mervyn king : balancing the economic see - saw speech by mr mervyn king, deputy governor of the bank of england, to the plymouth chamber of commerce and industry ’ s 187th anniversary banquet, on 14 april 2000. * * * mr chairman, distinguished guests, ladies and gentlemen, i was delighted to receive an invitation to speak at your 187th anniversary banquet. plymouth people are brave souls. and few are braver than those who choose to listen to a central banker at 10 o ’ clock on a friday evening. the more so, when i tell you that our ambition at the bank of england is to be boring. not, i hasten to add, at events like this. but in our management of the economy where our belief is that boring is best. macroeconomic policy has, for most of our lifetime, been rather too exciting for comfort. as miss prism told her charge in the importance of being earnest, “ cecily you will read your political economy in my absence. the chapter on the fall of the rupee you may omit. it is somewhat too sensational ”. if the rupee was too sensational, what words could describe the drama of sterling during the past fifty years? devaluations in 1949 and 1967, eight - week membership of the european “ snake ” in 1972, and the exchange rate mechanism ( erm ) which we joined in 1990 and left in september 1992. and now, of course, sterling ’ s remarkable strength against the new currency of the euro. in short, the peripatetic pound has caused, and continues to cause, severe headaches for economic policymakers. but was currency instability really the cause of those headaches in the past, or was it simply the effect of bad policies? some of both is the answer. large movements in sterling can create problems for monetary policy, as we have seen very recently. equally, the absence of a credible monetary framework means that the currency is likely to be volatile. sterling crises of the past reflected an absence of monetary stability. inflation has eroded the value of money to the point where the purchasing power of £1 in 1950 has been reduced to less than a shilling, or 5p, today. the failure to control inflation led to excessive expansions of the economy, and the subsequent struggle to bring inflation back down resulted in severe recessions. this country experienced the sharpest decline in output of any g7 economy in the early 1980s. and in the early 1990s only canada

new vibrancy to the anfield area. i personally heard last night about some of the great work that everton in the community are doing to tackle problems like homelessness and boost educational attainment. and the club of course has ambitious plans for a new stadium at bramley moore dock. liverpool ’ s science park provides office space alongside commercial labs, right at the heart of the city ’ s knowledge quarter. all speeches are available online at www. bankofengland. co. uk / speeches we ’ re here today to discuss with you what causes changes in the economy, how they affect people and businesses in merseyside and across the country and the bank of england ’ s role in supporting jobs and growth. the economy matters for everyone and people want to understand it better. three quarters think there should be better education about the economy and half want a better understanding themselves but virtually no - one – just 1 in 10 – think public figures talk about economics in an accessible way. today, we are trying to bridge that gap. we are helping to make discussions of the economy more accessible and are launching practical tools that can be used to help educate students, and indeed everyone, about the economy. this is all part of a wider effort to improve our communications. we are doing this to make the bank more open and accountable. quite simply, people need to understand our actions and their effects in order to hold us to account. doing so will also make our policies more effective. let me give you an example. our mission was originally set out in 1694 in the bank ’ s founding charter. that was to ‘ promote the publick good ’ – although that sentiment was contained within a 700 word sentence, hardly clear and transparent communication. and in practice at the time what it meant was raising money to carry on a war against france. today, our mission is still to promote the good of the people of the united kingdom, but now we do that by maintaining monetary and financial stability. let me explain what that means. maintaining monetary stability means two things. first, providing banknotes that you can use and trust. we have over 3 billion notes currently in use, and they are used in 44 % of all transactions. second, it means maintaining low and stable inflation. maintaining financial stability means three things. first, making sure that when you put your money in a bank it is safe. second, it means that if a bank fails, the costs fall on the bank ’ s investors and senior