around the world in the past. sooner or later, society would find itself regretting that it had not put in place the necessary resolution regime to cope with the failure of systemically important financial institutions. in short, there is no alternative to submitting banking and its investors to the disciplines of capitalism – failure as well as success. we cannot afford to have banking, so central to the allocation of capital in market economies, semi socialised. moreover, we need to harness the energies of bond holders to monitoring and helping to contain the tendency to excess characteristic of bankers, over the generations, in the upswing of the credit cycle. that is not see insol international ( 2000 ), statement of principles for a global approach to multi - creditor workouts. that strategy was initially set out by the financial stability board in 2010, reducing the moral hazard posed by systemically important financial institutions, available at http : / / www. financialstabilityboard. org / publications / r _ 101111a. pdf bis central bankers ’ speeches in and of itself a guarantee of stability, but i would rather give asset managers incentives to help the objectives of prudential supervisors than incentives to rely on a fiscal backstop. second, effective resolution regimes, capable of operating across national borders, are necessary for a healthy international monetary and financial system ( imfs ). as mervyn king has said, the large financial groups have been ‘ international in life, but national in death ’. without effective cross - border resolution arrangements, domestic authorities are left with a clear incentive to take steps to cap the contingent exposure of local taxpayers, who are local voters. that is surely part of the backdrop to the series of measures taken by national and regional authorities to restrict the range of activities or structure of banking. those measures need to be taken without the world slipping into a hard - to - reverse balkanisation of the international financial system. were that to happen, the breakdown in cooperation between sovereign states could all too easily give encouragement to those around the world who would like to use protectionist measures to shield their countries from the winds of global trade. if the international monetary and financial system relies, as it has since at least the collapse of bretton woods forty odd years ago, on the private banking system to supply the cross - border liquidity needed to underpin expansion of world trade, then we must ensure that the international banking system is safe and sound. that cannot rest solely on prophylactic prudential supervision.

is possible that the effect of productivity improvements, especially the temporary boost to profits, was obscured by the impact of the rise in sterling since 1996 and by global competition which have lowered prices and compressed margins. so it is too soon to dismiss the possibility of an acceleration in productivity similar to that experienced in the united states. indeed, productivity growth has increased to more than 4 % over the past year. revisions to the official data and the volatility of measured productivity - reflecting the business cycle - make it extremely difficult to infer changes to long - term growth rates. the absence of any compelling evidence for a rise in underlying productivity growth suggests that this is an unlikely explanation for consistently low inflation over the past decade. third, the new monetary policy framework - a symmetric inflation target and the transfer of interest rate decisions to an independent bank of england - has helped to anchor inflation expectations to the target. it is less likely now that a shock to inflation would lead to a further and persistent deviation of inflation from target. there is a belief that inflation will soon return to target. as a result, a surprise movement in inflation is expected to be temporary and so less likely to lead employers and employees to adjust their desired prices and wages. and there is convincing evidence that changes to inflation are much less persistent under the new monetary policy arrangements. so there you have it : three possible explanations for the recent low and stable level of inflation despite falling unemployment and rapid output growth. but this is no time for complacency or hubris. part of the improved short - run trade - off between growth and inflation may reflect temporary factors. inflation may have been close to target because of one - off explanations, such as increased competition that temporarily depressed retail prices relative to costs, or larger flows of migrant workers that have temporarily held down wage inflation. and even if inflation expectations are well anchored to the target they will remain so only if interest rates continue to be set to keep inflation close to the target. the 1980s provided a stark example of a rapid acceleration of prices with few early warning signs. from 1983 onwards, rpix inflation was stable - relative to recent experience at that time - with most of the outturns in the 3. 5 % to 5. 5 % range until mid - 1989, and wage inflation was high but not on any clear upward path. within a year, and despite a 6 percentage point increase in interest rates between 1988 and 1989, rpix inflation reached 9 % and wage inflation exceeded 10