in an integrated economy in the second. max corden distils the concern that many have about global imbalances down to a concern about the “ return journey ”. lenders of capital expect to receive the money they have lent back with interest ( dividends if it is an equity investment ). one reason that might increase concern as we move from transfers between households to crossing state borders to crossing national borders is that the information asymmetry about the return journey increases. amongst other things, the geographic separation reduces the ability of the lender to monitor the use of funds by the end - borrower. one could question why this still remains true today, with increased transparency and lower cost of information. for example, in the recent episode, the funds that made their way to the us housing market over the 2000s had a long and non - transparent chain between the provider of the funds and the ultimate borrower. there were major problems of information asymmetry and failures of due diligence right along the chain. another reason that borders matter is that the capacity to borrow in one ’ s own currency is important. the claims across state borders are denominated in australian dollars, which are this is the model which olivier blanchard himself taught me! in this stylised world, one could also add the corporate sector to the mix. as they are generally a net borrower, they would be another generator of current account deficits. in the current economic climate in australia, one could think about the possibility of the western australian economy experiencing an exchange rate appreciation relative to the rest of the country to mitigate the adjustment. however, the assessment is that the benefits of a common currency union for the australian states vastly outweigh any costs. bis central bankers ’ speeches easily settled without doubt in the integrated australian financial system. indeed, the system is so integrated that there is no easily obtainable measure of cross - border claims for the states. a further aspect that appears to be a common cause for concern about current account deficits is the economic adjustment that might ensue were they to narrow precipitously. much of this concern appears to stem from a fixed exchange rate world. in a fixed exchange rate world, sudden stops can ( and did ) occur that are very disruptive. capital inflows dry up rapidly and capital outflow increases, necessitating a sharp contraction of domestic demand so that the trade balance moves into surplus. inevitably, this is associated with a domestic recession.

last point is very important. according to bank of canada research, when canadians shop, they use cash for more than half of their transactions. they need a currency they can trust and the bank notes of this series are the most secure ever developed in the history of the bank of canada. let us move now to the images that are on these bank notes ; the bank consulted citizens throughout their development. it was canadians who told us they liked the new polymer material. and these citizens also gave us the ideas for themes. on the 50 dollar note you will see an image of the amundsen, an icebreaker that keeps our oceans open to navigation. the amundsen also undertakes search and rescue missions in the far north and serves as a research base where scientists from around the world come to work together. i think that roald amundsen, the great norwegian explorer of both poles, would be very proud of the spirit of adventure, scientific excellence, and collaboration that are so apparent on the ship that bears his name. thank you everyone for coming today. bis central bankers ’ speeches