mark carney : principles for interesting times remarks by mr mark carney, governor of the bank of canada, at carleton university, ottawa, ontario, 11 march 2010. * * * i would like to thank students from universities across canada for joining me on this special day, the 75th anniversary of the bank of canada. this afternoon, i will speak about the past and the present in the hope of enticing some of you to participate in the bank ’ s future. let me caution market participants that nothing that follows relates to the “ near future, ” that is, the horizon relevant for monetary policy decisions, so if you are not interested in the bank ’ s history, the bank ’ s gift to you on our birthday is an hour of found time. introduction the bank of canada ’ s mandate is to preserve the value of the nation ’ s currency and to promote the economic and financial welfare of canadians. as a consequence, we focus on the major macroeconomic issues of the day. over the past two years, these have been considerable. with current debates ranging from the relationship between price and financial stability to the future of the international monetary system, it is an exciting time in central banking. however, i would argue that for students such as yourselves, the issues facing central banks are always intriguing since they go to the heart of how modern economies function and, indeed, how human beings behave. the bank in turn needs you. the bank is a learning organization, with immense responsibilities. our work is grounded in academia, honed by analysis, and disciplined by an unrelenting focus on our mandate. our response to the recent economic crisis has risen to the highest standard set over our history. guided by well - researched, policy - based frameworks, the bank has acted decisively. as a result, the clarity and credibility of these frameworks has made action more powerful. the importance of this combination has been repeatedly demonstrated. the formidable economic and financial challenges facing canada today are not necessarily more intractable than those in the past. economic forces do not change. however, the speed and scale of information, capital flows, and trade are radically different. the global economy is more fundamentally interconnected than ever before – and that means the response times for policy - makers have shortened dramatically. in this environment, the value of principlesbased policy frameworks is supreme. i am reminded of a story told to me by jean - claude trichet, president of the european central bank. a mutual colleague

: 35 – 40. see “ the role of margin requirements and haircuts in procyclicality, ” a report of the bank for international settlements ’ committee on the global financial system, forthcoming, march 2010 ; m. k. brunnermeier and l. h. pedersen, “ market liquidity and funding liquidity, ” review of financial studies 22, 6 ( june 2009 ) : 2201 – 38 ; and m. k. brunnermeier, “ deciphering the liquidity and credit crunch, 2007 – 2008, ” journal of economic perspectives 23, 1 ( winter 2009 ) : 77 – 100. for a more detailed discussion, see m. carney, “ reforming the global financial system, ” remarks delivered to the rendez - vous avec l ’ autorite des marches financiers, montreal, 2009. available at http : / / www. bankofcanada. ca / en / speeches /. as chair of the drafting committee, rasminsky helped to reconcile views, mediating between the british and the americans. after the formation of the imf, rasminsky became canada ’ s first executive director, on a international monetary order aimed at establishing a system that allowed for a symmetric adjustment of balance of payments problems and a liberalized trading regime. the bretton woods system of pegged, but adjustable, exchange rates was a direct response to the instability of the interwar period. bretton woods was very different from the gold standard : it was more administered than market - based ; adjustment was coordinated through the international monetary fund ; there were rules rather than conventions ; and capital controls were widespread. despite these institutional changes, surplus countries still resisted adjustment. foreshadowing present problems, countries often sterilized the impact of surpluses on domestic money supply and prices. like today, these interventions were justified by arguing that imbalances were temporary and that, in any event, surpluses were evidence of virtue rather than “ disequilibria. ” in contrast, the zero bound on reserves remained a binding constraint for deficit countries, which eventually ran out of time. in 1950, canada faced adjustment problems of its own, and the bank, as a learning institution responded. large capital inflows threatened to drive up inflation in canada in the context of our then - fixed exchange rate. in an effort to maintain price stability, the decision, unpopular internationally, was taken to float the canadian dollar, which