. and while regulators can promote competition, end the subsidy enjoyed by institutions that are too big to fail, and determine the appropriate split of remuneration between fixed and variable elements to limit risks to financial stability, only society, not regulators, can determine whether the absolute and relative levels of compensation are acceptable. 3. uk monetary policy measures to make the system safer, fairer and to operate with more integrity are re - founding a more resilient, open global financial system. this sets the stage for monetary policy to support a supply side recovery. ben bernanke once said to milton friedman and anna schwartz, “ you [ were ] right, we [ the fed ] did it [ caused the great depression ]. but thanks to you, we won ’ t do it again. ” thanks in bis central bankers ’ speeches part to chairman bernanke ’ s leadership, central banks have pursued the opposite strategy to the 1930s to great effect. while the human cost since 2008 has been considerable, it is dwarfed by the experience of the great depression. central banks haven ’ t done it again, but that doesn ’ t mean they should be satisfied. there remains still considerable, if uncertain, slack in their economies. i say uncertain because obvious measures of slack, such as unemployment, are much lower than we would have expected given the scale of the fall in demand. supply side performance in advanced economies has been surprisingly poor. before the crisis, the growth in potential supply was largely predictable ( technically a stationary trend ). as a consequence, central bankers responded to movements in demand around that trend. the issue now is the extent to which the fall in demand has itself eroded potential supply and whether that could be reversed as economies recover. in the us, the question is whether labour force participation rates will pick up. in the uk, the question is whether labour productivity will reverse any of its poor performance. these questions mean it makes sense for policy to test the extent to which supply performance is “ endogenous ” to demand. 1 this is one of the main advantages of the forward guidance employed by both the bank of england and the federal reserve. last august the bank ’ s monetary policy committee made an easy call : we wouldn ’ t even begin to think about raising interest rates until the unemployment rate fell to 7 %. given the weakness of the uk recovery and the flexibility of the labour market, we could expect that considerable slack would ensure that the mpc was not taking undue risks with inflation as

contends that the 1930s were the most technologically progressive decade of the 20th century. he notes the development of chemical - based materials like teflon, nylon and synthetic rubber ; the development of the television, and the expansion of the public road network that paved the way for advances in distribution and transportation. in the 1930s, the collapse of demand meant mass unemployment and slow adoption of new technologies. it took a recovery in aggregate demand after the great depression, partly spurred by mobilisation for the second world war, for many innovations to be applied and new markets to develop. demand was persistently weak in the 1930s because policy mistakes were legion. a protectionist backlash closed global markets and ended global finance. policies favouring liquidation led to widespread bank failures. monetary policy was tightened dramatically. this time, thus far, is different. protectionism is being resisted, banks recapitalised, and the global financial system rebuilt. in parallel, monetary policy is highly accommodative. as the global economy gains momentum, staying the course on these policies will be decisive to achieving escape velocity. the united kingdom is at the centre of these decisions. let me expand. 2. financial reform in recent years, protectionism has been the dog that didn ’ t bark. although gently mocked, the g20 pledge to resist protectionism has been largely respected. in contrast, some major trade deals have been signed ( such as between canada and europe ), and other even more significant ones are in train. the uk can help spur on the transatlantic trade and investment partnership discussions on wide ranging free trade between the eu and the us. in tandem with keeping the global trading system working is the re - founding of an integrated, open global financial system. as the leading global financial centre, the uk will be central to completing the job of financial reform. the uk financial system is both a global good – it supports an open global system – and a national asset. to realise its potential, we need our system to be safe, fair and to act bis central bankers ’ speeches with integrity. without those foundations, the innovation for which finance in the uk is renowned will be meaningless. a safe system means resilient banks and markets that together can absorb rather than amplify shocks. much has been achieved in recent years to repair the core of the banking system. minimum capital requirements for the world ’ s largest banks have been increased seven - fold. these banks are on course to meet these new requirements five years before