much larger as a share of gdp than in the other major economies. these features of the u. s. financial system seem to have made us better at allocating u. s. savings, a more attractive place for the savings of other countries, and probably less vulnerable to shocks. they have also made macroeconomic policy more effective in responding to shocks. and a final factor, by most accounts, involved good policy choices. this has been an exceptionally good period for u. s. monetary policy, with the formidable combination of volcker and greenspan achieving a dramatic and sustained moderation in inflation. better monetary policy and inflation outcomes played a central role in laying the foundation for the increased investment that made the productivity surge possible and in bringing about the reduction in the depth and length of recessions that are a feature of the more even u. s. economic performance. better fiscal policy in the 1990s helped too, by reducing long - term interest rates and improving confidence in future u. s. economic performance. more of the savings the united states borrowed from the world went to finance private investment rather than government consumption. this list of factors - technology, openness and flexibility, the more innovative u. s. financial system, and good monetary and fiscal policy - is not a comprehensive list. it ’ s hard to know how important each element was to the overall record and whether we would have seen as much improvement without all four of these elements. we were fortunate in the sense that the size of the shocks we experienced were smaller than in the past. the strategic environment of the 1990s seemed at the time more peaceful and secure, and so our security needs claimed a smaller share of resources than is true now and may be true for some time. but it wasn ’ t just luck. much of what was exceptional in the u. s. was the result of conscious choices by policy makers. this is encouraging in the sense that it suggests that with good policy choices we have the capacity to sustain quite strong rates of income growth in the future. we face a number of major challenges to sustaining this record. i want to focus on just a few of these those where the risks are highest and the return to sensible policies is likely to be highest. the first of these challenges is the combination of our fiscal and external imbalances. both are unsustainable. each magnifies the risk in the other. fiscal deficits of the magnitude projected are large enough to damage future growth prospects of the u. s

markets continues to serve the real economy and is not to its detriment. realisation as to what was happening in the markets came somewhat late. we are currently seeking to correct bis central bankers ’ speeches that. authorities the world over agree that we need to discipline the markets and the financial system as a whole and make them much more resilient in all circumstances. jesus drove the money - changers – i. e. the bankers – out of the temple. how do you, as a man of money, feel about this parable? central bankers are guardians of monetary stability, which is a public good. so, when the markets run riot, whether on the upside or on the downside, we ensure that there is a return to discipline. wisdom needs to discipline “ animal spirits ” – excessive greed or fear. on the other hand, i would certainly warn against making it difficult for banks to carry out their functions. in europe, banks finance 75 % of all economic activity. the real economy needs banks to finance investment, and we should not mistreat or ignore them. we would be shooting ourselves in the foot if we did that. you experienced the occasionally violent protests of the 1968 movement at close quarters – from ministries in paris with people demonstrating in front of them. how seriously do you take the “ occupy ” movement, which has spread from wall street to cities around the world? i think we should always be very attentive to the signals coming from society. they are manifold and complex. people are asking themselves how it was that first the financial markets and then the real economy turned out to be so vulnerable. we now need to make our market economies much more robust, as only they are capable of creating wealth and employment. and banks need to strengthen their resilience and avoid behaviour – including excessive bonuses – that is not compatible with the values of our societies. these are the messages that i would take from public opinion. we are all working hard to strengthen the financial system, both at the european and at the global level. to what extent has the greed of the financial markets damaged the notion of the market economy and freedom in europe and beyond? we should be very conscious of the fact that certain behaviour in the markets has caused considerable irritation. that includes the size of certain bonus payments. this has shocked the public on both sides of the atlantic. we therefore need a change in values and a change in behaviour in this respect. we are all living in democracies