: a choice would have to be made as to the true nature of the “ super reserve currency ”. would it be a basket of existing monies or a new “ fiat ” currency? if the “ super reserve ” is a basket of existing currencies ( such as the sdr today ) it would basically serve as an instrument for diversification of foreign exchange reserves ( or private portfolios ), and such a diversification can easily be achieved by using existing currencies. on the other hand, the “ super sovereign ” could be issued as such as a fiat currency. then, the international community would have a basic choice. either the new currency could be made “ strong ” and never depreciate against any other major existing currencies, which probably means that its supply would be severely restricted. or, the “ super sovereign ” would be issued according to pre - specified rules, and depreciation against existing currencies could not be excluded. it would ensure regular supply of international liquidity, but could only provide partial protection against exchange rate volatility and valuation losses. there is an important trade off, there, which is the essence of a new “ triffin dilemma ” and which cannot be avoided when looking at the public supply of international liquidity, whether by one nation or within a multilateral framework. more fundamentally, a new currency which would provide a reliable store of value would, in fact, grant its holders a collective guarantee against exchange risk. that guarantee would benefit surplus countries and would be given by deficit countries. this issue was intensely debated when the substitution account was discussed and negotiated within the imf, more than 25 years ago. it became clear, at the time that it would not be accepted by many countries unless some explicit, binding and symmetric rules on balance of payment adjustments were agreed upon simultaneously. most likely, those questions would be raised again today and the creation of a new reserve currency would have to be part of a broader framework. conclusion and provisional policy lessons looking at the next decade, one can project two alternative – and polar – scenarios for the evolution of the international financial system. first, a scenario of progressive and partial fragmentation : no significant capital account opening would occur in many parts of the world. on the contrary, new barriers could be erected either in the form of capital controls or through national regulations forcing financial institutions to ring fence local pools of capital and liquidity. there would be little convergence in domestic financial systems and regulations. foreign exchange

philipp m hildebrand : ten theories on the economic relationship switzerland europe summary of a speech by dr philipp m hildebrand, member of the governing board of the swiss national bank, to the arbeitgeberverband basel, basel, 8 september 2004. the complete speech can be found in german on the swiss national bank ’ s website ( www. snb. ch ). * * * the relationship between switzerland and the eu is close in so many ways that it appears almost stronger than that among many member states themselves. the debate on a possible integration into the eu as a logical consequence should be as broad - based as possible. economically speaking, the issue has become more pressing since the introduction of the euro, as switzerland is now surrounded by a single - currency area. switzerland ’ s weaker economic growth is also frequently quoted as an argument in favour of integration, since the necessary domestic structural reforms would then be easier to realise. however, one tends to overlook the fact that the national authorities would continue to be responsible for implementing reforms and that, moreover, the absorption potential of autonomous monetary and fiscal policies would be forfeited. even with an independent policy, switzerland is in a position to outperform if it again focuses on its strengths of flexibility and openness. the independent monetary policy has helped to keep inflation in switzerland at a low level for decades. this and the diversification properties of the swiss franc make capital cheaper in switzerland by approximately 1. 5 percentage points ( interest premium ). exchange rate volatility vis - a - vis the euro area has declined, while it would continue to exist vis - a - vis the us dollar even after integration. the as yet more flexible labour market ushered in by the transition period ii of the bilateral agreements i is the flagship of swiss economic policy. it keeps unemployment and the resultant national costs low in the long term and strengthens the incentives for individual performance. it is essential to translate openness and flexibility, also with respect to internal structural reforms and external relations, into autonomously implemented reforms and a practical global orientation.