The industry trends underlying the pick-up in trade are encouraging. The global electronics sector is on a strong upswing. Semiconductor exports surged by 20% in 2017. This reflects both a cyclical upturn as well as a structural uptrend, as products ranging from smartphones to automobiles and home electronics become increasingly chip-intensive. The broad-based, geographical spread of the current economic expansion is perhaps the strongest basis for its durability. The rising tide is lifting most boats. The advanced economies are leading the charge. The US economy is expected to grow at or above trend, driven by strength in consumption, a healthy labour market, and better prospects for business fixed investment with the enactment of the tax reform package. 1/7  BIS central bankers' speeches  The Eurozone economy was probably the most pleasant surprise of 2017, with a strong recovery in household spending and private investment. There is still slack in the economy, suggesting that the growth momentum is likely to be sustained. The Japanese economy has recorded the longest growth streak in 16 years, with a resurgence in exports and investment. Emerging market economies – especially in Asia – are benefitting from the positive spill-overs from the advanced economies as well as healthier macro fundamentals. Emerging Asia is benefiting from the pick-up in the global electronics cycle, recovery in commodity prices, steady domestic demand, and benign financial conditions. China is likely to see a moderation in growth this year but not cool off sharply.
The question of when it would have been right to intervene – and how – is extremely difficult to answer, however. No one has perfect foresight. Many lessons will doubtless be learned from the experience of the past few years, including lessons about capital and liquidity requirements, concentration of financial company ownership, financial links between owners and financial companies, and financial companies’ ownership of other businesses, to name a few. But those lessons are outside the scope of my talk today. Conditions in the global financial system are at their worst since the Great Depression, particularly after the collapse of Lehman Brothers. It is virtually an unprecedented crisis. Perhaps it is possible to say after the fact that the fall of Lehman sealed the fate of Iceland’s banks. Once Lehman had failed, nothing could have saved them. Assets had become almost impossible to sell due to the crisis of confidence and the global credit squeeze the Icelandic banks faced a much harsher operating environment and could expect that strict limitations would be placed on their foreign deposit business – if it were not stopped entirely. Government authorities in other countries consulted with one another more and more frequently on these issues. Early in October, the Icelandic Parliament passed emergency legislation authorising the Financial Supervisory Authority to take over the banks’ operations. The authorities had no choice but to act on that authorisation immediately, take over the three large banks, and divide their operations into two parts, the old banks and the new.