. consequently, the governmental swiss franc is indispensable in switzerland, even in a situation of competition with private currencies. moreover, as long as a central bank fulfils its mandate diligently, i do not consider it likely that a private currency can pose any serious competition to a state currency. return to a gold standard the second reform idea, the return to a gold standard, is directly linked to the financial crisis. in some circles there are fears of massive inflation in the short or long - term as a result of the unprecedented relaxation in monetary policy worldwide. the solution that is sometimes proposed is a return to a gold standard, in other words, pegging the currency to gold. i intentionally spoke of “ a ” gold standard and not of “ the ” gold standard because this standard has taken various different forms over history. under a pure gold standard, a swiss franc is equivalent to a certain amount of gold, and therefore, vice versa, the gold price is fixed in terms of swiss francs. the snb would be obliged to purchase or sell gold at this price, without any restriction. in other words, there would be an obligation to redeem snb banknotes in gold. in my view, the are two main arguments against a return to the gold standard. the first argument relates to gold as an anchor of price stability. our modern economy is diverse and complex. why, then, should we confine it in a monetary corset that takes as its measure the scarcity of a precious metal that, for the overall system, is relatively unimportant? price stability is not guaranteed by the gold standard. as we have most clearly seen in the past few years, there is no direct connection between the gold price and the general price level of goods and services. the second argument is that the gold standard reduces the room for manoeuvre in monetary policy. the closer it comes to its pure form, the greater the reduction in the freedom of manoeuvre. only those who believe that no monetary policy at all is required to react to economic shocks should plead the case of the gold standard. yet this ability to react, in particular, is of great importance for our economy, which is heavily dependent on economic exchange with other countries. the current paper money system based on an independent central bank committed to long - term stability provides an alternative, which – overall – achieves far better results than a gold regime could. here, if

it has an important social component and is part of the glue that holds our modern society together. price stability protects the purchasing power of pensions and enables citizens with lower incomes to accumulate and maintain assets. retention of value cannot be taken for granted. over the course of history, our neighbour countries have often experienced the pain of a collapsed currency. money that retains its value, backed by sound institutions, therefore makes an important contribution to social harmony and material prosperity in our country, particularly in today ’ s world, with its major insecurities and imponderabilities. bis central bankers ’ speeches however, sound institutions alone are not enough. additional prerequisites for sound money are widespread fundamental trust by the general public in both our monetary order and the snb, as well as understanding and support of our stability policy. it is only because these conditions were and are met in switzerland – for which i am very grateful – that the snb has been able, and is able, to fulfil its mandate. a second important invariable in our more recent monetary history is the fact that, in this country, this fundamental trust and the culture of stability are deeply rooted. making money even better? alternatives to the present monetary order can we make our sound money even better? in order to answer this question, let us begin by recalling the basic framework of the current monetary order. as an independent central bank, the snb is required to pursue a monetary policy in the interests of the country as a whole. it has a mandate to ensure price stability while taking due account of the development of the economy. this mandate is the compass that guides all our actions. by guaranteeing price stability in word and deed over the years, the snb, as an independent institution, has been able to build up its credibility. credibility is the anchor needed so that the public at large has confidence in our paper currency. this confidence, in its turn, makes it possible for the snb to react flexibly in the short - term to economic disruptions, because the public does not question its policies aimed at long - term stability. in view of the major economic and social importance of the monetary order, as outlined previously, it is legitimate and necessary that this order be subjected to repeated review. in this sense, we welcome the general growth in interest in the monetary system, following the turmoil of the financial crisis, and the fact that discussion on reform ideas is more lively than in the past. nevertheless, we should