people are highly indebted, that could tip the economy into recession. recessions that follow periods of rapid credit growth tend to be deeper and longer lasting. since we start from a vulnerable position, we need to be especially careful. to insure today against such risks in the future, the bank has introduced both new affordability tests for borrowers and a cap on the proportion of any lender ’ s new residential mortgages at high multiples of borrowers ’ incomes. by acting early, the bank can reduce the need for more drastic action later on. and by acting as we have, we can encourage a broadening of the housing market recovery. we recognise that there are large differences in housing markets across the uk. around one in five new london mortgages are extended at or above 4. 5 times borrower income, compared to one in ten across the uk as a whole, and one in twenty in scotland. capping the riskiest borrowing means that for every high ratio mortgage six must be extended at lower ratios. this helps spread lending capacity across the country, further contributing to balanced growth and a sustained economic expansion. trade good domestic policy cannot, on its own, guarantee balanced growth in an open economy like the uk ’ s. our fortunes are also tied to those of our trading partners. in recent years those fortunes have been modest. demand from the uk ’ s traditional markets, such as europe, is a staggering 25 % below a continuation of its pre - crisis trend. this is because the uk relies heavily on the slow - growing advanced economies ( chart 1 ). in contrast, the commonwealth countries, which account for only a tenth of uk exports, have grown over three percentage points faster on average each year than our major trading partners between 2008 – 13. the need to diversify trade to faster - growing economies in the commonwealth and emerging markets is clear. this will require both the continued initiative of uk businesses and a determined trade strategy. in short, we all need to be inspired by another great scottish figure, david hume. hume brilliantly showed that free trade was beneficial to all ; that it acquainted nations “ with the pleasures of luxury, and the profits of commerce ”, spurring them on “ to further improvements in every branch of domestic and foreign trade. ” 2 his ideas helped usher in the first great era of globalisation during the 19th century. in this wave, the british economy grew twice as fast as during the preceding century ( table 1 ). almost exactly a

mark carney : winning the economic marathon speech by mr mark carney, governor of the bank of england and chairman of the financial stability board, at the commonwealth games business conference, glasgow, 23 july 2014. * * * accompanying charts can be found at the end of the speech. it is a pleasure to be in glasgow for the opening of the 20th commonwealth games. for the athletes, the games represent the culmination of years of training. for fans they are a chance to witness great sporting achievements. i remember attending the 1978 games in my hometown of edmonton and being mesmerised by one of its stars : scotland ’ s allan wells. at just 26, wells burst onto the scene, winning silver in the 100 metres, beating the reigning olympic champion in the process. he spurred scotland to gold in the 4x100 metres, won the 200 metres outright and set the stage to become the fastest man in the world two years later at the olympics. the uk economy has also had some sprint success of late and is the current holder of the “ fastest growing advanced economy in the world ” title. that is welcome after some difficult years, but what really matters is what comes next. the bigger prize is winning the economic marathon by achieving a durable expansion. we must replicate the sprint success of wells over longer distances, taking our lead from scotland ’ s liz mccolgan, who memorably won gold in the 10, 000 metres last time the games were held in scotland, before going on to win the new york, tokyo and london marathons. to understand how we – and by “ we ” i mean the uk, the commonwealth and the world – can win the economic marathon, i want to draw on three less athletic, but nevertheless great, scots, each of whom points us to an essential ingredient of economic success : the right policy framework ; an open trading system ; and fair and effective financial markets. in all these respects, the uk is leading the way. the right policy framework the uk ’ s current policy framework has its origins in the work of william paterson of skipmyre, dumfriesshire. more than three centuries ago paterson proposed the establishment of the bank of england to “ promote the publick good and benefit of our people … ” 1 at that time the public good meant financing a war with france. over the ensuing centuries, as objectives evolved, paterson ’ s bank would have many guises including government banker, lender of last resort, bank supervisor