of money in order to support a recovery in the economy and keep inflation on track to meet our target. and because monetary policy is a flexible instrument that can be changed in either direction each month, it is the best tool for managing the economy in the short run. nevertheless, the road ahead is unlikely to be straight. there is considerable uncertainty about the prospects for both the united states and the euro area – our most important export markets. business and consumer confidence at home has weakened recently, and it will be some time before our banking sector is able to finance a recovery on the usual terms. the transition to a better balanced economy will be difficult. but we are already seeing encouraging signs of expansion in manufacturing and uk exports. this morning ’ s figures show a small rise in the claimant count and a small fall in the labour force survey measures of unemployment. but the big picture is that unemployment is higher than before the crisis but lower than many had feared a year ago. in july, on one of my regular visits to different parts of the country, i met with the scottish tuc in glasgow to learn more about the labour market there. our contacts with experienced union officials in touch with a range of companies and sectors are the best source of intelligence on labour markets. with your help, we are determined to understand what is happening in every region and country of our economy so that we can set the right monetary policy. i want to assure you that the bank of england is there to serve the whole economy, right across the length and breadth of this country. the costs of this crisis will be with us for a generation. and we owe it to the next generation to seize this opportunity to put in place the reforms that will make another crisis much less likely and much less damaging. we at the bank of england and you in the trade union movement should work together. that is why i am pleased to be with you today. it will require patience and determination on all our parts, including your members. but the prize of restoring and maintaining economic stability – and a return to sustained rises in employment and living standards – will be worth the effort.

together on these issues. and we are fortunate that the bank of england ’ s wider programme of intelligence gathering allows us to explore these issues alongside market participants. for while only policymakers may end up going the final step to assess what all this could mean for the real economy, everyone has an interest in continuing to think about what collateral management means for the resilience of markets. the second possible iceberg is the liquidity mismatch in investment funds. the 2008 variant of this was egregious. many of you will recall looking on in horror as $ 400bn of redemptions by their investors forced money market mutual funds into fire sales of their assets, including commercial paper. these funds had offered redemption of each $ 1 share at par. they walked like a bank and quacked like a bank. they were shadow banks. so when the reserve primary fund, which held $ 785m of lehman brothers ’ commercial paper, announced it would no longer be able to meet its offer and ‘ broke the buck ’, a run developed on these funds ( slide 12 ). corporate funding markets, particularly for banks, went into meltdown. the united states government stepped in to guarantee redemption at par from money market funds – effectively a form of deposit insurance. all speeches are available online at www. bankofengland. co. uk / speeches that iceberg has now melted. a series of measures are eliminating toxic forms of shadow banking like these ‘ constant net asset value ’ money market funds. 18 as a result, markets are safer to navigate. shadow banking of old is transforming to more resilient market - based finance of today. so what need is there to dive into liquidity mismatch in investment funds? it ’ s certainly the case that any remaining risks are much smaller and more subtle than those around money market funds. since the crisis, funds have flowed into open - ended investment funds that make no promise of redemption value : the investor bears the risk from the outset. they have few of the problems of the crisis money market funds. but these funds are increasingly invested in less liquid assets while continuing to offer next day redemption to investors. the share of corporate bonds held in open - ended funds in the uk and the euro area has increased by 70 % since the crisis ( slide 13 ). and their structure may create incentives for their investors to redeem in a stress, forcing fire sales of illiquid assets. i emphasise ‘ may ’ because we have not