We acted swiftly to defeat the manipulators at their own game with a series of measures that threw them off their guard, drove them out of the market, and raised the defences against future attacks. First, drawing on the official reserves, we went into the stock and futures markets. In the second half of August we accumulated $ billion worth of shares: I am happy to say they are now worth $ billion, but our aim was not to make money; it was simply to deter manipulation by making sure that it did not pay off. That objective was achieved. The manipulators were forced to close out their short positions, in many cases with heavy losses. And we followed through with a package of technical measures to strengthen our currency board arrangement to make our money market less susceptible to manipulation. These measures are working well. Further reforms are being introduced in the securities and futures markets to reduce the possibility of market dislocation. Our actions served their purpose of deterring market manipulation. We could not passively sit through the speculative attack and see our markets overshoot to produce profits for the manipulators, and our entire financial system brought to the brink of collapse. We do not pretend that our intervention in the markets was not a controversial act. This was not a decision that we enjoyed taking. It involved many risks, not least among them the risk of being misunderstood.
The challenge that lies ahead of us is how to include this new objective in our policy making; whether inflation targeting and financial stability can be combined or whether a new regime altogether is needed. Various new radical approaches have been mentioned so far. However, I believe that we should not discard all the hard-learned lessons and the successes of the past. Stabilizing inflation should be something that central bankers may be proud of, something that we should cherish and continue to strive for. Incorporating financial stability objectives with the inflation targeting regime should be seen as an opportunity to understand economic developments and potential macro-financial risks, to achieve both these objectives and preserve long-run economic stability. I believe the course of the monetary policy will continue to be extensively discussed in the future, including our improved understanding of the role of asset prices and financial frictions. Under the current conditions, the largest central banks in developed countries have stretched central banking theory and practice beyond traditional activities. Their balance sheets have increased beyond imagination and, in some cases, include private assets; they have accepted a much broader role and have assumed more responsibility. This all new and untested type of central banking will have a strong impact not only on the nature of monetary policy and its interaction with other central bank objectives but also on the independence and credibility of the central bank itself.