interest rates in canada to be below those in the united states, there has been - - rightly - - a strong market perception that the relative weakness of the canadian dollar is temporary and that a future appreciation will compensate investors for the lower yields on canadian dollar assets. but experience has taught us that this process of exchange rate / interest rate interaction works well only if there are no concerns in the markets about canadian economic policies. as we found out in 1994 - 95, when there were concerns about fiscal policy, a decline in the value of the canadian dollar can generate a loss of confidence and expectations of further depreciation of the currency, not of subsequent appreciation. the upshot of all this is that, with a floating currency, market participants need a consistent and credible policy framework to help anchor their expectations about future movements in the exchange rate. such a framework rests, above all, on a firm undertaking by the authorities to preserve the domestic purchasing value of the currency. i believe that our inflation - control targets, by giving a clear, precise view of this commitment, provide a strong underpinning for the external value of the canadian dollar. what is my main message to you today? canada is in better shape now than it has been for many years to face the economic challenges of the future and to reap the benefits of changing technology and an increasingly integrated world economy. but, for this scenario to unfold, there will have to be continued commitment by the authorities to prudent, credible economic policies. as far as monetary policy goes, this means a pledge to maintain canada ’ s good inflation performance. that is a pledge i can give without reservation.

a master plan. that ’ s because there are no simple, realistic, quick - fix solutions. and that ’ s why a serious debate is needed about what we can do to make our economies future - proof. three principles, in my mind, should guide our discussions. first, we need a fairer market economy. what do i mean? markets are in principle successful in organising the complex division of labour. but they have negative externalities – in other words, others may be negatively affected by a market transaction between two individuals or firms. it might lead to the pollution of our environment, the lowering of labour standards or the loss of jobs. if these side effects become too much, they can threaten social cohesion. to prevent this, we need to strike the right balance between two policies : policies that foster the competitive dynamics of market economies, and policies that ensure the social cohesion that is necessary for market economies and indispensable to democratic societies. the most obvious tools are fiscal policy instruments that serve to strengthen the social security system, which provides financial compensation to individuals such as those who are unemployed. at least as important as the provision of financial compensation is making sure that people are capable of helping themselves. to that end, we need better education and higher qualifications : countries need to promote equal access to high - quality primary, secondary and tertiary education. what is crucial to educational success in 5 to 50 years is that we increase public spending on qualified personnel. moreover, active labour market policies are needed to support the jobless in their efforts to qualify for other professions. the second principle is that we must tackle the hidden problems that are weakening our market economies. what do i mean? i ’ m talking about the problems that are complex in nature and difficult to solve – which makes them less intuitively appealing – but nonetheless pose challenges that are significant. we need an open and honest debate about these problems, even though the debate might not be promising in terms of electoral gains. because if we don ’ t talk about them, the populists surely will – and once they own the debate, facts will certainly play less of a role. let me give you an example of what i mean : where should we take money from to fund the compensation and education measures that i just talked about – without increasing public debt? this is a difficult debate, but one important aspect needs more debate than it has received so far : financing must be tax - based rather than debt - based. and the tax