stimuli to increase private provisions for old age in order to create a third pillar alongside statutory and company pension systems. such ideas have now been incorporated into the federal government ’ s plans to reform the pension system. this might even be underpinned by specifically targeted fiscal measures. 15 with a view to enterprises, it will be particularly important, given the global challenges, to produce a sustained strengthening of the earnings base for forming sufficient risk capital, since this is the only way to create a macroeconomic counterweight to offset a decline in private savings. the necessary reforms entail budgetary burdens. the only way to cope with them will be by ensuring that the state spending ratio is simultaneously lowered over the medium term. a sustained consolidation of public sector finance would tend to increase the savings ratio in the economy as a whole and would hence take account of future demographic change. 16 recently, alan greenspan also see h - j hansen, the impact of interest rates on private consumption in germany, economic research group of the deutsche bundesbank, discussion paper 3 / 96. see also m feldstein, fiscal policies, capital formation, and capitalism, in european economic review 39 ( 1995 ), p. 418. “ instead of correcting the tax and transfer problems that have contributed to the low rate of capital formation and growth, the natural tendency of the political process may be to emphasize policies that appear to have favourable short - term effects but that ignore the longer term consequences. ” see deutsche bundesbank, the economic scene in germany in spring 1999, monthly report, may 1999, p. 67. drew attention to this point again in a statement he made on the statutory pension system to the house of representatives. 17 in germany, up to now households have been the most important provider of savings. of course, the funds provided by them, were not sufficient to satisfy the enormous financing requirements of the german unification process. this development is also reflected by the fact that net foreign assets, which were around dm500 billion at the end of 1990, have now declined to one - tenth of that volume owing to transactions and revaluations. this was primarily attributable to the dramatic expansion of the government ’ s and banks ’ bond market liabilities to foreign lenders. the likewise strongly expanding direct investments and portfolio investments of domestic enterprises and individuals abroad could not keep pace with that. thus, the public sector ’ s securities liabilities abroad rose from around dm150 billion at the end

is not a policy that has been adopted by the federal reserve. there are implementation challenges with this approach. in particular, it is difficult for a monetary policy committee today to institutionally bind future monetary policy committees to follow actions that could conflict with their objectives in the future. without such a credible forward commitment, such policies would likely be ineffective in affecting expectations in the manner needed to provide additional monetary policy accommodation. in contrast, i think there are greater potential risks to central bank independence from the fed ’ s large - scale asset purchase programs and the treasury maturity extension program. these programs do create some budget risk for the federal reserve. the issue here is not that the fed is taking credit risk because the fed ’ s purchases are restricted to treasuries and agency mbs. instead, the budgetary risks stem from the fact that these asset purchase and maturity extension programs expose the federal reserve to increased interest rate risk that could affect the level of net interest earnings and therefore the amount of the fed ’ s remittances back to the u. s. treasury. if the federal reserve needed to raise short - term rates to attain its objectives, it would do so by raising the interest paid on its reserves. as a result, net interest earnings would fall due to the increase in interest cost. if the rise in rates were sufficiently large, the federal reserve ’ s net interest margin could turn negative, resulting in losses for the federal reserve. the fed ’ s earnings could also be adversely affected by asset sales. for example, if the fed determined that it needed to reduce the aggregate level of reserves through asset sales, the fed might incur losses by selling these assets at prices below their amortized costs. although this risk is real, i believe it is not a big threat to the federal reserve ’ s independence for two reasons. first, the potential for this outcome is mitigated by the fact that the federal reserve has considerable non - interest bearing liabilities on its balance sheet – namely currency. these liabilities incur no interest expense regardless of the stance while i have categorized providing a forecast for the future path of the policy rate as a form of unconventional monetary policy, this may be a misnomer in that some central banks use this form of forward guidance as part of their standard communication strategy, and the federal reserve may choose to continue to provide this form of forward guidance even after its policy rate is no longer constrained by the zero lower bound. bis central bankers ’ speeches of monetary policy