##ngs crisis of the 1890s. in france, the unravelling of speculative positions in the stock market in 1882 led the banque de france to provide secured loans to the paris bourse. in italy, the collapse of a building boom in rome and naples in 1893, and the resulting failure of one of italy ’ s largest banks, prompted the creation of the central bank, the banca d ’ italia. 3 financial stability considerations also played a role in the development of central banking in australia, although less explicitly than in the united states. in the early decades of this century there were strong advocates for a central bank along the lines of the bank of england. progress, however, was hampered by ideological debates about the role of private banking, and by concern that a central bank would out - compete private banks. while the commonwealth bank did take on some central banking functions in the 1920s, including note issue and the provision of settlement accounts, the watershed was the 1936 royal commission. it is here that we return to professor r. c. mills. in between establishing the economics department of the university of sydney and chairing the university ’ s professorial board, professor mills played a prominent role as a member of the royal commission. as s. j. butlin notes in his biography of mills, the structure of the commission ’ s report and its drafting owes much to mills ’ hard work and his ability to argue and persuade. mills was an advocate of a strong central bank with responsibility for ensuring the overall stability of the financial system and the economy. he, and his colleagues on the royal commission, argued that the private banks had intensified economic fluctuations by lending aggressively during the boom of the late 1920s and then contracting lending harshly during the depression. this was seen to be a repeat, although on a smaller scale, of the situation in the 1880s and 1890s. the commission argued that a strong central bank might have been able to limit the unhealthy expansion that eventually brought about the crisis. the idea that a central bank should seek to restrict those developments in the financial system that threaten the health of the economy strikes a strong resonance today. the difference between today ’ s interpretation and that advocated by mills and his colleagues is a subtle, but important, one. in the 1930s, banks dominated the financial system, and a framework of regulation on banks was seen as the best way to ensure financial stability ( and to operate monetary policy ). today we realise that heavy regulation stifles competition and innovation, and

can probably imagine, benjamin franklin ’ s philosophy has crossed the atlantic and still guides decision - makers today, including at the european central bank. in that regard, i would like to touch on a few ideas drawn from his autobiography. i need not remind you of his great fondness for quotations, especially in poor richard ’ s almanack. in his autobiography, benjamin franklin defined a number of virtues that he believed to be cardinal. they included temperance, silence, order, resolution, frugality, industry, sincerity, justice, etc. i find his interpretation of these terms interesting. for instance, for benjamin franklin, the term “ temperance ” should be understood as follows : “ temperance first, as it tends to procure that coolness and clearness of head, which is so necessary where constant vigilance was to be kept up … ”. this, to my mind, is one of the virtues that central bankers must impose on themselves. my eurosystem colleagues and i have made it one of the guiding principles of our actions. benjamin franklin continues his description of these virtues in the following terms “ frugality and industry freeing me from my remaining debt, and producing affluence and independence, would make more easy the practice of sincerity and justice,..., ”. he emphasises the importance of being freed from one ’ s debts and recovering one ’ s independence. we know from his political activity that he attaches a great deal of importance to the independence of the nation, but here we are talking about that of individuals and therefore of the institutions for which they are responsible. as we will see later, this is the type of independence that lies at the heart of the eurosystem. furthermore, sincerity can be associated with transparency, another key principle of the eurosystem. as in most human activities, the conduct of monetary policy involves some risk - taking and may, justifiably or not, be subject to debate and criticism, as we will see later on. i would like to conclude this brief tribute to benjamin franklin by quoting one of his phrases that makes an encouraging link between success and risk : “ there are many ways not to succeed, but the most certain is not to take risks ”. let me turn now to my main topic which is to provide you with an overview of the single monetary policy of the eurosystem that consists of the european central bank and the 12 national central banks of euro area member states and of its main