Times Have Changed.

• Author: Issing, O.

To paraphrase a Roman proverb, times are changing, and central banks are changing with them. This is nowhere more evident than in banks' moving from secretiveness to transparency. Active communication has become a favorite tool of most central banks.

The so far most effective example was delivered by Mario Draghi, president of the European Central Bank. On July 26, 2012, he made his magical statement: "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough."

These words were followed by the announcement of the Outright Monetary Transactions (OMT) program. Immediately after Draghi's speech, the spreads of ten-year government bonds in Spain, France, and Italy relative to Germany's declined from their temporary peak to previous levels. Until today, not a single euro has been spent to intervene under this program. Words, communication alone, did the work. However, this effect cannot be separated from the person and the position of the originator.

Impressive as this case is, the fact that...