Almost without exception, countries favour criteria for representation that boost their own influence. This is normal when these kind of issues are discussed, but makes progress difficult. In the eyes of many it is Europe that is overrepresented. But it is enough to read the book ‘An Uncertain World', by the former US Secretary of the Treasury Robert Rubin, to realise that it is not Europe that has the real power - it is the United States that essentially calls the shots. This simple example illustrates that there is a big difference between the formal and actual power. Personally, I come to a number of different conclusions from this discussion. The world has changed since the fall of communism and as a consequence of the positive development in a large number of emerging markets. That gives cause to modify countries’ formal influence in the IMF by updating  BIS Review 43/2005  3  quotas to better reflect recent changes in world economy. Such changes should be implemented step by step, and with as broad support as possible. Some argues that the criteria used for determining countries’ influence should be modified. I am not convinced that this is the right way to move forward. There is much symbolism in this issue, which makes it a difficult one. For obvious reasons, it is also difficult to find criteria that balances the need for both borrowing countries and creditors to get reasonable influence, and, at the same time assures that the organisation functions well.
A natural explanation is that demand has been weak and uncertain. Our ordinary Business Survey, which was published last week, confirmed the picture that many companies currently perceive the situation as relatively uncertain and that they are so far cautious in implementing price rises. 2 Although there are some signs that price increases have been held back by an increase in competition, it is nevertheless reasonable to expect faster price increases and higher inflation when economic activity strengthens again and demand increases. In addition to inflationary pressures, developments in housing prices and household debt – and not least the counter-measures needed and their consequences – comprise an important, but difficult to assess, domestic condition for monetary policy. One should bear in mind the fact that experiences from other countries point to a high and growing indebtedness sooner or later having serious socio-economic consequences, but there is no clear limit as to when the situation becomes unsustainable. If one looks at the information available on indebtedness among the households taking on new mortgages, which thus in many respects comprise the purchaser side of the housing market today, I think there is reason for concern. On average, these households take mortgages equivalent to more than 350 per cent of their disposable incomes. The interest rates they pay on these mortgages are very low in an historical and an international perspective. This is partly due to the fact that a very high percentage of new Swedish mortgages are taken at variable interest rates.