Now some people may argue that “offshore” markets in national or regional currencies complicate the conduct of national or regional monetary policy, with the implication that national or regional currencies should somehow be confined to their national or regional space. I must confess that this view seems to ignore the fact that it has in practice over the past twenty or thirty years proved perfectly possible for monetary policy to be conducted successfully despite the existence of the euro-markets. And I do not see how one could realistically expect to contain the use of a major currency, which the euro will certainly be, within territorial borders in any event. But as I have made clear, the UK’s interest -- “in” or “out” -- lies unambiguously in doing all that we can to ensure that the single currency succeeds. And in this context we would, of course, co-operate with the ECB in any way we could, to avoid potential disturbance to European monetary policy, were it shown to exist. Mr Chairman, London does not hold its pre-eminent position as Europe’s major financial centre as of right. We must continue to earn it. If we are to take advantage -- “in” or “out” -- of the opportunity that the euro will bring, then we must be technically well prepared. We will be. There is increasing evidence that financial institutions in the UK are now taking the steps necessary to ensure that they are ready for the introduction of the euro, whether or not the UK joins EMU.
But it seems reasonable to assume that some common causes lay behind both the crisis and the imbalances themselves. International capital flows have made countries increasingly interconnected and interdependent. At the same time, major transformations have occurred over the past decade in our international environment. The monetary and financial system has become truly “multipolar”. An increasing number of countries, both developed and emerging, have become active participants in the global capital market. While there are currently three main currency blocs, at least one (the Chinese RMB) and maybe other additional systemic currencies will emerge in the future. Participants in the international financial system are increasingly diverse from the point of view of their economic structure, their demography, their level of development, and, more importantly, their social choices and preferences. For instance, different saving rates may be seen as resulting from divergent time preferences. Likewise, diversity in capital account regimes may, to some extent, reflect different choices and tradeoffs between efficiency and stability in the financial infrastructure. These characteristics will most likely persist over time. A large number of different countries, with different preferences, will permanently be linked and interdependent through growing and active international capital markets. It is not clear, at this stage, how the coexistence and interaction between national financial systems worldwide will finally play out.