More generally, after more than 20 years of experience, the economy and financial system have shown that they can adjust to even quite large changes in the exchange rate without undue disruption. This has involved a reasonable amount of learning by doing on the part of financial markets, businesses and policymakers – and, on occasion, the learning curve was fairly steep.
But there is no doubt that the present world is preferable. The story of how we got to this position is an interesting one, and it is that story I would like to tell today. Let me do this by referring to two episodes. When capital flows were a problem The first is the year 1983.