be some general sense of the purchasing power of money both across time and across goods and services. hence, we must assume that embodied in all products is some unit of output, and hence of price, that is recognizable to producers and consumers and upon which they will base their decisions. the emergence of inflation - indexed bonds does not solve the problem of pinning down an economically meaningful measure of the general price level. while there is, of course, an inflation expectation premium embodied in all nominal interest rates, it is fundamentally unobservable. returns on indexed bonds are tied to forecasts of specific published price indexes, which may or may not reflect the market ’ s judgment of the future purchasing power of money. to the extent they do not, of course, the implicit real interest rate is biased in the opposite direction. doubtless, we will develop new techniques of measurement to unearth those true prices as the years go on. it is crucial that we do, for inflation can destabilize an economy even if faulty price indexes fail to reveal it. it should be evident from my remarks that ample challenges will continue to face monetary policy. i have concentrated on how we have tried to identify and analyze new developments, and endeavored to use that analysis to fashion and balance policy responses. i have also tried to highlight the questions about how to specify and measure the ultimate goals of policy. nonetheless, all of us could easily add to the list. in dealing with these issues, policy can only benefit from focused and relevant academic research. i look forward to learning about and utilizing the contributions made under the sponsorship of the center for economic policy research over the years to come.

or in foreclosure, and one in ten near - prime mortgages in alt - a pools and more than one in five subprime mortgages are seriously delinquent. 3 lenders appear to be on track to initiate 2 - 1 / 4 million foreclosures in 2008, up from an average annual pace of less than 1 million during the pre - crisis period. 4 predictably, home sales and construction have plummeted. sales of new homes and starts of single - family houses are now running at about one - third of their peak levels in the middle part of this decade. sales of existing homes, including foreclosure sales, are now about twothirds of their earlier peak. notwithstanding the sharp adjustment in construction, inventories of unsold new homes, though down in absolute terms, are close to their record high when measured relative to monthly sales, suggesting that residential construction is likely to remain soft in the near term. as i mentioned earlier, the problems in housing and mortgage markets have become inextricably intertwined with broader financial and economic developments. for example, mortgage - related losses have eroded the capital of many financial institutions, leading them to become more reluctant to make not only mortgage loans, but other types of loans to consumers and businesses as well. likewise, some homeowners have responded to declining home values by cutting back their spending, and residential construction remains subdued. thus, weakness in the housing market has proved a serious drag on overall economic activity. a slowing economy has in turn reduced the demand for houses, implying a further weakening of conditions in the mortgage and housing markets. reducing preventable foreclosures because developments in the housing sector have become so interlinked with the evolution of the financial markets and the economy as a whole, both macro and micro policies have a role in addressing the strains in housing. at the macro level, the federal reserve has taken a number of steps, beginning with the easing of monetary policy. to the extent that more accommodative monetary policies make credit conditions easier and incomes higher than they otherwise would have been, they support the housing market. estimates of delinquencies are based on data from the mortgage bankers association and from first american loanperformance. foreclosure starts are based on data from the mortgage bankers association, adjusted to reflect the limited coverage of their sample. historically, about half of foreclosure starts resulted in the borrower losing the home,