now offered widely, at least for a period of up to 3 - 5 years. by choosing a fixed - rate loan, households with a large net debt have more predictable expenses for servicing their debt. the more long - term distributional effects of monetary policy are completely different. if interest rates are kept at a low level over a longer period, price and cost inflation will eventually pick up and longterm interest rates will rise. rising wage and price inflation reduces the real value of assets and debt. in isolation, this will naturally benefit individuals and enterprises that have a high debt, while others will see a decline in the value of their savings. at the same time, low interest rates could lead to a rise in property prices and other asset prices. a sharp rise in house prices and advances in stock markets imply a substantial shift in favour of those who are already well positioned in these markets. many young people will find that the price of entering the housing market is too high. income less net interest expenditure. cyclical fluctuations, income developments and asset prices will show greater volatility in an economy without a nominal anchor. the policy of devaluation and low interest rates in the 1970s and the beginning of the 1980s contributed to pronounced cyclical fluctuations and sharp variations in property prices. the winners and losers as a result of such instability are to some extent arbitrary. some will always manage to come out ahead ; those who take their profits in boom periods will also be able to secure and withdraw from exposed positions in time. others - who do not use resources for these activities to the same extent - are often the losers. the economic downturn and unemployment which often follow when the bubble bursts will primarily affect the most vulnerable segment of the labour force and have very negative distributional effects. monetary policy cannot and shall not steer price developments in the housing market or other asset markets, but a monetary policy that inspires confidence will curb wealth effects because the potential for the emergence of bubbles is reduced. nominal stability is the best contribution monetary policy can make to the distribution of income and wealth. interplay between economic policy components - the role of monetary policy the basis for achieving stable economic growth is created through a successful interplay between the various components of economic policy, ie between fiscal policy, monetary policy, the system for income settlements and other measures aimed at improving the functioning of the economy - often referred to as structural policy. the norwegian economy is vulnerable to abrupt shifts in the global economy. we cannot fully shield ourselves against external

global systemic crisis. how to react to that? if the crisis is “ imported ” and the country cannot meet its financing needs, the imf should provide liquidity and contribute to any kind of anti - cyclical adjustment. in that regard, the authorities of leading economies should usefully consider to allow the imf to issue bonds. in a moment of de - leveraging, when we are talking about re - leveraging, a leveraged imf would have increased ability to meet its rising challenges. in regard to the world bank, it should focus on poor countries, the ones that not only require liquidity or loans, but effectively need financial support. and for both the imf and the world bank, a critical question today is legitimacy. and the way emerging market economies are playing a more important role in the global economy – not only they are representing a larger share of world output as compared to before, but also represent at this point a solution for the crisis – it is imperative that these countries have a proportional weight in the governance structure of the two bretton woods institutions. another fundamental development these days is the increasing role played by the g20, for the very same reason of the growing participation of emerging markets economies in global output. it is clear today that the g7 alone or even the g10 are not able to address all relevant issues that affect the world economy, which are better dealt by a larger group as the g20. evidently there is always a trade - off, the larger the group, the more difficult its effectiveness. but that is a challenge that we have to face. the first meeting of heads of states of the g20 was an essential step towards making the g20 a more effective decision - making forum. the next topic is a global supervisory authority. the g20 suggested the creation of a college of supervisors, following a financial stability forum recommendation. president kohler raised here the idea of having the imf playing this role. we are in the very preliminary phase of this discussion and many challenges lay ahead in that regard, particularly deciding what should be subject to international supervision and what should be subject to national or regional supervisory entities. much of the discussion today evolves around crisis prevention. in terms of crisis resolution, the recommendation is for every country to take all the necessary actions to restore the regular working of its financial system, consumer and investor confidence and the level of economic activity. but every country must act according to its needs and resources. countries were financial institutions faced