These stones could be as large as 12 feet in diameter and represented a value determined by both by the stone’s size, the quality of its craftsmanship and the history associated it. 5 See for example, ‘Money: the unauthorised biography’ by Felix Martin. 3  All speeches are available online at www.bankofengland.co.uk/speeches  3  Societies do not need to have such social technology – there are examples in history of quite advanced 6  societies that have not used it. But modern economies and the changes to living standards to which we have become accustomed would almost certainly be impossible without it. This social technology is of course supported by other technologies - physical, legal and institutional. But these can be very different in different societies and they evolve and change over time. The claims we hold on each other and exchange can be expressed in physical form, like coins or as records in a paper or an electronic ledger. They can be issued or authorised by the state and governed by law - but they do not have to be. In the end, what counts is that the social convention that is money continues to hold. When it fails, when it gets ‘out of order’, the damage to society can be very great. And though money can exist without them and although they can vary, what I have called the supporting technologies matter hugely.
Finally, the ultra-accommodative monetary policy stances of advanced economies have contributed towards greater global asset price co-movements and increased cross-border financial spillovers. In the context of a highly globalized financial system, extreme monetary easing has ‘pushed’ capital to other parts of the world, particularly emerging market economies where yields are higher, and boosted asset prices globally. The exceptionally long period of zero interest rates has also led to a buildup of financial positions that are attractive or justified only if yields remain low. As a result, global bond yields and exchange rates have become acutely sensitive to shifting expectations about monetary policy 5  changes in advanced economies. Such excessive sensitivity has put global markets on a knife edge with frequent bouts of volatility. These developments have critical implications for the transmission mechanism of monetary policy and its conduct. On the one hand, the greater influence of global factors and structural growth headwinds may have made inflation and output less responsive to monetary policy. On the other hand, financial markets and asset prices globally have become more sensitive to monetary policy actions and communication. This raises a dilemma. With inflation and output below targets, monetary policy is eased. Against the tide of global factors and growth headwinds, inflation and output fail to respond, and the temptation is to do more and more. In the meantime, financial markets respond vigorously to low interest rates and the search for yield accumulates in the form of greater financial fragility over time. Something will eventually have to give.