which takes account of the management ’ s revised non - nama expected losses ( both as of end - september ). there are a few loose - ends of course : – for the smaller loans hitherto intended for nama but now staying with the banks, a provision equal to the average all - tranche nama haircut for that bank has been applied. this needs to be verified more thoroughly. – the final nama haircut, following the rigorous procedure mandated in law and required by the eu commission, could deviate somewhat from the current estimate. these could go either way, but in any case are relatively small elements. the current figures are as precise as can reasonably be expected at this stage. for the future, the central bank will continue to conduct pcar exercises on an annual basis. this will allow capital requirements to be kept consistent with evolving information on future economic and financial developments, including the performance of the residential mortgage portfolio. progressively, these exercises will also look forward to taking account of the emerging basel 3 capital rules. much has been learned through this process. indeed, the reality is that traditional bank accounting practices were not really geared to deal with ( i ) assets that are so uncertain ( and long - lived ) ( ii ) an economy that has tanked so deep ; ( iii ) future economic prospects that are so uncertain. but as the banks become increasingly adept at assembling the underlying information needed so the pcar figures will become progressively more reliable. already we see differences with some bank managements taking a more aggressive approach to provisioning leaning more towards the expected loss idea than to the old - style interpretation of incurred loss. it may be no coincidence that new brooms have been to the fore here. let me return finally to the question of the government accounts. i do not want to speak today about the necessary adjustments or to qualify any of the percentages that have been publicly discussed in regard to the future budgetary profile. anything that is unsustainable will stop. a sequence of double digit government deficits is certainly no exception to this rule. absent a managed reprogramming of the fiscal adjustment, market forces will take over and put a stop to the unsustainable increase in the debt ratio. what policy can – and i am hopeful will – achieve is that the adjustment will, not least by rolling back unaffordable excesses, be accomplished in a manner that is much less damaging to the economy and society. this means in

were to abandon our service to our respective nations and form a company, we would use our good names to borrow as much money as we could at current rates. the fed ’ s policy objectives, as stated in section 2a of the federal reserve act, are that “ the board of governors of the federal reserve system and the federal open market committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy ’ s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long - term interest rates. ” see www. federalreserve. gov / aboutthefed / section2a. htm. see “ the fed ’ s evenhanded policy ”, by randall w. forsyth, barron ’ s, aug. 23, 2014. for the latest reading of the dallas fed ’ s alternative measure of trimmed mean pce inflation, see www. dallasfed. org / research / pce / index. cfm. bis central bankers ’ speeches and this, indeed, is happening. u. s. companies have used this bond market and borrowing rate hiatus from normalcy to pile up cheap, nearly cost - free balances. this cheap and abundant monetary fuel, with the proper incentives from the fiscal and regulatory authorities, can be deployed to the benefit of company stakeholders ( shareholders and employees ) to enrich and grow the economy. in this sense, we are unique in the world. mr. ambassador, american businesses are rich and muscular. and those muscles are being flexed. for example, just two days ago, the institute for supply management ( ism ) released its purchasing managers index. the data surprised most all forecasters to the upside. activity was broad based : 17 of 18 industries surveyed reported growth in august, and new orders reached a 10 - year high. today, the ism released its nonmanufacturing index, which registered the highest level in nine years. these reports echo a string of others – including the beige book survey of regional economic conditions released yesterday by the federal reserve – that underscore the healing that is taking place in the u. s. economy despite our having what is, in truth, a dysfunctional and counterproductive fiscal and regulatory environment. all we need now is for the fiscal and regulatory authorities – congress and the executive branch – to unleash the animal spirit of business that is well nourished with the feed of cash and ready