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Thank you for inviting me here today. It is a pleasure to be with you. This afternoon, I would like to talk about liquidity and the role of the Bank of Canada.

The Bank's mandate is to promote Canada's economic and financial well-being. Clearly, this is an important mandate, and we are determined to demonstrate excellence as we work to fulfill it.

With your professional interests in foreign exchange, money markets, capital markets, and derivatives, I'm sure the past year and a half has been exciting and interesting – if those are the right words. We've been living through a period of astonishing financial turbulence, historic marketplace losses, and serious threats to financial stability.

The financial turbulence over the past year has been costly and difficult for many individuals and financial institutions; it's been challenging for policy-makers; and it's had implications for the overall economy.

Today, I'd like to discuss some of the crucial issues that we have been dealing with during this period. I'll begin with a brief overview of some key events that have led to the turbulence that continues to upset financial markets and that greatly contributed to the remarkably wide credit spreads that we now witness.

Sound financial investment is important to individuals, to firms, and to society as a whole. By definition, investment is forward looking, and thus our future financial well-being is shaped by the soundness of the investment decisions we make today.

The strengths of the twin cities - in research, advanced manufacturing, and information technology, among other sectors - are well known. Less well known, perhaps, is the region's success in responding effectively to changes in the world economy.

The hedge fund industry has been growing so quickly that meetings like this one are welcome—they provide a chance to step back and look at context and trends. And that's what I propose to do this morning. Specifically, I'd like to speak about volatility in both the real economy and in financial markets and discuss how it has been affected by monetary policy and financial innovation.

Many analysts have examined the relationship between the financial system and economic development. They have uncovered some interesting facts regarding the characteristics of the financial system - characteristics that contribute to the best possible allocation of savings to productive investments, which are themselves engines of economic growth.