remain exceptional for some time. that should help reassure british business that the path of interest rates will be consistent with a sustained recovery – that is, with escape velocity. this recognises that many of the headwinds holding back the economy will remain for some time yet. public and private balance sheets continue to be repaired. world demand remains weak and the appreciation of sterling will hold back the expansion of net exports. and there remain strains in the financial system despite good progress on post - crisis repair. these persistent headwinds mean that, even in the medium term, the level of interest rates necessary to sustain low unemployment and price stability will be somewhat lower than before the crisis. in the jargon, the equilibrium real interest rate, which has been negative for much of the period since the crisis, will eventually turn positive again, but it is likely to remain well below historical norms. escape velocity won ’ t come cheap. the bank of england is helping to build the foundations for britain ’ s future success : the conditions for recovery while maintaining price stability ; a financial system that is safe and does not impose losses on the taxpayer. on those foundations, britain ’ s businesses can build again, through investment and innovation, the country ’ s future prosperity. bis central bankers ’ speeches

valuable. thank you! in fact using the paye system would probably be the easiest way to implement such a scheme. moreover, if the government were actually to send out vouchers redeemable into cash it might well fall foul of the prohibition on monetary finance contained in the lisbon treaty. note that this only requires consumers to wish to smooth their spending over time, not that they internalise the implications for future taxes of more government borrowing ( so - called “ ricardian equivalence ” ). david miles ( 2011 ), “ mortgages and housing in the near and long term ”, http : / / www. bankofengland. co. uk / publications / speeches / 2011 / speech488. pdf bis central bankers ’ speeches the economic outlook cml mortgage industry conference london charlie bean, deputy governor monetary policy 03 november 2011 bis central bankers ’ speeches chart 1 : uk activity real gdp pmi surveys percentage increase on a quarter earlier 1. 2 cips services ouput cips manufacturing output index, 50 = no change 0. 9 0. 6 0. 3 - 0. 3 - 0. 6 2009 q3 2010 q1 2010 q3 2011 q1 2011 q3 jul 09 jan 10 jul 10 jan 11 jul 11 chart 2 : international activity composite pmi surveys real gdp percentage change on a quarter earlier us euro area 1. 2 index, 50 = no change us euro area 0. 8 0. 6 0. 4 0. 2 2009 q3 2010 q1 2010 q3 2011 q1 2011 q3 jul - 09 jan - 10 jul - 10 jan - 11 jul - 11 bis central bankers ’ speeches chart 3 : euro - area sovereign and banking risks cds - based bank default risk 10 - year government bond spreads basis points percentage points portugal ireland italy spain france uk austria, belgium, france, germany and netherlands greece, ireland, italy, portugal and spain uk us jan 10 jul 10 jan 11 jul 11 jan 10 jul 10 jan 11 jul 11 chart 4 : change in net exports after big sterling moves percentage point contribution to gdp 3. 0 1996 q1 ( 22 % ) ( inverted ) 1992 q2 ( - 14 % ) 2. 0 2007 q2 ( - 25 % ) 1. 0 0. 0 - 1. 0 - 6 - 4 - 2 10 12 14 16 quarters before / after start of exchange rate movement bis central bankers ’ speeches chart 5 : output losses after banking crises percent of pre - crisis trend ; mean difference from year t =