BIS central bankers’ speeches  3  The game of guessing what everyone else is guessing (everyone else is guessing…) was familiar to Keynes who observed that too often investors “devote [their] intelligences to anticipating what average opinion expects the average opinion to be”. 6 This disconnect between decisions and fundamentals feeds market volatility and capital misallocation. Such “beauty contest” dynamics afflict not only sophisticated investors, but also many mortgage lenders and homebuyers, particularly during a “new era”. If house prices can only go up, it’s possible to borrow large multiples and pay off future obligations with the capital gains that will almost surely follow. Such “rational” behaviour fuelled the credit binge that ultimately led to the global crisis. Second, if markets always clear, they should possess a natural stability. Evidence to the contrary must be the product of market distortions or a result of incomplete markets. Much of financial innovation springs from the logic that the solution to market failures is to build new markets on old markets. 7 Progress through infinite regress. During the Great Moderation, such thinking became an organising principle for financiers and policymakers. The latter pursued a light touch regulatory agenda in quest for the perfect world of complete markets first described by the economists Arrow and Debreu. 8 Their world imagines self-interested, atomistic agents, coolly calculating odds over all future possible states of the world, writing and trading contracts with each other, all frictionlessly enforced, all achieving mutually beneficial – indeed socially optimal – outcomes.
François Villeroy de Galhau: Card payments in Europe – latest trends and challenges Speech by Mr François Villeroy de Galhau, Governor of the Bank of France, at the Bank of France conference “Card payments in Europe – latest trends and challenges”, Paris, 18 January 2016. *  *  *  Ladies and gentlemen, Dear Yves Mersch, Dear Mario Nava, First and foremost, on behalf of Banque de France, I would like to warmly welcome you all in Paris. I am delighted to open this conference dedicated to card payments in Europe. A large number of European actors involved in the card payments market are represented today, including regulatory authorities and market players, and I have no doubt that the debates that are going to take place will give us a valuable insight on the latest trends and the challenges they bring with them. Before leaving the floor to our speakers and panelists, I would simply like to share with you a few thoughts on two of those challenges, one addressed to the supply side of the card payments market and one to the regulatory community. I. First challenge: the sustainability of the dominance gained by cards as payment instruments. Will the most used payment instrument in Europe continue to rise or will it fall? Over the last decade, payment cards have steadily consolidated their dominance as the most used non-cash payment instruments in France and Europe.