, economic momentum accelerates. 2 as sales improve and profits rise, businesses become more confident. as a result, they invest in machinery, equipment and buildings to expand capacity. investment expenditures raise employment, household income and spending, which, in turn, boost demand and further stimulate businesses to invest. the other factor that promotes the cyclical flows in investment spending is depreciation. over time, capital assets depreciate or become obsolete and need to be replaced. during periods of weak or uncertain demand, firms typically delay their reinvestment decisions. 3 however, they can do so for only so long. thus, when it appears that the economic tide is turning, firms will take the opportunity to reinvest, and their collective actions will amplify the economic upswing. 4 in practice, these psychological and economic forces often work in tandem and are selfreinforcing. structural forces for the structural forces, or long - term determinants of the demand for capital and investment, it is useful to think about a typical firm ’ s production process. firms combine labour, capital and technology to produce goods and services. therefore, demographic forces that affect the growth of the labour force will also affect the demand for capital. for example, faster labour force growth will encourage firms to invest not only to meet greater demand but also to equip these additional workers with machines and other capital to raise their productivity. 5 the rate of technological progress is also a key factor, since a faster pace of innovation raises the return on each additional unit of capital, stimulating firms to invest more. indeed, fresh investment often embodies new technology and serves to further increase productivity. the composition of investment matters too. the nature of the production process determines the amount and type of capital ( and investment ) required. services, for example, generally require 2 / 9 bis central bankers'speeches less investment than oil sands or motor vehicle production. thus, the ongoing expansion of the service sector means we may see a shift from traditional forms of investment in structures, such as factories and heavy machinery, toward investment in intellectual property, such as software and research and development, as well as in human capital. 6 and public investment can complement and thereby enhance the productivity of private investment. high - quality infrastructure in the form of transportation systems, power - generation facilities and, more recently, telecommunication networks ( some of which may be provided privately ) are essential to modern production processes, especially given the accelerating digital transformation of the global

in this case, counterfeiting was a family business : ed johnson, the " king of counterfeiting, " engraved the printing plates by hand, his five sons printed the notes, his two daughters forged the signatures on them, and his wife sold the counterfeits to a wholesale dealer. the johnsons were caught and served many years in prison, but not before they had put a million dollars worth of counterfeit canadian and american currency into circulation – a significant sum in the 1880s. banks accepted the forged notes, not recognizing them as counterfeits, and even the men whose signatures appeared on the notes couldn't distinguish the forged signatures from their own. the johnsons were tracked down and brought to justice by ontario's first full - time detective, the famous john wilson murray. detective murray travelled extensively in the united states, trying to track down the johnson clan, before finally catching up with them in toronto. the counterfeit notes were extremely well executed, but they " could be distinguished from authentic notes because they were " too perfect " and lacked the engraving flaws present in authentic notes. " 20 " crime lost a genius, " murray said, " when old man johnson died " 21 [ image : genuine note and johnson counterfeit ]. for the sake of brevity, i'm going to skip over some interesting history – prince edward island's " holey dollar, " the paper 25 - cent " shinplaster, " the issuance of $ 6 and $ 7 bank notes, the rise and fall of " phantom banks, " among other developments. but i hope you're beginning to see that money works only to the extent to which people have confidence in it, and why the raison d'etre of an effective monetary authority is always a " quest for confidence. " before turning to the modern era, let me underline two lessons from this early period of history : • there's a basic need for money, and sound money makes business and commerce much easier ; and • two main threats – counterfeiting and inflation – can undermine the soundness of money. money and the central bank to understand money in modern times, it's useful to know a bit about the role of the central bank. the bank of canada was created in 1934. interestingly, proposals to establish a central bank, or something akin to it, go back a long way in canada – almost 200 years. in 1820, an anonymous pamphlet published in quebec