mark carney : summary of the latest monetary policy report opening statement by mr mark carney, governor of the bank of canada, at a press conference following the release of the monetary policy report, ottawa, 23 october 2008. * * * good morning and thank you for joining us. before i discuss today's monetary policy report, which reflects the bank of canada's latest thinking on the economy, i would like to say a few words about the global financial crisis. we realize that this has created a great deal of uncertainty and stress. we understand the severity of the situation, and we are taking action to address it. these problems originated outside of our borders, and the primary solutions to correct them must take place there as well. that is why we are working so closely with our international colleagues and why the g7 plan of action is so important. many international banks need substantial additional capital, and efforts to provide this capital are now under way in earnest. in canada, our financial system is sound, and our financial institutions are already well capitalized. we are nonetheless affected by global developments. that is why the bank of canada has taken extraordinary measures to provide liquidity. this will aid the ongoing functioning of our financial system during this time of stress, and we will continue to provide additional liquidity for our financial institutions as long as conditions warrant. it is important to remember that canadian monetary policy remains firmly focused on the bank of canada's mandate to maintain low, stable, and predictable inflation. we know through long experience that this is the best way to promote the economic and financial wellbeing of canadians. let me turn to today's monetary policy report. in it, we note that three major interrelated global developments are having a profound impact on the canadian economy and making the outlook for growth and inflation more uncertain than it was at the time of the july monetary policy report update. first, the intensification of the global financial crisis has led to severe strains in financial markets. the associated need for the global banking sector to continue to reduce leverage will restrain growth for some time. second, the global economy appears to be heading into a mild recession, led by a u. s. economy already in recession. third, there have been sharp declines in many commodity prices. the bank expects growth to be sluggish through the first quarter of next year, then to pick up over the rest of 2009 and to accelerate to above - potential growth in 2010 supported by improving credit conditions

of the resulting publicity. the gradual confession of that professional and ethical crime really caused the earthquake. because it was a blow to the very heart of the ethics that underlie our financial reporting system. so a public sense of great urgency resulted. for example, the financial stability forum, which comprises finance ministers, central bank governors and regulators, discussed the enron - case at length at its march meeting in hong kong. let me briefly explain the ethics of the financial reporting model that are at stake. in business we have shareholders on the one hand, and firms led by directors on the other. shareholders are dependent on the accounts given to them by the directors. but the latter know more about their business than the shareholders. this is called information asymmetry. to bridge this gap, directors use accounting as an intermediating language between them and the shareholders. but this language is difficult to understand and can be manipulated. so the shareholders called for independent interpreters. the shareholders require these interpreters to check the language used, and then to convey to them the real messages they need to know. the shareholders are entitled to ask this, as they are the principals of the directors who are using their money. now multiply these shareholders into many kinds of stakeholders, including employees, taxpayers, bondholders, agencies. one can easily see that you need a lot of interpreters. by interpreting correctly, they help to establish fiduciary relationships between all these principals and their many agents. that is, building trust in the economic relationships that are the basis for our conduct of business. now what kind of ethics would one require from these interpreters? well, the least that one expects from the interpreters is that they are unbiased, impartial translators of what they hear. if they make a mistake now and then, are tired or simply miss something, ok. but it would not be acceptable if they made up their own stories, or are deliberately involved in playing games with their audience. they would be thrown out immediately. these key ethics are well known in the auditing profession. let me read you several quotes from a magnificent book about the history of 75 years arthur andersen, called “ a vision of grandeur ” ( 1988 ). the young arthur andersen and his partners believed strongly in key statements like : “ think straight / talk straight. ” and : “ rigid standards of honesty and integrity. ” and : “ accounting principles can and should only be accepted if they present most fairly and most