and the moral of this story is this : the miracle of money creation by a bank may stimulate industry and trade – the upward phase of a business cycle in modern language – and give almost everyone a warm feeling of well being. but taken to excess, this miracle may result in a terrible day of reckoning. how to have the wonder without the reckoning? that is the question. mankind has progressed somewhat from the times of the 1720 ’ s with the creation of modern central banks whose functions typically include an element of oversight over the banking system. but the cupidity of certain people is eternal ; and requires eternal vigilance. beware of financial geniuses. this, i would like to suggest to you, provides the best firm reason for the continued existence of the iob. it must equip all those who are going to work in the banking system with the requisite set of j. k. galbraith ( 1975 ) money : whence it came, where it went, penguin books ethics with which to restrain people ’ s greed and cupidity : and protect bright, keen and energetic young men – and women – from the ways of nelly, the mentor, by providing them with the requisite training. that done, we will all proudly be able to assert as we look back on our contributions to a safe and sound banking system, “ finis coronat opus ”. thank you for your attention. ndi gqibile.

is at great recession levels. the barclays pmi has spent much of the year below the neutral level of 50, including through august and september. our composite business cycle leading indicator has trended lower this year, and is now at levels last reached in late 2009. unexpectedly, the economy contracted in the second quarter of the year, shrinking by 1, 3 per cent, with negative contributions from agriculture, mining and manufacturing. but this number should not be treated as cast in stone. gdp estimates are necessarily uncertain. we are often reminded of this by the us, where the practice is to release preliminary estimates of growth followed by second and final versions – and then sometimes a revised estimate after that. in the first quarter of this year, for instance, us growth was described as 0, 2 per cent, then – 0, 7 per cent, then – 0, 2 per cent and finally – i hope – 0, 6 per cent. similarly, calculations of south african output are not straightforward. the second quarter of this year is a particularly striking example. the estimate of south africa ’ s gdp growth taken from the demand side gave a different verdict to the supply - side version. the demand - side number was positive. the gap or residual required to reconcile the demand - and supply - side versions was 2, 2 per cent of gdp. this is very large and suggests that revisions to the secondquarter number will be significant. our forecasts, like those of others in the market, showed weak but positive outcomes for that quarter, and it is possible that these will turn out to be somewhat less wrong than seen at first sight. we do anticipate growth to be positive in the third quarter, but this is scarcely comforting. growth will remain very low over the next few years. our best judgment is that potential growth for 2015 has fallen all the way to 1, 8 per cent. and with actual growth expected to be 1, 5 per cent, the output gap will increase somewhat. policy and the problem of stagflation let me turn now to our current policy stance. in this environment of weak economic growth, we are sometimes encouraged, as the monetary policy authorities, to try and do more for growth. this is a valid and important contribution to policymaking, so i would like to spend a few minutes explaining the monetary settings we have in place now and why we think these settings are supportive of growth. the inflation outlook is not favourable. we expect headline inflation to average more than