upon a “ chain of trust ” among human beings the reason why i can purchase goods with money is because the recipient believes that it can be used for its own payments and will be accepted by unknown others. as such, the fact that human beings were able to create a chain of trust among many others, including among those with no personal acquaintance, was the key to the development of an economic society. this shows how important “ trust ” is for the payment system and the economy. bis central bankers ’ speeches central banks and payments infrastructure to put it in another way, one break in the chain of trust could have a catastrophic impact on the payment system and the overall economy. indeed, many central banks, including the bank, were founded with the aim of restoring and maintaining confidence in payment systems when people ’ s trust in them were about to be lost or damaged, which also shows that payments and settlements are inherently the primary function of central banks. the central banks ’ other core functions – such as the lender of last resort and monetary policy – are also ultimately based on the ability of central banks to provide, without constraints, central bank money, which provides “ finality ” to payments and settlements in a sense that receivers of central bank money do not have to worry about payment unwinding or its credit risks any more. such power also gives central banks the ability to influence real interest rates, which are regarded as the “ rate of exchange ” on expenditures exchanged over time, as a foundation of monetary policy. most central banks around the world, including the bank, support economic activities by issuing banknotes and operating large - value payment and settlement systems, which constitute basic infrastructures of the economy. following the emergence of money in the form of banknotes and coins, various types of payment instruments, including checks, bank transfers, credit cards, debit cards, and e - money, have emerged to meet people ’ s evolving needs. at the same time, the role of central bank payment and settlement infrastructure is playing a more important role in light of economic developments and innovations in information technology, since the central bank is the only entity to be able to settle more diverse and complex transactions with finality. payment infrastructures intrinsically have the characteristics of a “ network ”. the value of participating in a network increases as more participants use it. at the same time, a single payment failure could spill over across the network, potentially leading to systemic crisis. moreover, participation in the network by a high risk profile

additional stimulus ; it expanded the size of its asset purchase program earlier this month out of concern about possible slowing of domestic and global economic growth. the bank of japan has acquired a wide range of assets, including government and corporate bonds, commercial paper, exchange - traded equity funds, and equity issued by real estate investment corporations. the ecb purchased privately issued covered bonds between july 2009 and june 2010 to improve liquidity in a key market segment ; it recently announced plans to resume such purchases in november. the ecb has also bought the sovereign bonds of some vulnerable euro - area countries, “ to ensure depth and liquidity in those market segments which are dysfunctional ”, although the monetary effects of these purchases have been sterilized through offsetting operations. 6 in most cases, the use of balance sheet policies for macroeconomic stabilization purposes has reflected the constraints on more - conventional policies as short - term nominal interest rates reach very low levels. in more normal times, when short - term policy rates are not constrained, i expect that balance sheet policies will be rarely used. by contrast, forward guidance and other forms of communication about policy can be valuable even when the zero lower bound is not relevant, and i expect to see increasing use of such tools in the future. financial stability policy even as central banks were innovative in the operation of their monetary policies, they were forced to be equally innovative in restoring and maintaining financial stability. serving as a lender of last resort – standing ready in a crisis to lend to solvent but illiquid financial institutions that have adequate collateral – is, of course, a traditional function of central banks. indeed, the need for an institution that could serve this function was a primary motivation for the creation of the federal reserve in 1913. the federal reserve ’ s discount window is an example of a facility that operates in normal times to provide very short - term liquidity to depository institutions. most other central banks have facilities with similar features that are generally aimed at banks that find themselves with temporary liquidity needs. during the crisis, as short - term funding markets failed to function normally, central banks around the world acted forcefully to channel liquidity to institutions and markets by lengthening the terms of their lending, increasing the range of collateral accepted, and expanding the set of counterparties with which they would undertake operations. to help stabilize the financial system and facilitate the flow of credit to households and businesses, the federal reserve responded to the dislocations in funding and securitization markets