developments in the world and in south africa and conclude my address with a few remarks on monetary policy and exchange rates. 2. global economic developments the global economy started to recover at an accelerated pace during the course of 2003 and the first quarter of 2004 and then growth seems to have slowed down somewhat in the second quarter of this year. this was mainly due to slower growth in the united states and china. the softening in the economic growth of the united states'economy is probably a temporary phenomenon related to the spike in the international price of oil, which affects consumer expenditure. it is, however generally expected that business investment in the united states will pick up strongly in the second half of 2004 and give further impetus to the world economic recovery. the slowdown in the chinese economy was the result of deliberate policy actions taken by the chinese authorities to cool down the rapid growth that they have experienced over the past years. although the slower growth in china will occur from a very high level, it could have a significant impact on other asian economies. a slowdown in china's energy, steel and chemical production could also affect demand in international commodity markets, resulting in a decline in international prices. china has become a major player in the world economy and is also now the fifth largest trading partner of south africa. however, it seems unlikely that this slower growth will be a lasting feature of the world economy and most international organisations such as the international monetary fund and the bank for international settlements are still projecting a marked recovery in the global economy in the rest of this year and in 2005. another important risk that the world economy is facing is the substantial increase in international oil prices. brent crude oil prices have increased from levels around us $ 24 per barrel in may