conceptual distinctions are required, as are consistent choices. the first distinction is between relative and absolute prices. the energy transition calls for an increase in the relative prices of fossil fuels ; the general level of prices is ( at least as an initial approximation ) entirely indifferent. in fact, the increase in fossil fuel prices is actually leading to generally higher prices : in part ( as i said at the beginning ) directly, because of the proportional impact of energy prices on the general index, and in part indirectly, through the sectoral interdependencies in production, which mean that energy prices are incorporated into the cost of products that use energy as input, and the increase thus spreads to other components of the index. so? here we need the second distinction, between a one - off increase in prices and prolonged inflation. we need to start from the point set out very clearly by the governor in his concluding remarks a few days ago. the external rise in energy prices is a kind of ‘ unavoidable ’ tax that weighs on the economy of importing countries, technically through a worsening in the terms of trade. the governor said that ‘ government action can redistribute the effects of inflation between households, factors of production, and present and future generations, but it cannot wipe out the overall impact ’. for this reason, this tax is reflected in a one - off increase in price levels ; given the same nominal income, everyone comes out poorer. inflation would be unleashed if, under the illusion of being able to recoup at individual level the purchasing power that the community as a whole has lost, everyone ( households, firms ) tried to redefine their nominal income from time to time, thereby causing what the governor defined as a ‘ pointless wage - price spiral ’ while talking about european monetary policy. pointless, because by impacting firms ’ costs, also affected by higher energy costs, a wage increase would in turn spark a new round of price rises, and vice versa, in a symmetrical way. there is a risk that this process, once started, will not stop. the experience of the 1970s shows that prolonged inflation is not an unavoidable consequence of an external shock to input prices. it is what happened in italy at that time, because we were unable to protect ourselves against the monetary illusion. it was different in other european countries, and the effect of the oil shock seemed more like a one - off increase in prices than the triggering of an inflationary process that

political situations, and their regulatory and corporate environments. they will surely compete amongst themselves to gain market share and critical mass, and anchor in asia some of business which presently goes to london and new york. but in my view they also have considerable scope for co - operation, as each will occupy a distinct market niche and none can dominate in all aspects of finance. singapore will never have the advantage of tokyo's large economic base. nor do we have hong kong's physical proximity to china. but we seek to provide a world - class regulatory environment that responds to the needs of global markets and global institutions, and the most efficient infrastructure for businesses to use as a platform for all of asia. singapore plays host to some 6, 000 multinational corporations and the financial institutions that are their global advisers, many of which use singapore as their regional headquarters. and our strategic location at the heart of southeast asia and within 7 hours of key markets in northeast asia, south asia, and australia positions us well to serve as a financial centre for all of asia. singapore while the external environment is not within singapore's control, our strategies and policies are. we believe that the right strategies and policies will help us to capitalise on opportunities and overcome disadvantages arising from our size. there are no secrets to the strategies, because the factors for success are not unique to singapore. the challenge is in their execution and implementation. here are five things that we have set out to do in order to excel as a financial centre in the new economy. enhance business environment first, we are seeking to further enhance our conducive pro - business environment. economic and political stability, an efficient and impartial legal system, comprehensive and up - to - date market infrastructure, and fiscal discipline that allows low taxes are key preconditions, more important than special incentives for the financial sector. singapore has established a reputation for delivering these preconditions, which we will maintain and improve upon in future. build talent pool second, we are building up our talent pool. in a knowledge - intensive industry like financial services, singapore will not get anywhere without world - class talent. we are making a concerted effort to attract foreign talent who can make a contribution to singapore, and to integrate them into our economy and society. we are also nurturing home talent to its full potential through a good education system for the young and ongoing training opportunities for those in the workforce. as asian companies begin to use more complex strategies and products