unprecedented and concerted fiscal expansion. these policies worked well, no doubt about that. no matter how you feel about the final outcome, we all recognize that it could have been far worse – indeed, that coordinated policy response may have averted a full - blown global depression. nevertheless, given the passage of time, it is reasonable to ask why growth has not yet returned to pre - crisis trends. one widely accepted explanation is that, historically, a recovery following a financial crisis has always taken longer than a recovery in a more normal business cycle. according to this view, a period of subdued growth after a financial crisis can still be regarded as cyclical, in the sense that it will eventually prove to be temporary. once balance sheets have been repaired, growth should return to its historical trend – bearing in mind that growth in the united states, and much of the rest of world, leading up to the crisis was extraordinary, so the true historical trend precedes that period. still, given the uncertain timing, this approach reminds me of that old excuse, “ sorry, but the cheque is in the mail. ” bis central bankers ’ speeches more than a hangover but the global economy may not be just suffering through a hangover from the financial crisis. there are other, longer - term forces at work as well. some analysts are suggesting we may be facing a long period of secular stagnation. on this alternative view, the economy could perform well below normal, leaving many out of work or underemployed for a long time to come. as business people, you need to understand that possibility, and how much weight to put on it. as a central banker, i need to understand it as well. let ’ s dive in. long - term economic growth is driven by two factors : 1 ) growth in the supply of labour, which is connected to population growth and changes in its composition, or what we call “ demographics ; ” and 2 ) productivity growth, which is economists ’ shorthand for how efficiently we produce goods and services. for illustration, if we had 2 per cent trend growth in the supply of labour and 1 per cent trend growth in productivity, trend growth for the economy would be about 3 per cent. now, productivity is fodder for a speech all on its own, which i won ’ t impose on you. let me quickly summarize how it fits in before expanding on the demographic forces at work. productivity growth fluctuates around

effects. it ’ s only logical to expect that secular trends and cyclical fluctuations interact with each other – and this is certainly true of the demographics - savings trend and the crisis. as i mentioned, the crisis walloped global demand. it opened up a huge and persistent uncertainty wedge that has held down global demand for business fixed investment. in many countries, the crisis also triggered household and bank deleveraging, not to mention fiscal consolidation. as a result, there has been a crisis - induced increase in savings at a global level. there already was a demographics - driven desire for higher savings in advanced economies and there were massive savings inflows from emerging markets. then, through widespread deleveraging, the crisis added an extra boost to the world ’ s aggregate savings. naturally, this translates into weak aggregate demand. as a trade - dependent economy, canada feels these effects directly. weak global demand is limiting the growth of our exports, and the associated uncertainty is holding back business investment in structures, equipment and software. in other words, demographic forces and the lingering hangover from the financial crisis are pulling in the same direction, putting limits on our growth possibilities. bis central bankers ’ speeches policy response and the outlook for growth i ’ ve slowly come around to answering my own question about why this matters to a central banker. it ’ s not just because we care – which, let me assure you, we do. but in order for us to do our job properly, we need to understand all the dynamics that feed into the canadian economy – and, importantly, how our own policy measures affect the outcomes. in canada, low policy rates motivated canadians to invest even more in real estate. you could say the canadian recovery was due to the reinforcing of activity that was already under way, thanks to underlying demographic forces. but we know that we cannot sustain economic growth in canada based on housing alone. our belief is that the post - crisis hangover in the united states is dissipating, and momentum is building. this will inevitably lead to more growth in canadian exports and, with the reduction in uncertainty that comes with that, more investment in canada ’ s economic capacity, including creating more companies – and the much - anticipated rotation in growth. this won ’ t necessarily happen in a linear fashion. although we continue to expect abovetrend growth in canada this year and next, the recent data suggest that the first quarter will be on the soft side. this mostly seems to be attri