they see ( often dimly ) as only prospective. reality eventually replaces hope, but the cost of delay is a more abrupt and disruptive adjustment than would have been required if action had been more pre - emptive. increased transparency for businesses, financial institutions, and governments is a key ingredient in fostering more discipline on private transactors and on government policymakers. increased transparency can counter political bias in part by exposing for all to see the risks to stability of current policies as they develop. under such conditions, failure to act would also be perceived as having political costs. i suspect that recent political foot dragging by governments in both developed and developing countries on the issue of greater transparency is credible evidence of its power and significance. transparency, which is so important to foster safe and sound lending practices, is, of course, less relevant for local currency lending if banks are guaranteed with sovereign credits. moreover, transparency becomes especially difficult to create for organizations and corporations with large interlocking ownerships. cross holdings of stock lead too often to lending on the basis of association, not economic value. the list of problems that must be addressed to achieve balance in our future global financial system could be significantly extended, but let me end with a notion that is relevant also to today ’ s crisis. it is becoming increasingly evident that supervision and regulation should address excess nonperforming loans expeditiously. the expected values of the losses on these loans are, of course, a subtraction from capital. but since these estimates are uncertain, they embody an additional risk premium that reduces the markets ’ best estimate of the size of effective equity capital even if capital is replenished. it is, hence, far better to remove these dubious assets and their associated risk premium from bank balance sheets, and dispose of them separately, preferably promptly. * * * as a consequence of the unwinding of market restrictions and regulations, and the rapid increase in technology, the international financial system has expanded at a pace far faster than either domestic gdp or cross - border trade. to reduce the risk of systemic crises in such an environment, an enhanced regime of market incentives, involving greater sensitivity to market signals, more information to make those signals more robust, and broader securities markets - coupled with better supervision - - is essential. obviously appropriate macro policies, as ever, are assumed. but attention to micro details is becoming increasingly pressing. nonetheless, it is reasonable to expect that despite endeavors at risk containment and prevention the system may fail

loss of about 8 - 3 / 4 million jobs from early forecast ranges here and below refer to the central tendencies of the projections of fomc participants, as presented in the “ summary of economic projections ” released with the minutes of the january fomc meeting. for example, both the survey of professional forecasters ( see the first quarter 2011 survey released by the federal reserve bank of philadelphia on february 11 ) and the blue chip forecasting panel ( see the february 10, 2010, issue of blue chip economic indicators ( new york : aspen publishers ) ) now project real gdp growth of about 3 - 1 / 2 percent from the fourth quarter of 2010 to the fourth quarter of 2011, about onehalf percentage point higher than the corresponding projections made in august. looking further ahead, most fomc participants project that economic growth will pick up a bit more in 2012 and 2013, whereas private forecasters tend to see the expansion proceeding fairly steadily over the next few years. ( note : blue chip economic indicators and blue chip financial forecasts are publications owned by aspen publishers. copyright © 2009 by aspen publishers, inc. all rights reserved ; www. aspenpublishers. com. ) bis central bankers ’ speeches 2008 through 2009, private - sector employment expanded by only a little more than 1 million during 2010, a gain barely sufficient to accommodate the inflow of recent graduates and other entrants to the labor force. we do see some grounds for optimism about the job market over the next few quarters, including notable declines in the unemployment rate in december and january, a drop in new claims for unemployment insurance, and an improvement in firms ’ hiring plans. even so, if the rate of economic growth remains moderate, as projected, it could be several years before the unemployment rate has returned to a more normal level. indeed, fomc participants generally see the unemployment rate still in the range of 7 - 1 / 2 to 8 percent at the end of 2012. until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established. likewise, the housing sector remains exceptionally weak. the overhang of vacant and foreclosed houses is still weighing heavily on prices of new and existing homes, and sales and construction of new single - family homes remain depressed. although mortgage rates are low and house prices have reached more affordable levels, many potential homebuyers are still finding mortgages difficult to obtain and remain concerned about possible further declines in home values. inflation has