have recently seen all too clearly the damage that can be caused by the volatility of international capital flows - but we need to set that against the positive benefits - in terms of potential growth rates - that had previously resulted from massively greater private sector capital investment in many of the emerging markets, and which has now resumed. certainly we need to reform the system to try to ensure greater stability - and a great deal of effort has been expended on precisely that over the past few years - by developing standards and codes of best practice by national authorities, for example, designed to help them to help themselves to take greater advantage of the opportunities presented by globalisation. more certainly needs to be - and is being - done, recognising the particular problems facing different countries at different stages of development. but it would be a terrible mistake to turn the clock back and retreat from “ globalisation ” into a world of nation states linked together predominantly by official financing. none of the poorer countries themselves are arguing for that, yet that is what some of the protests seem to imply. and so it is with some of the more specific issues - like pushing for higher labour standards in developing countries, which is fine up to a point, but if pushed too far could mean lower activity and higher unemployment in those countries ; or debt forgiveness not tied to programs designed to improve the lot of the people living in the debtor countries ; or the appropriateness of particular development projects and so on - we cannot simply focus on particular aspects of the problem in isolation, we need to examine both the pros and the cons in each case to try to find the best means to what is quite likely to be an agreed end. and dialogue in my view is likely to be a better and more productive approach to that than attempts at direct action. mr chairman, it is absolutely right that not just the church but anyone with a sense of humanity should react against the extent of the inequality that we see around us locally, nationally and internationally. it is, however, wrong in my view to attribute that inequality simply to the nature of the financial system. no doubt that system has its deficiencies which we need continually to address. but by and large it is the best system that we have - or indeed that we have had. within it we have collectively to make all kinds of trade - offs between what may be seen, at least in the short run, as conflicting objectives. in that process we must all be free to follow

suggest that any of the increases in asset prices seen to date are out of line with the improving economic outlook and the desired impact of our asset purchase programme. rather, i was conscious that the current stance of monetary policy – in which bank rate is very low and substantial amounts of liquidity are being injected into the economy – increases the likelihood that asset prices may move out of line with their fundamental values and that this could be costly to rectify were it to occur. it is a risk that we need to be alert to. however, as i suggested, it is important not to make too much of these differences ; all mpc members – myself included – were of the view that a significant degree of monetary stimulus needed to be maintained in order to meet the inflation target. conclusion the economy has come a long way over the past year. at the time of this annual breakfast a year ago, output was in freefall, the banking system was in near meltdown, business and consumer confidence had evaporated, and there was a very real risk of a serious economic depression. monetary policy has played a critical role in the stabilisation of the economy. we have turned a corner on the road to recovery. but there is a long way to go with many challenges ahead as the economy moves into better balance. in facing these challenges, the monetary policy committee will do whatever it takes to ensure that inflation remains on track to hit the target. references eichengreen, b. and k. h. o ’ rourke ( 2009 ), “ a tale of http : / / www. voxeu. org / index. php? q = node / 3421, 1 september 2009. two depressions ”, romer, c. d. ( 2009 ), “ back from the brink ”, http : / / www. whitehouse. gov / administration / eop / cea / backfromthebrink, speech given at the federal reserve bank of chicago, 24 september 2009.