We know that the UK’s terms of trade have improved substantially since the mid 1990s, as the price of our imports has fallen more than the price of our exports, boosting domestic spending power. But this seems to be partly an IT story, much of it concentrated in capital rather than consumer goods; and lower prices may be related to exchange rate changes, which could be temporary. Clearly new technology is playing an increasing part in helping consumers to search out bargains as well as to make purchases. While the total value of on-line sales remains relatively small, it is clearly growing very rapidly. Comprehensive data is still hard to come by, but one source suggests that on-line sales have risen more than ten fold over the last four years. Several recent reports have pointed to a sharp acceleration in the second half of last year, as the habit of e-shopping spreads. Structural changes within the retail sector are also part of the story. High street retailers are facing stiff competition from the major supermarket groups across a wider range of products. BIS Review 11/2004  5  What is driving these changes? No doubt there are many factors at work, but I find the Agents’ picture of an increasingly demanding consumer quite thought provoking. We live in a consumer society, and shopping, in one form or another, is what many people do much of the time; helped by technology, why wouldn’t they learn to do it rather well?
Prudential limits on banks’ FX balance sheets, in the form of specific LCR and NSFR in FX, have been imposed. In practice, this will greatly limit the size of their FX balance sheets and the associated maturity mismatch that was the proximate cause of the demise of the old banks that failed during the crisis. Finally, a tax or other equivalent measure of the type I just mentioned is being contemplated. 3 Taken together, this will amount to a very different paradigm for economic management than the one prevailing before the crisis. History will tell whether it is sufficient to preserve monetary and financial stability in the rougher seas of freer capital movements that we intend to embark upon. In any case, we need to strike a balance between dynamism and freedoms, on the one hand, and stability, on the other. Thank you very much. 3  4  Further details on these proposals can be found in Central Bank of Iceland Special Publication no. 5: Monetary policy in Iceland after capital controls, December 2010, and no. 6: Prudential rules following capital controls, report of the Central Bank of Iceland to the Minister of Economic Affairs, August 2012. www.cb.is. BIS central bankers’ speeches