mr. greenspan's remarks to the economic club of new york remarks by the chairman of the board of the u s federal reserve system, mr. alan greenspan, at the economic club of new york in new york city, on 02 / 12 / 97. dramatic advances in the global financial system have enabled us to materially improve the efficiency of the flows of capital and payments. those advances, however, have also enhanced the ability of the system to rapidly transmit problems in one part of the globe to another. the events of recent weeks have underscored this latter process. the lessons we are learning from these experiences hopefully can be applied to better the workings of the international financial system, a system that has done so much to foster gains in living standards worldwide. the current crisis is likely to accelerate the dismantling in many asian countries of the remnants of a system with large elements of government - directed investment, in which finance played a key role in carrying out the state ’ s objectives. such a system inevitably has led to the investment excesses and errors to which all similar endeavors seem prone. government - directed production, financed with directed bank loans, cannot readily adjust to the continuously changing patterns of market demand for domestically consumed goods or exports. gluts and shortages are inevitable. the accelerated opening up in recent years of product and financial markets worldwide offers enormous benefits to all nations over the long run. however, it has also exposed more quickly and harshly the underlying rigidities of economic systems in which governments - - or governments working with large industrial groups - - exercise substantial influence over resource allocation. such systems can produce vigorous growth for a time when the gap between indigenous applied technologies and world standards is large, such as in the soviet union in the 1960s and 1970s and southeast asia in the 1980s and 1990s. but as the gap narrows, the ability of these systems to handle their increasingly sophisticated economies declines markedly. in western developed economies, in contrast, market forces have been allowed much freer rein to dictate production schedules. rapid responses by businesses to changes in free - market prices have muted much of the tendency for unsold goods to back up, or unmet needs to produce shortages. recent improvements in technology have significantly compressed business response times and enhanced the effectiveness of the market mechanism. most asian policymakers, while justly proud of the enormous success of their economies in recent decades, nonetheless have been moving of late toward these more open and flexible economies. belatedly perhaps, they have

a referendum on the introduction of a sovereign money system called vollgeld, which requires that every credit granted by a commercial bank is entirely covered by deposits. the proposal was eventually rejected. this does not mean that central banks are entirely indifferent to sovereign money systems, as will become clear in a little while when i talk about central bank digital currencies. alternatives to money in the form of euro banknotes and deposit liabilities at central banks and commercial banks so far, i have been talking about central bank money which is being provided in the form of banknotes and deposit liabilities in euro. but any type of money can potentially be created and issued by for example private entities, as long as it allows in one way or another to fulfil the main functions of money. let us call these types of money alternative money ( in the sense that they are an alternative for both central bank money and for deposits in euro at commercial banks ’ accounts ). central banks also take an interest in alternative types of money, even though they would at first sight fall outside the ambit of the central bank ’ s usual competences. central banks may have more than one reason for this. for starters, a considerable increase in the quantity and use of alternative money may undermine the efficacy of the central bank ’ s monetary policy. if the market players were to massively move away from the use of banknotes and deposits in euro, a central bank could find it more difficult to attain its objective of price stability. indeed, by substitution for regular money such as banknotes and deposits in euro, widely adopted types of alternative money could significantly reduce a central bank ’ s control over monetary conditions, such as its ability to steer interest rates 12. furthermore, many central banks, among which the eurosystem central banks, are entrusted with the task of contributing to the stability of the financial system 13. financial stability may be impacted by sudden or considerable changes in the quantity and use of alternative types of money 14. 3. 1 local currencies a local or complementary currency is a currency that can be spent in a particular and usually limited geographical locality, which differs from an official currency ( like the euro ) and about which a group of private persons, companies or government instances have agreed to accept it as a means of exchange. a local currency therefore acts as a complementary currency to an official currency, rather than replacing it, and aims to encourage spending within a local community or to support the local or social economy. european law