of monetary policy in overcoming inflation. that has reduced not just expected inflation, but also the inflation risk premium – the cost levied by lenders to protect them against uncertain price changes. but the decline in nominal yields has also been driven by a fall in real yields, which is the real return generated by the balance of saving and investment in the economy. a temporary period of policy rates being close to zero or even negative in real terms is not unprecedented by any means. over the past decades, however, we have seen long - term yields trending down in real terms as well, independent of the cyclical stance of monetary policy. the drivers behind this have been, among others, rising net savings as ageing populations plan for retirement, relatively less public capital expenditure in a context of high public indebtedness, and a slowdown in productivity growth reducing the profitability of investment. bis central bankers ’ speeches one study finds such factors can account for around 400 basis points of the 450 basis points fall in long - term real interest rates over the past 30 years. 1 the forces at play are fairly intuitive : if there is an excess of saving, then savers are competing with each other to find somebody willing to borrow their funds. that will drive interest rates lower. at the same time, if the economic return on investment has fallen, for instance due to lower productivity growth, then entrepreneurs will only be willing to borrow at commensurately lower rates. on both counts, it is structural factors that have lowered the real return on investment. and since we operate in a global capital market, this has exerted downward pressure on returns on savings everywhere. the role of asian economies in this story has been well - documented, for instance in the “ global savings glut ” thesis. 2 but today the euro area is also a protagonist. we have a current account surplus over 3 % of gdp, and our largest economy, germany, has had a surplus above 5 % of gdp for almost a decade. in the past, countries with such surplus positions may have been able to easily export excess savings towards countries willing to borrow them at higher rates. this would have prevented domestic interest rates from falling, as would otherwise have been the case. and that would have been good for the global economy as saving flowed from ageing, slower growth economies to those with younger demographics and higher investment needs. but in a world where real returns are low everywhere, there is simply not enough demand for capital elsewhere in

nout wellink : central banks as guardians of financial stability speech by dr nout wellink, president of de nederlandsche bank and president of the bank for international settlements, at the seminar " current issues in central banking ", on the occasion of the opening of the new office building of the central bank of aruba, oranjestad, 14 november 2002. * * * it is a great honour for me to deliver a speech on the occasion of the opening of the new office building of the central bank of aruba. this is an important milestone in the short history of this institution. since its creation in 1986, the relationship between the central bank of aruba and the nederlandsche bank has been very close. those of you who are familiar with the dutch weather will understand that this relationship is something we especially cherish during this time of the year. but there are many more reasons why our co - operation has always been fruitful, and will remain so in the future. indeed, although aruba and the netherlands have a different history and different traditions, our central banks have much in common. first of all, we both gave up much of our monetary autonomy a long time ago. the aruban florin has been pegged to the us dollar since its creation in 1986. likewise, the netherlands had pegged its currency to the deutsche mark since 1983. this fitted in a longer tradition of stabilising the dutch guilder vis - a - vis the deutsche mark since the demise of the bretton woods system in 1971. eventually, we gave up our own currency in 1999, to become part of the euro. a second common characteristic is that we are both small, open economies with a particular interest in a stable international financial system. while aruba is an offshore financial center, dutch banks, insurance companies and pension funds have invested a substantial part of their assets abroad. finally, a third similarity is that both our central banks have a broad range of activities. we are not only involved in monetary policy, but are also responsible for the prudential supervision of banks and some other parts of the financial sector. in this context, it is important to be open - minded organisations and to adjust to changes in the financial environment. seemingly, a new trend is that central banks increasingly present maintaining financial stability as their core task. a dozen or so central banks in the industrialised countries have launched a regular financial stability review, and financial stability is often given a more prominent place