mugur isarescu : the power of the mind opening address by mr mugur isarescu, governor of the national bank of romania and president of the romanian association for the club of rome, at the annual conference of the club of rome “ the power of the mind ”, organized by the club of rome, the romanian association for the club of rome ( arcor ) and the national bank of romania, bucharest, 2 october 2012. * * * dear colleagues of the club of rome, honoured guests, ladies and gentlemen, it is a pleasure and a privilege for the romanian association for the club of rome and for the national bank of romania to be the host of the international conference of the club of rome, here in bucharest, with such a challenging topic : “ the power of the mind ”. as we all know, 2012 is an anniversary year for the club of rome, since we are celebrating the 40th anniversary of the first report to the club, which was entitled “ the limits to growth ”. when this report was published, it created shockwaves all over the world, including the communist countries. i can testify this, because i addressed comments concerning this issue when i was a young research fellow, after graduating the university. actually, i confessed to my colleagues that my first public appearance in 1973 was related to the club ’ s first report. but the debates were not limited to romania or to europe. they were manifest all over the world, and are still continuing today. i dare to sustain that nowadays, with the global economic crisis still ongoing and this fight for resources, the above - mentioned issues appear to be highlighted even more now than in 1972. of course, today, being in recession, particularly we in europe are in recession, we dislike considering limits to growth, except perhaps putting some limit to money supply growth. not all the predictions of the club of rome came true. nevertheless, it has initiated not only debates, but also radical changes in human behaviour, many of them still ongoing today – for example the environmental movement that started early in the ‘ 70s with the first report to the club of rome ; or the need to increase the efficiency of energy consumption ( just recall how big and low efficient american cars were 40 years ago ). but, above all, these debates have changed our way of thinking. like albert einstein used to say, “ the world we have created is a product of our thinking ; it cannot be changed without changing our thinking ”. related to this

on 6 march 2003, short - term interest rates in switzerland fell to a very low level. since the opportunity costs for holding money were consequently reduced to practically zero, the demand for liquidity increased markedly. immediately following the interest rate reduction, annualised monthly growth rates of more than 15 % were observed for m3. once the demand for liquidity by companies and households has reached the desired higher level, liquidity should only increase in line with nominal gross domestic product and should not pose a threat to price stability. in actual fact, the growth rates of m3 have fallen recently, but nevertheless the economy has more liquidity at its disposal than is compatible with price stability in the medium term. according to our last forecast published in march, given an unchanged monetary policy and a threemonth libor of 0. 25 %, inflation could have climbed to 3 % in the fourth quarter of 2006. the current forecast shows that - on the assumption that the three - month libor will remain stable at 0. 5 % in the next three years - inflation will only rise to 2. 7 % by the end of 2006. at the end of the new forecasting horizon in the first quarter of 2007, inflation would slightly exceed 3 %. by taking a small step towards the normalisation of the short - term interest rate level, we are thus gradually and cautiously siphoning off excess liquidity in order not to jeopardise price stability in the long term either. financial markets is the economic analysis on which our inflation forecast rests in conformity with that of the financial markets? in the recent past, a flattening of the interest rate curve was observed in switzerland. interest rates for maturities of up to ten years in particular moved up. this shows that the financial markets have anticipated a somewhat less expansionary monetary policy. since economic activity began to pick up momentum more rapidly in switzerland than in the neighbouring countries, it became evident that interest rates would rise sooner, which enhanced the attractiveness of the swiss franc somewhat. nevertheless, the competitiveness of swiss companies remains intact. at the very long end of the interest rate curve interest rates have hardly moved, an indication of consistently low inflation expectations. the markets assume that the national bank ’ s monetary policy is in conformity with its goal of ensuring price stability in the long term. monetary policy still expansionary in march 2001, we initiated a series of interest rate reductions in response to the sluggish business climate and the enduring strength of the swiss