Consequently, I am not optimistic that a modified fixed exchange rate regime, such as that pursued in Iceland before the inflation target was adopted in 2001, will be successful.7 In the event that currency union membership is not an option, the question arises whether it would still be desirable to remove the temptation and source of instability represented by a flexible or floating exchange rate, either through a currency board or through unilateral adoption of another currency. The preconditions for such radical steps to be sensible are much farther off on the horizon, however, than EMU membership, should that option become available. There are two primary reasons for this. First of all, recent experience has demonstrated that the provision of central bank liquidity can determine whether a country’s banking system survives a period of extreme stress. It failed to prevent the collapse of the Icelandic banking system, but many relatively healthy banks in Europe and elsewhere would probably have failed as well in the autumn of 2008, with all the economic and social cost implied, if their national central banks had not provided them with liquidity during the turmoil and were it not for cross-border co-operation among central banks. Therefore, I am of the view that unilateral adoption of a foreign currency or a currency board could only be considered prudent if all of Iceland’s largest banks were owned by a strong foreign bank with the financial strength to provide them with liquidity during times of distress.
Conclusion Our banknotes serve as repositories of the country’s collective memory, promoting awareness of the United Kingdom’ glorious history and highlighting the contributions of its greatest citizens. That tradition continues with the new £ As Austen herself advised us “You must learn some of my philosophy. Think only of the past as its remembrance gives you pleasure.” Today, we look forward to the launch of the new £ note, graced by Jane Austen, as we look back to her life and celebrate the joy she has brought, and is yet to bring, to all those who read her work. 7  The advantage of using the engraving, rather than the original portrait, is that it has sufficient detail that it can be used without requiring any alterations to the image. 8 This image is from a drawing by Isabel Bishop (1902-1988), who illustrated E. P. Dutton & Company’s 1976 edition of Pride and Prejudice. 9 Miss Bingley, Chapter XI. 10 Other features of Bank of England banknotes that aid the visually impaired include the tiered sizing of different denominations and bold numerals. 4  All speeches are available online at www.bankofengland.co.uk/speeches  4