debit cards, over the new year ’ s weekend. not at all. rather, this larger - than - normal inventory, together with the preparations made by the bank and by private sector institutions that are responsible for distributing banknotes, is intended to reassure canadians that, should some people decide to stock up on cash, the financial sector will be able to respond. by taking these actions, and by publicizing them, we hope to ease any public concerns in this area and so reduce the likelihood that we will actually need to use these extra banknotes. we have also made contingency arrangements to ease potential liquidity concerns in the business and financial sectors. of course, the primary responsibility for contingency plans to meet possible liquidity needs rests with financial institutions. in addition to these private sector preparations, the bank of canada has set up a special liquidity facility to address any worries financial institutions may have about being hit with extraordinary demands for liquidity from their customers. and we are widening the range of collateral they can use to secure loans from the bank. we have also announced arrangements to prevent any unusual liquidity demands from putting upward pressures on money market interest rates in canada around the end of the year. so, there should be no reason for any material year 2000 risk premium in canadian interest rates. in summary, the canadian financial sector is well - prepared for the century changeover. all participants, including the bank of canada, have made contingency arrangements. should unexpected glitches develop, these arrangements will provide a quick, effective response to minimize any disruptions. more importantly, they should bolster the confidence of canadians in the financial sector ’ s ability to operate normally. and this should ease year 2000 fears and reduce the likelihood of an overreaction. i would like to reiterate what i have said before : when it comes to financial matters, i see no reason why canadians should prepare for this coming new year ’ s weekend any differently than for any other long weekend. i would now like to turn to the economy and monetary policy. the current economic situation the canadian economy has bounced back from the global financial crisis of 1997 – 1998 and its negative impact on the prices of the key commodities we export. indeed, when the numbers for the third quarter of 1999 are out, i expect that they will show that output has expanded by over 4 % since the third quarter of 1998. and the unemployment rate has continued to fall over the past 12 months - from 8. 3

a lack of transparency ) led to a drying up of liquidity and an increase in bank funding costs. that turmoil accelerated dramatically this september, moving far beyond liquidity problems to a more acute and broad - based crisis of confidence, sparked by a series of failures and near - failures of financial institutions in the united states and europe, and increased prospects of a world recession. as a result, wholesale funding markets came to a standstill in many countries, and commercial banks essentially stopped making unsecured loans to one another at terms longer than overnight. the crisis rippled through various markets as investors became very risk averse. corporate bond spreads surged to new all - time highs, equity prices plunged, and foreign exchange rates became very volatile. investors'concerns about the impact of the turmoil on the global economy turned into a vicious circle. financial institutions became increasingly reluctant to extend credit, given their own funding difficulties and their concerns about what an economic slowdown would imply for the credit quality of their loan portfolios. tighter credit conditions and the increased difficulties that businesses faced in trying to raise funds have, in turn, contributed to the slowdown in the world economy. another contributing factor was the drop in consumer confidence triggered by the wealth destruction that resulted from sharp falls in equity markets and housing prices. the combination of these factors has produced extremely volatile and difficult financial conditions, and what has become the deepest, broadest, and longest financial crisis since the 1930s. in response, governments and central banks around the world – including the bank of canada – have undertaken a series of unprecedented actions aimed at stabilizing the financial system. these include making available significant overnight and term liquidity to a broad range of market participants ; guarantees of bank deposits and borrowing ; purchases of bad assets ; and capital injections for financial institutions. the g - 7 plan of action announced in early october has provided the foundation for urgent and unprecedented measures to stabilize financial markets and restore the flow of credit, essential to continued economic expansion. importantly, it included a commitment from g - 7 leaders to use all available tools to support systemically important financial institutions and prevent their failure. governments in industrialized countries and in some systemically important emerging - market economies have also pledged to take steps to encourage economic growth and to reduce the severity of the global recession. canada ’ s response consistent with the g - 7 plan of action, the bank of canada has acted swiftly to ensure that adequate liquidity is available to institutions within our borders. our actions have been significant.