were regarded as just one out of a long list of political and economic objectives - rather than as a common goal and a precondition for the successful pursuit of other objectives - then there would be no legitimacy for entrusting this task ( and only this task ) to independent central banks. making value judgements when trading - off different objectives and balancing conflicting interests is the legitimate job of elected politicians with a popular mandate and not of appointed technocrats. an independent central bank thus pre - supposes a broad consensus on the “ quasi - constitutional ” nature of the common good of price stability. assigning the central bank a clear overriding objective also imposes limits on its discretionary exercise of power and makes it easier for the public to hold the central bank accountable for its mandate. this is important to keep in mind if we entertain the possibility that while, yes, “ money is too important to be left to the politicians ” one could similarly concur with poincare that “ money is too important to be left to central bankers ” ( as quoted by milton friedman in his 1962 essay on “ should there be an independent monetary authority? ” ). in other words, why should one trust central bankers more than politicians? friedman, at least at the time he wrote, trusted neither of the two and advocated a constitutional rule for constant money growth as his preferred solution of the long - standing debate on “ rules versus authorities in monetary policy ” ( which is the title of the classic paper by henry simons from 1936 ). his concerns reflect what i would regard as a healthy distrust of the unfettered “ rule of men ” as opposed to the “ rule of law ” which he much prefers - in line with the long and venerable tradition of british liberal thinking. friedman, at the time, was quite sceptical on central bank independence and asked whether it was “ really tolerable in a democracy to have so much power concentrated in a body free from any kind of direct, effective political control? ” this is why i believe it is important to stress that, if an independent central bank is assigned a clear and limited mandate, this represents a constraint on the discretionary exercise of power by the government but also by the central bank itself. in the absence of a complete and universally applicable rule for monetary policy an independent central bank which focuses firmly on the single overriding goal of price stability is the closest realistic and credible substitute for a literal “ rule of law ”. in particular such a central bank

opportunity to obtain financing by issuing sdos against mortgage loans as collateral. this sharpens competition and also gives the banks a new and stable source of financing to counter the growing deposit shortfall, to the benefit of financial stability. i don't want to deny that at danmarks nationalbank we believe that the current mortgage - credit legislation, of which one cornerstone is a tight balance principle, has functioned well. the purpose of a balance principle is to limit the issuers risk to credit risk. both the present and the proposed new balance principle fundamentally entail the rule that no interest - rate risks, option risks or exchange - rate risks may be taken. today, risks are mainly covered by selling bonds that exactly match the mortgage loans, and this will naturally still be possible under the new balance principle, if wished for. however, the new balance principle also makes it possible to cover the risks using modern financial instruments to a greater extent. the new legislation on sdos also comprises a tightening of mortgage - credit legislation, required by eu - legislation, namely that throughout the duration of the loan no mortgage loan may have a value that exceeds 80 per cent of the value of the home that is mortgaged. today, this only applies at the point in time when the loan is raised, as you will know. if house prices fall, the credit institutions must to the extent necessary, re - establish the collateral behind the issued sdos, e. g. by raising loans and buying government securities to use as collateral. this means that the new sdos will always be backed with sound collateral, and this will limit the refinancing risk. overall, danmarks nationalbank assesses that the regulation on sdos provides a basis for a mortgage financing system that is just as safe as today's mortgage - credit system. now it remains to be seen how the market will receive the new bonds. in principle, the introduction of a new mortgage financing instrument that can also be used by banks must be expected to increase competition. this is by no means detrimental, but it does require consumers to be active and capable of understanding the opportunities made available to them. the extensive work of devising methods to ensure transparency still remains to be undertaken. the cross - border integration of the financial markets is one of the more striking phenomena of the last 30 years. this integration makes high demands of the underlying infrastructure. cross - border securities trading still entails considerable costs. on this basis, the european central bank, ecb