Let us try to remain serious, lucid, serene and balanced in our analysis, in our judgements, in our decisions. Let us all beware of the herd instinct which is always a very bad counsellor. Let us beware of fashion. As regards the present situation, we must remain prudent and cautious, but we have some signs indicating a bottoming out in the US and in Europe, including in my own country. And I see absolutely no reason why the European economy pick up would not be as early as in the US, taking account of the strong European fundamentals. §  Third, confidence is of the essence in the present situation. Confidence in our currency, confidence in its capacity to be a good store of value, confidence in its medium and long-term solidity, confidence in the capacity of the European Central Bank and the Eurosystem as a whole to deliver price stability. This confidence – which is warranted by the central bank – is a very precious asset for the Europeans. It is a very important ingredient for fostering growth through consumer confidence and therefore consumer demand which is presently the main driving force behind the European economy. I thank you for your attention. 9
With China now a member of the WTO, the global labour force expanded considerably. Low wages and cheap goods from China exerted downward pressure on goods prices. As China’s substantial savings surplus continued to grow, large amounts of savings were exported to the West. Inflation slowed in the decade following the turn of the millennium, in spite of high growth and falling unemployment. Combined with China’s savings surplus, this resulted in persistently low interest rates. Low interest rates coincided with weaker regulation of the banking and financial sectors, particularly in the US, but also in Europe. That proved to be a dangerous cocktail. Banks took more risk and levels of equity capital were too low. Household debt rose substantially. In many European countries, government debt ballooned in the shadow of low interest rates. When the crisis erupted in 2008, many were ill-prepared. 1  Chap. 8 and 9 in Lie, Einar and Christian Venneslan (2010), Over Evne: Finansdepartementet 1965 – 1992, Pax, Oslo (Norwegian only). 2  The expression “counterstructural policy” was used by Hermod Skånland in autumn 1977 when he wrote “The countercyclical policy conducted in Norway has to some extent also become a counterstructural policy”. Skånland (1977): “Konjunkturperspektiver og norsk næringsliv” in Sosialøkonomen 10/1977, p.10 (Norwegian only). 2  BIS central bankers’ speeches  Two aftershocks – China and Europe The global economy is still struggling with the repercussions of the crisis, with record-low interest rates and overcapacity. Growth is low.