sheets in historically rude health, have the means to act – and the incentives. canadian firms should recognize four realities : they are not as productive as they could be ; they are under - exposed to fast - growing emerging markets ; those in the commodity sector can expect relatively elevated prices for some time ; and they can all benefit from one of the most resilient financial systems in the world. in a world where deleveraging holds back demand in our traditional foreign markets, the imperative is for canadian companies to invest in improving their productivity and to access fast - growing emerging markets. this would be good for canadian companies and good for canada. indeed, it is the only sustainable option available. a virtuous circle of increased investment and increased bis central bankers ’ speeches productivity would increase the debt - carrying capacity of all, through higher wages, greater profits and higher government revenues. this should be our common focus. the bank of canada is doing its part by fulfilling its mandate to keep inflation low, stable and predictable so that canadian households and firms can invest and plan for the future with confidence. it is also assisting the federal government in ensuring that canada ’ s worldleading financial system will be there for canadians in bad times as well as good and in pushing the g - 20 action plan because it is in canada ’ s interests. conclusion it makes sense to step back and consider current challenges through the longer arc of financial history. today ’ s venue is an appropriate place to do so. a century ago, when the empire club and the canadian club of toronto would meet, the first great leveraging of the canadian economy was well under way. during the three decades before the first world war, canada ran current account deficits averaging 7 per cent of gdp. these deficits were largely for investment and were principally financed by long - term debt and foreign direct investment. on the eve of the great war, our net foreign liabilities reached 140 per cent of gdp, but our productive capacity built over the decades helped to pay them off over time. our obligations would again swell in the great depression. but in the ensuing boom, we were again able to shrink our net liabilities. when we found ourselves in fiscal trouble in the 1990s, canadians made tough decisions, so that on the eve of lehman ’ s demise, canada was in the best fiscal shape in the g - 7. we must be careful, however, not to take too much comfort from these experiences. past is not always prologue. in the past

mark carney : growth in the age of deleveraging remarks by mr mark carney, governor of the bank of canada and chairman of the financial stability board, to the empire club of canada / canadian club of toronto, toronto, ontario, 12 december 2011. * * * introduction these are trying times. in our largest trading partner, households are undergoing a long process of balance - sheet repair. partly as a consequence, american demand for canadian exports is $ 30 billion lower than normal. in europe, a renewed crisis is underway. an increasing number of countries are being forced to pay unsustainable rates on their borrowings. with a vicious deleveraging process taking hold in its banking sector, the euro area is sinking into recession. given ties of trade, finance and confidence, the rest of the world is beginning to feel the effects. most fundamentally, current events mark a rupture. advanced economies have steadily increased leverage for decades. that era is now decisively over. the direction may be clear, but the magnitude and abruptness of the process are not. it could be long and orderly or it could be sharp and chaotic. how we manage it will do much to determine our relative prosperity. this is my subject today : how canada can grow in this environment of global deleveraging. how we got here : the debt super cycle first, it is important to get a sense of the scale of the challenge. accumulating the mountain of debt now weighing on advanced economies has been the work of a generation. across g - 7 countries, total non - financial debt has doubled since 1980 to 300 per cent of gdp. global public debt to global gdp is almost at 80 per cent, equivalent to levels that have historically been associated with widespread sovereign defaults. 1 the debt super cycle has manifested itself in different ways in different countries. in japan and italy, for example, increases in government borrowing have led the way. in the united states and united kingdom, increases in household debt have been more significant, at least until recently. for the most part, increases in non - financial corporate debt have been modest to negative over the past thirty years. in general, the more that households and governments drive leverage, the less the productive capacity of the economy expands, and, the less sustainable the overall debt burden ultimately is. another general lesson is that excessive private debts usually end up in the public sector one way or another. private defaults often mean public rescues of banking sectors ; recessions