in. and the us did a great job. but then two years or so ago the us began to fade - or give up the " ghost " if you like - with an investment - driven slowdown associated with the bursting of the ict bubble and correction of over - exuberance in equity markets. but the ghost has shown clear signs of renewal over the past year ; in fact us output in the third quarter was 3 % up on a year earlier. this turn - around from recession was helped initially by the inventory cycle, but it has been underpinned by resilient consumer spending, which itself has been encouraged by the strength of the housing market, offsetting some of the negative wealth effects of lower equity prices. meanwhile manufacturing output recovered - notably in the semiconductor, computer and communications equipment sectors - and investment appears at least to be no longer contracting. certainly the macro - economic data are mixed - they almost always are, but on the whole they remain reasonably positive. more fundamentally, the financial system - notably the commercial banking system - has held up well, far better than one might have expected through the slowdown. market interest rates have fallen where they were pointing higher earlier in the year. and perhaps most importantly, although there has been some deterioration in the labour market, average annual productivity growth has remained strong - at around 2½ % since 1995, well above the 1. 5 % rate averaged over the preceding 20 years. at current growth rates that means there is no inflationary pressure - and both monetary and fiscal policy remain supportive, indeed us monetary policy was eased quite sharply further last week to underpin the expansion. all in all, we - along with many other macro - economic forecasters - expect that after somewhat slower growth in the 4th quarter - us gdp will continue to expand at an annual rate of 3 - 3½ % over the next two years. that's not a massive rebound, but it is a positive picture - even allowing for downside risks. so we are, in fact, seeing - in terms of turandot's first riddle - the renewal of the us economy. and of course it is immensely important for the global economy that we should, because the prospects in some of the other major industrial economies, notably japan and germany, are rather more uncertain. surprisingly in the light of all this, turandot's own answer to her first riddle was not " the us economy. " her answer was hope. i suppose i would settle for

provide 3 - year financing, via a collateral swap, for assets that had become illiquid as a result of the crisis. 20 how the facilities can work in extremely stressed conditions monthly, wide - collateral repos for a 3 - month maturity and typically of fairly modest size, together with a continuously available window for 30 - day collateral swaps, are now permanent features of the bank of england ’ s regime. various parameters can be adapted in the face of extremely stressed conditions of the kind we have been facing. thus, the widecollateral repos have been held fortnightly rather than monthly, and for very large sizes. and the dwf currently offers a 12 - month swap option, as well as the standard 30 - day facility. in summary, by providing liquidity insurance the bank aims effectively to give essentially sound banks and others time to address the problems created by stress, and for the authorities to develop remedial plans, without creating perverse incentives or exposing itself to risk. given those aims, banks must avail themselves of these facilities. we believe, for example, that all qualifying banks and building societies should sign up for the discount window facility ; that they should pre - position with us a range of eligible collateral, so that they avoid operational stumbles when they seek to use the window ; that they should use it regularly in meaningful size as part of testing and making a reality of their contingency plans ; and that they should share those plans with the bank, which, amongst other things, would help us assess applications to draw. in that way, the dwf can truly help to underpin the system ’ s liquidity in the future. see tucker pmwt ( 2008 ), “ the structure of regulation : lessons from the crisis of 2007 ”, a speech to the lse ’ s financial markets group conference ; and the committee on the global financial system, paper no. 31 ( july 2008 ), “ central bank operations in response to the financial turmoil ”, cgfs papers, bank for international settlements. the sls was introduced in april 2008 and was open until end - january 2009. it enabled banks to swap legacy illiquid securities ( principally rmbs and covered bonds ) for uk treasury bills for a period of three years. the bank announced in early february that it lent £185bn of tbills, against £287bn ( nominal ) of collateral. prudential regulation of banks ’ liquidity : how it relates