I must admit that, as a central banker charged with setting official interest rates, I have difficulties to accept this particular to my mind unfounded - belief, even if the authority in question was claimed to be Aristotle or the Bible, both of which I am quite happy to consult on other matters. 3. Credibility: the role of rules and institutions  The weight of historical experience, a large body of theoretical literature and of empirical evidence point to the importance of price stability as the foundation of a well-functioning market economy and as a precondition for durable growth and prosperity. Nevertheless history is littered with episodes of high inflation which imposed high economic and social costs on society. To be sure, at times the importance of the common and precious good of price stability may have been underrated or forgotten by society. At other times stability may have been purposefully compromised in the pursuit of other seemingly more pressing objectives. However, the main lesson that I would take away from history is this: when it comes to price stability, good faith and honest intentions are not enough. Fundamentally, money represents a promise. It requires trust by the users of money in the issuer of money to honour this promise. Money is built on trust, but in turn trust must be built on solid foundations. The promise must be made credible and this - at least in relatively modern times - is the job of central bankers. A promise always concerns the future.
If I may take the example of the Bundesbank, the borderline between trust and quasireligious faith, indeed, becomes very hard to make out. It was Jacques Delors who once famously remarked: “Not all Germans believe in God, but all believe in the Bundesbank”. Such a degree of faith is, of course, partly the result of the success that this central has had in maintaining its promise of stable money. However, one needs to remember that the Bundesbank (and its predecessor organisation, the “Bank Deutscher Länder”) started from almost zero after the catastrophes of tyranny, war and inflation, which had thoroughly destroyed faith and trust in public authority. In this regard the ECB, thankfully, is in a much more favourable position. The attitude of the German public towards their central bank is also the product of the high premium that was - and continues to be - placed on stability in Germany, as a consequence of the traumatic instabilities of war and inflation in the first half of the 20th century. This sort of “faith” thus can be explained in the case of Germany. Andre Glucksmann has used the term “currency religion” to describe the Germans’ devotion to monetary stability and to the Bundesbank as the guardian of the D-Mark. In my view such devotion, nevertheless, represents something of an anomaly. I am not sure that it is necessarily always helpful for an institution like a central bank to be held in such awe.