35 % in the uk and 45 % in the us during the current financial crisis. during the previous century both countries had experienced similar falls, at least four and three times respectively. investment grade corporate bond yields in the uk and us rose by over 300bps in the twelve months to october 2008 ; both countries had experienced at least three similar episodes within the last hundred years. falls in residential property prices in the uk have not been exceptional – though the falls in commercial property values have been, as have declines in us house prices. at the risk of over - simplifying – i would say that declines in asset values leading up to ( and during ) the financial crisis have generally been on the scale of a once - in - every - 25 - year event ; but the financial mess has been ( at least ) on a once - every - century scale. had gearing of financial institutions – and specifically of banks – not been so high ( chart 15 ) the strains that falls in asset value brought would surely have been substantially lower, as would have been the falls in asset values themselves. a bad equilibrium path for the financial sector – or in more everyday language a vicious cycle – is much more likely to exist in a world where financial firms that hold large amounts of risky assets, such as banks, have small equity cushions. the smaller bank capital is the greater will be the concern over bank solvency from a given fall in the value of bank assets. that can trigger a drying up in funding for banks causing a sale of some bank assets that drives their values lower, exacerbating the concerns about the ability of banks to survive. there need be nothing irrational about this process. indeed, there are many examples of bad, but rational, equilibrium paths that markets – and whole economies – can follow. the idea that this is news to economists who use formal models expressed in maths is completely wrong - headed. yet there is a current view that economists who use mathematical models to analyse outcomes where people behave rationally are always led to the panglossian conclusion that things will work out just fine. it would come as a surprise to those who hold this view that two of the most famous economic articles in the last forty years which are routinely taught to economics undergraduates – by george akerlof ( 1970 ) and by diamond and dybvig ( 1983 ) – draw entirely non - panglossian conclusions from formal ( mathematically expressed ) models of collective rational behaviour. i was

. 4 / 6 bis - central bankers'speeches the onus is now on them to provide factual information and convey financial literacy skills in a direct and targeted manner. what could be done to strengthen the network of educational opportunities, enhance the visibility of the services on offer and make measures more effective? in its 2020 " recommendation on financial literacy ", the oecd recommends a national strategy for this. 2 the " alliance for economic education " in germany is also calling for german policymakers to adopt a national economic education strategy. 3 the bundesbank is open to the idea of launching a national strategy for economic education or financial literacy. however, this is something that policymakers have to decide upon. as i see it, they have been not been receptive to the idea of a national strategy so far. the main reason for this is probably that responsibility for education lies with the federal states. as much as a national strategy could promote existing activities, it is now that much more important to make updated resources easy to understand, put them in a realworld context and increase their appeal, especially in order to reach out to people with lower levels of formal education. the bundesbank's money museum in frankfurt is also a hands - on learning environment that is geared specifically to those who know little about money, monetary policy and financial markets. our publication " geld verstehen " ( understanding money ), which is aimed at younger secondary school pupils, conveys basic knowledge in a very understandable manner. the " mit geld umgehen " ( managing money ) media package and an interactive and multimedia e - book round this out. however, i would also like to clarify at this juncture that educational resources are not the one and only way to protect society's most vulnerable. rigorous consumer protection and clear legal regulations are essential to prevent predatory investment, loan and purchase agreements. and, of course, the way enterprises and financial institutions specifically design their products and set their prices in an inflationary environment will ultimately also be key. 5 conclusion ladies and gentlemen, how can the financial literacy of the public be promoted effectively? what skills are needed in order to make sound financial decisions in an inflationary environment? what can motivate people to make adequate provision for the future? how do government programmes need to be designed? what are suitable nudges? 5 / 6 bis - central bankers'speeches in order to answer these and many other questions not only on the basis of anec