- six per cent of central banks are exploring cbdcs and many countries have already undertaken operational tests, developed proof of concepts, or run trials. 14 private players have also developed sophisticated products for differing interests. falling behind is also not an option for us and for that reason we will soon be commencing proof - of - concept design and testing for a cbdc as part of our assessment of the case for a cbdc in new zealand. the technology exists now to implement a cbdc, but it needs to be well designed and thought through, user - friendly, bulletproof to cyber and operational risk, with privacy and other controls that ensure and promote widespread trust and use. cash system issues i want to emphasize again that the reserve bank is not proposing to remove physical cash from our economy. cash is central bank money that is a safe and trusted value anchor. cash plays a critical role in supporting financial and social inclusion. cash allows people to engage in the economy without having to rely entirely on banking services for all their day - to - day activities, without the need to be able to access a computer or smartphone, and with the safety and security of knowing that the cash you have is worth what it says it is. it provides choice, supports competition with other forms of money, offers a back - up for users of other means of payments, and allows all users a degree of autonomy and privacy. _ _ _ _ _ _ _ _ _ _ _ _ bank for international settlement bis innovation hub work on central bank digital currency ( cbdc ) although cash is used less in percentage terms ( from 30 % in 2007 for households payments to 13 % in 2019 ), the amount of cash in the hands of the public has been growing at an average of 3. 7 % per year since 1995. 15 graph 2 : cash in the hands of the public cash in the hands of the public, 2017 prices, $ per person 1995 to 2021 1, 400 $ per person 1, 200 1, 000 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 avg $ per person, 2017 prices we know that new zealanders consider cash to be important and they support its ongoing availability. we at te putea matua are committed to ensuring cash remains available for as long as people need it. however, our earlier work has identified some challenges facing the cash system. an innovative approach is needed to support a more efficient and resilient cash system. graph 3 : the current cash system _ _

as figure 1 shows, this measure of dysfunction waxed and waned considerably through the period, but was substantial throughout. figure 1. disruptive events and the us 3 - month libor - ois spread source : bloomberg this is but a small fraction of everything that has been relevant, for obvious reasons of space. in the rest of this section i try to knit it together into a single story, probably risking oversimplification along the way. the narrative here is necessarily linear, but that obscures many important feedbacks and interactions. these feedbacks are a very real part of understanding and coping with the turmoil. it is no accident that the massive simultaneous surges in the prices of commodities, equities, housing and other real estate around the world since the mid - 2000s until 2007 matches the surge in credit. in hindsight, this correlation can be explained fairly simply as the mutual reinforcement of a number of powerful factors. emerging market countries, especially in asia, ran high rates of national savings out of the earnings from strong export - led growth. as world oil prices surged, national savings in oil exporting countries also increased rapidly. finally, the developed world ran fairly loose monetary policy as part of the recovery from the 2000 - 01 recession. in this environment, the premium charged for credit risk fell to low levels through the middle part of the decade ( figure 2 ). the growth in asset prices in the latter part of this period increased capacity for secured borrowing, adding further stimulus for credit growth. figure 2. spread between us 10 - year sub - investment grade corporate bond yields and us government bond yields source : datastream figure 3. credit - to - gdp ratio sources : imf, datastream. together, these factors enabled the funding of an extraordinary rate and diversity of financial innovation and credit creation in the developed world, and very substantial increases in the ratios of credit to gdp in developed countries, particularly the uk ( figure 3 ). also fuelling the credit growth through the period was a shift of the major us and european banks away from the traditional “ originate to hold ” banking model towards an “ originate to distribute ” model, which for a range of reasons was seen as more profitable. in “ originate to hold ”, mortgage and other credit originations typically stay on the originating bank ’ s balance sheet until maturity. in “ originate to distribute ”, the credit originations are securitised and sold, removing them from the originating bank ’ s balance sheet. a