mark carney : redeeming an unforgiving world remarks by mr mark carney, governor of the bank of england and chairman of the financial stability board, at the 8th annual institute of international finance g20 conference, shanghai, 26 february 2016. * * * the global economy risks becoming trapped in a low growth, low inflation, low interest rate equilibrium. for the past seven years, growth has serially disappointed – sometimes spectacularly, as in the depths of the global financial and euro crises ; more often than not grindingly as past debts weigh on activity ( chart 1 ). this underperformance is principally the product of weaker potential supply growth in virtually all g20 economies. 1 it is a reminder that demand stimulus on its own can do little to counteract longer - term forces of demographic change and productivity growth. chart 1 serial growth disappointments actual gdp growth dotted lines = emerging economies solid lines = advanced economies per cent source : imf. that is not to suggest that such stimulus is without value or impact. accommodative monetary policy can support activity while parts of the economy delever. monetary stimulus can avoid hysteresis in the labour market. and monetary stimulus can buy time for structural adjustments which shift activity from public to private, external to domestic, and declining to rising sectors. the time purchased by stimulus has been well spent fixing the fault lines which caused the global financial crisis. derivative markets have been made simpler and safer. fragile shadow the imf has downgraded their growth forecast for the fifth consecutive year ; and now expects global growth to be around 3 ½ % in 2016 and 2017. in part, this reflects a reduction in the imf ’ s assessment of global potential growth to below the around 4 % average growth rate in the decade prior to the crisis. at the bank of england, our protections are slightly weaker still. we expect ppp - weighted global growth this year to be just 3. 0 %, a quarter of a point lower than our estimate for 2015. bis central bankers ’ speeches banking activities are being transformed into stronger market - based finance. and the scourge of too - big - to - fail is ending. 2 most notably, a more resilient global banking system is being built. the dog that hasn ’ t barked in recent months has been financial distress at the core. this means banks are poised to dampen rather than amplify the impact on households and businesses of recent global financial shocks. monetary stimulus

save too much but whether we are saving too little. the level of income that will sustain us in the future depends critically upon how much as a nation we set aside today. in other words, what is happening to the national saving rate - the proportion of the net national product that is not consumed by either the private or public sector? since the late 1960s the national saving rate has been declining fairly steadily, from over 10 % to around 5 %. although saving rates elsewhere in the g7 have also fallen, they were higher than in the uk for most of the post - war period. recently the gap between saving rates in the uk and the rest of the g7 has narrowed considerably, not as a result of higher saving in the uk but lower saving elsewhere. in large part this reflects changes in fiscal policy. there is ample empirical evidence that higher government borrowing lowers national saving. and for twenty years or more the g7, while lecturing each other and the rest of the world on the need for fiscal discipline, has continued to borrow more and more. the ratio of net public debt to gdp in the g7 has more doubled since 1980 from around 25 % to around 60 %. the uk is the only member of the g7 in which the ratio is lower than in 1980. the uk has a clear framework for fiscal policy. although rules and frameworks cannot guarantee that governments will pursue sustainable fiscal policies, as the large deficits in the early 1990s illustrated, they make deviations from medium - term sustainability more transparent. but in the rest of the g7 the absence of a clear framework, as in japan and the united states, or the lack of credibility in the stated framework, as in the failure to enforce the stability and growth pact in the euro area, has made it easier to let the fiscal position slip. as a result, the g7 fiscal deficit is now close to its 25 - year peak, and the average national saving ratio has halved. at home, the government ’ s fiscal rules constrain the path of fiscal deficits. they limit borrowing, over the economic cycle, to the level of public investment and place an upper limit on the debt to gdp ratio of 40 %. in assessing the fiscal position it is important to look forward and not just backward at the realised deficits over the past cycle. of course, it is also important to recognise the many uncertainties surrounding the future path of the public finances. central bankers probably talk too much about fiscal policy