To assess that, it is helpful to ask two questions: •  what are the risks? and  •  who is running them? In cross-border capital flows, the main complication is that someone is bearing exchange rate risk. If a current account deficit turns out to be a problem, it is usually because domestic entities have borrowed foreign currency unhedged.
These factors have since proven to be key contributors to the current, worldwide turmoil in financial markets. A third contributing factor, which we didn't foresee, has been the extent to which financial markets had expanded without proper support structures, like a house built on sand. I'll have more to say on this point a bit later in my remarks.