peter praet : the role of money in a market economy speech by mr peter praet, member of the executive board of the european central bank, at the bargeldsymposium, organised by the deutsche bundesbank, frankfurt am main, 10 october 2012. * * * i would like to thank massimo rostagno and federic holm - hadulla for their contributions to the preparation of this speech. ladies and gentlemen, it is a great pleasure for me to speak here today at the bargeldsymposium of the deutsche bundesbank. i would like to congratulate the organisers for devising a programme that covers such a vast range of practical aspects involved in managing a currency. my fellow speakers at this symposium have already shared their expertise on many of these practical issues. i have nothing further to add to their insights and expert judgement. instead, i would like to take a step back and address some crucial conceptual questions that surround the role of money in a modern market economy. let me start by briefly reviewing the key economic explanations for why the use of money has been such a prevalent phenomenon in history. to this end, i will adopt the common definition of money as being any object or token that is generally accepted as a means for paying goods and services and for settling debts. i will illustrate the evolution of money in form of a linear parable, which leads from a barter economy to a system with commodities as a medium of exchange ; and from there to a fiat currency regime. however, it is important to point out that in fact, the history of mankind ’ s experimentations with money in its various incarnations has been far from linear. it is made of sudden breakthroughs – often in response to wars, famines or fiscal crises – followed by set - backs and regressions to earlier and less developed states of affairs. money and trust imagine a clever merchant who regularly loads his produce onto a cart and heads to the market place where all merchants meet to exchange their goods. this market place is impossibly complicated. any merchant in need of a commodity that he does not produce himself has to search endlessly. much of his time is spent in trying to find a partner in a direct barter “ giving what was not wanted directly for that which was wanted ” ( as william stanley jevons would have described the situation ). 1 trading time could be protracted even longer, as a lucky encounter would not necessarily mean that a trade

jorg asmussen : the global monetary policy stance – what are the risks? speech by mr jorg asmussen, member of the executive board of the european central bank, at the bruegel annual meeting, brussels, 10 september 2013. * * * dear chairman, dear ladies and gentlemen, the recent years have been challenging for monetary policy makers around the world, including in europe. the economic and financial crisis that broke out in late 2008 turned central banks into “ unconventional ” market players and forced them to be creative. since 2007, central banks have adopted a wide range of unconventional policies to repair the transmission mechanism and provide additional accommodation at the zero lower bound. these policies have been different across economic areas and depended on central banks ’ operational frameworks, mandates and country specific challenges. within our mandate, we at the ecb, at the be - ginning under the leadership of jean - claude trichet, acted strongly to prevent a credit crunch and reduce financial fragmentation in the euro area : • we provided unlimited liquidity to banks, extending the maturity of our operations to 3 years, and allowed our collateral rules to adjust to the new environment. these measures prevented a more severe contraction in credit and reduced divergences across countries caused by bank funding risk. • we introduced the outright monetary transactions ( omt ) to remove financial fragmentation caused by currency redenomination risks that had surfaced due to unfounded fears of a euro break up. the omt has calmed markets leading to significantly improved financing conditions. as a result, target 2 imbalances have declined by 1 / 3 since their peak. let me also say that the omt is a policy for the euro area as whole. by reducing financial fragmentation, the omt contributed to the normalisation of those yields that were excessively compressed by market fears. while unconventional monetary policy actions were necessary, we also need to pay attention to the related risks. let me briefly discuss them together with broader challenges for monetary policy. one risk is complacency. monetary policy can only gain time for other policy makers to tackle structural problems. this is particularly important in europe where governments need to continue implementing structural reforms to boost growth potential and employment, especially among the youth, to consolidate public finances, and to strengthen domestic banking systems. another risk relates to the side effects of globally low yields, which has already been widely debated in international fora. risks of capital misallocations, stemming from low risk premia and yields, are not confined