in the supply of the other components of money, that is, so - called inside money, which has been supplied exclusively by the private sector. until just recently, inside money consisted exclusively of bank deposits which were supplied competitively by banks. however, governments have nevertheless restricted the supply of means of payment and stores of value by the private sector in the past. but this has been very substantially liberalised over the last 20 years or so. the result is that the availability of efficient means of payment that can also serve as good stores of value ( and thus as a hedge against inflation ) has improved almost beyond recognition compared with what was available during the period of financial repression. although governments have retained a monopoly on the production of high - powered money, they have always permitted and indeed increasingly encouraged competition in the production of inside money. the upshot of this is that outside money now comprises only a rather small fraction of total money balances ( taking, say, a broad definition of the money stock ). after undergoing a dramatic decline, particularly in the period following the second world war, it now ranges from about 1 % in the united states and about 5 % in the united kingdom to about 6 % in germany. 16 governments have retained a monopoly over the production of high - powered money. there are very good reasons for this. notes and coin issued by the central bank and, in some cases, by the government are unique in the following sense : they are the only instrument that can mediate a transaction and settle it with finality at one and the same time, which it does by virtue of its legal tender status. currency is also unique in that it supplies the unit of account for the whole economy. although privately supplied inside money and publicly supplied outside money compete with one another as transaction media and stores of value, there is nevertheless a kind of symbiotic relationship between the two. this is, first, because inside money ( predominantly bank deposits ) may owe its acceptability to the fact that its issuers promise, and indeed are legally bound, to redeem it [ either immediately ( sight deposits ), upon maturity ( time deposits ) or after a period of notice ( savings deposits ) ] in outside money and, second, because outside money provides the unit of account for the whole system without which inside money might be less acceptable in the absence of a single ( commodity ) numeraire. seen in this light, it appears that hayek was correct in arguing that efficiency and ( price )

willem f duisenberg : the role of the eurosystem in prudential supervision speech by dr willem f duisenberg, president of the european central bank, on the occasion of the conference organised by de nederlandsche bank on the 50th anniversary of dutch banking supervisory legislation, amsterdam, 24 april 2002 * * * i am very pleased to be here tonight on my “ home ground ” and to participate in this conference th celebrating the 50 anniversary of dutch banking supervisory legislation. i would like to thank president wellink for giving me the opportunity to meet with this distinguished group of experts and former colleagues who have come together to discuss highly topical issues in the field of banking supervision. the law enacted 50 years ago formalised the role of de nederlandsche bank in banking supervision. these duties had to some extent developed “ organically ”, through the history of the bank, out of its original function as provider of liquidity to commercial banks and its gathering of statistical data from them. i should probably not boast too much as i was myself involved in overseeing the dutch banking system in my former position as the president of de nederlandsche bank. however, the supervisory system in the netherlands has been undeniably successful. dutch banks – like the financial system as a whole – have prospered and steadily improved their efficiency, and the stability of the system as a whole has generally withstood structural changes and episodes of financial market turbulence. the fact that we are celebrating a supervisory law which was established so long ago might give an image of a static regulatory and supervisory system. some sceptical observers even take the general view that supervisory structures are rigid and are only ever discussed critically after major disruptions in the financial system. as we know, this image does not correspond to reality. in the netherlands, many adjustments have been introduced over time in response to market developments rather than crisis events. for instance, co - operation mechanisms between the authorities in charge of supervising banks, securities firms and insurance companies were established – in the form of the “ raad van financiele toezichthouders ( rft ) ” – in reaction to the growing importance of financial conglomerates and the development of close links between different financial products. moreover, the dutch ministry of finance proposed last year – with subsequent approval by parliament – to strengthen the role of the central bank in the prudential supervision of banks and financial conglomerates and to establish even closer links with the prudential supervision of insurance