the first world war led to higher tariffs as governments scrambled to raise revenue. income tax was introduced in 1917, which finally gave governments another important source of revenue and made tariffs what they are today — purely a tool of protectionism. foreign investment into canada slowed sharply, immigration came almost to a halt and a major recession followed the first world war. things improved briefly during the roaring twenties amid industrialization in both canada and the united states. but the us stock market crashed in 1929, and shortly afterward, the western world fell into the great depression. foreign investment and immigration to canada slowed again during the depression. from 1929 to 1932, canada ’ s economy shrank by 25 per cent. with public sentiment turning against the banking system, then - prime minister r. b. bennett set up a royal commission, leading to the establishment of a central bank to act in the public ’ s interest. and since 1935, the bank of canada has been operating with a mandate to promote the economic and financial welfare of canada. meanwhile, in a bid to protect american workers and farmers from foreign competition, the us congress pushed up the average tariff rate on dutiable goods to nearly 60 per cent by 1932. this policy backfired spectacularly. most other countries, including canada, retaliated with tariffs of their own. the trade war had no winners ; everyone suffered as international shipments collapsed. canadian trade fell by more than 50 per cent during the depression ; us trade, by 70 per cent. unhappily, the second world war is what happened next. post - war success our final episode follows the second world war. after the depression and war, many countries — including canada — were determined to create international institutions aimed at preventing such disasters from happening again. at the 1944 international conference at bretton woods, canadian economist and future bank of canada governor, louis rasminsky, not only led the drafting of many of the documents but was also credited with breaking deadlocks between the british and american delegations. canada would benefit greatly from this international push toward openness. a consensus emerged on the wisdom of an open trading system, and three years after bretton woods we saw the general agreement on tariffs and trade ( gatt ). over the next 50 years, successive rounds of gatt talks led to lower and lower tariffs, from the roughly 22 per cent average seen before the war to about 4 per cent following the uruguay round in the 1990s, 4 / 7 bis central bankers'speeches reducing

in december 2005, included an in - depth article on pension funds – future prospects and uncertainties by guðmundur guðmundsson and kristiana baldursdottir. the study found that pension fund assets could peak at more than double the value of gdp. however, the pension funds ’ future profitability is fraught with uncertainties. the most important criterion is return on investment, which could change and drastically affect the level of contributions required to sustain the pensions that the funds are expected to pay. changes in life expectancy and disability expectancy will have some effect, although these are not as crucial as the uncertainty over return in investment. this indicates that the most important task ahead for pension fund management will be to optimise their return on investment, within the prudential limits that pension funds must respect. the foreseeable expansion of pension funds suggests that they will gradually have to step up their outward investment, which means that returns on foreign portfolios will be crucial for their future. clear long - term strategies are needed on which to base their investments. ladies and gentlemen : earlier i mentioned the extensive international coverage of the icelandic economy and the position of its banking sector. the depth of the analysis has varied. among the best informed observers of the icelandic economy are the three international rating agencies that assign iceland ’ s sovereign credits ratings, and international organisations such as the oecd and imf. all the rating agencies recently affirmed the sovereign rating, while one changed the outlook from stable to negative. the two agencies that have already assigned ratings to all the icelandic commercial banks have also affirmed them, while the third agency recently awarded a first – and strong – rating to an icelandic bank. earlier this week, an imf mission visiting iceland published the concluding statement for its article iv consultation with the authorities. in it, the imf says that the medium - term outlook for the icelandic economy remains enviable and institutions and policy frameworks are strong. however, the current conditions require a tight fiscal and monetary stance to reduce macroeconomic imbalances. the central bank of iceland will play its role in that effort.