john murray : is there a commodity curse? lessons from the past remarks by mr john murray, deputy governor of the bank of canada, at the university of alberta institute for public economics and c. d. howe institute, edmonton, alberta, 6 may 2010. * * * good evening. thank you for inviting me to this significant and topical event. it ’ s fitting that this conference is dedicated to bradford reid. he will be missed by so many former students and colleagues : as a friend, a dedicated teacher, and an insightful researcher. his particular research interests included fiscal policy and public - debt management, and their implications for the macroeconomy. these would certainly fit well with our discussions here today and tomorrow. as the title of the conference suggests, we have seen many boom - and - bust cycles in the commodity sector. this raises one obvious and central question : how can we avoid them in the future? more specifically, how can canada and alberta get out of this seemingly endless cycle of feast or famine? the answer, regrettably, is that it isn ’ t possible to eliminate the cycle entirely. the best that we can hope to do is to dampen its effects by learning from past experience. history, it has been said, is a good teacher, but policy - makers are not always good students. tonight, i ’ ll present a few thoughts on how we might make better use of these sometimes painful lessons. alberta and canada are different from the rest canada ’ s economy is different from most other advanced economies. primary commodities – resources – account for a much larger share of our national gdp. the estimated size of the sector varies according to how it is defined, but using a reasonably conservative approach, one finds that resource production represents about 10 per cent of canada ’ s gdp, 5 per cent of total employment, and 45 per cent of export sales. 1 the share of resource production in u. s. gdp, by comparison, is only 5 per cent. canada is a large net exporter of raw materials, unlike the united states, which is a large net importer. in this respect, the united states is similar to most other advanced economies. countries such as canada, australia, and norway, on the other hand, are the exceptions. statistics canada. alberta is also different when compared with most – but not all – of the nine other provinces in canada. in 2006, the last year for which statistics canada has comparable figures, resources accounted for roughly 32

transparency. the most challenging area though was agreeing on the guidance that should be provided with regards to the specific topic of trading activity in the last look window. what is clear to me is that there is – at the very least – the potential for misuse of this specific feature, as various ongoing misconduct cases bear testament to. the code already provides guidance that is designed to minimise the risks of that misconduct occurring. the underlying debate, which our consultative process seeks to resolve, is whether there are ways of reducing those risks even further. if we can identify specific, legitimate, uses of this type of trading activity, as well as the already well - known illegitimate uses, we can then cater for both within the code. but if the evidence suggests that trading in the last look window is simply inconsistent with good conduct, this section of the code will need to be updated accordingly. it ’ s impossible for me at this stage to presuppose the outcome. what i want to emphasise is the gfxc ’ s commitment to acting on the evidence we receive. we are fully aware that the committee ’ s eventual conclusion has the potential impact on some firms ’ current business models, and that is why we are committed to establishing the broadest possible evidence base on which to take our decision. there are nine days remaining before the feedback window closes, and i encourage all of you – both price makers and takers – to provide us with your views. while the last look debate is the current centre of attention it is important to recognise that over time the committee will need to update other areas of the code. in some cases these might amount to tweaks to avoid unintended consequences ; in other cases they will be in response to further evolution in the market itself. and although crystal ball gazing is always a perilous exercise, if you take the agenda for this conference as a guide, then one area likely to remain in focus in coming years is transparency. http : / / www. globalfxc. org / consultative _ process. htm all speeches are available online at www. bankofengland. co. uk / speeches on the one hand the demand for market data will only continue to rise – for example, as end users demand transaction cost analysis tools and analytics to measure the quality of their execution and to predict the optimal time to execute trades. but on the other hand, growing market complexity and greater internalisation of flows tend naturally to reduce the ease with which