immediate future, given the current configuration of economic activity and prices around the world. obviously, the u. s. deficit has as a counterpart an equal current account surplus in the rest of the world combined, after allowance for gaps in the statistical reporting system. the size and persistence of these imbalances reflects two interrelated forces. first is the gap between spending and production in the united states and a similar gap of opposite sign in the rest of the world. the united states as a whole is spending much more than it is producing. saving rates are especially low in our household and federal government sectors - both of which are spending more than their current income. this configuration is not so unusual for the government, but it is for households, where low interest rates ( until recently ) and the rising value and easier accessibility of housing wealth apparently have boosted spending relative to income. outside the united states, the shortfall of domestic demand relative to production capacity has importantly reflected weak business investment along with high saving rates, a mechanism identified by my colleague, chairman bernanke. low levels of investment relative to profits, sales, and the cost of capital are global, including in the united states. indeed, it is one reason interest rates have been so low through much of the recent global expansion. in the united states, the shortfall in business demand has been made up for largely by the household sector, as i just noted ; for a variety of reasons, that has been less the case in many other countries, especially in asia, and these countries have, in effect, relied on exports to fill the gap between demand and potential production. the second force affecting global imbalances has been the continuing strong demand for dollar assets, without which exchange rates and other prices already would have adjusted to limit the growth of the imbalances. arguably, it was this strong demand, in response to the step - up in productivity growth in the united states and the asian financial crisis, that appreciated the dollar in the late 1990s and initiated the string of large u. s. current account deficits. but the demand has continued this decade, albeit with some fluctuations, financing the growing u. s. current account deficit. private investors apparently perceive opportunities for relatively high returns on dollar assets in light of the more rapid growth of productivity in the united states than in many other industrialized economies. the attraction of dollar assets likely also is enhanced by the liquid nature of the markets in which they trade and because as collateral these assets are

both the economy and the financial system. these include physical risks from disruptive weather events and transition risks from adapting to a lower - carbon global economy. the bank is incorporating this risk into its analysis of the canadian economy and financial system. we are also working to improve our understanding of climate risks as they relate to our mandate. turning from vulnerabilities to risks, i will conclude by saying the overall risk to the canadian financial system has increased slightly since our last assessment nearly a year ago. this is due to the recent slowdown in economic growth in canada and abroad. however, as we said in our recent monetary policy report, we expect economic growth to pick up later this year. as for the risk of a severe house price correction, we judge that to be moderate and declining, with froth having decreased in the toronto and vancouver areas. meanwhile, the risk of a sharp increase in long - term interest rates driven by higher global risk premiums is moderate, but increasing. with that, senior deputy governor wilkins and i would be happy to answer your questions. 2 / 2 bis central bankers'speeches